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Medicare Drug Program News
Medicare Part D Pushed Drug Prescriptions Up 158
Million, Gov Cost by $32 Billion
Oldest, poorest spending a much greater share of
their own income on premiums and health services than others
 Nov. 1, 2007 – The Medicare drug program (Part D)
boosted the business of drug makers and pharmacists by 158 million
prescriptions in 2006 and Medicare paid the bill of $32 billion, but a
new study says the drug use and cost decrease to senior citizens was
"relatively minor."
 Many senior citizens already had prescription drug
coverage, so the new benefit reduced the average amount paid by seniors
per day of therapy by 18.4% and increased threir prescription drug use
by only 13%, say researchers in a study published today in the 25th
anniversary issue of the journal Health Affairs.
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“The increase in drug utilization and decrease in
cost to the elderly was relatively minor,” said study coauthor Frank
Lichtenberg, a business professor at Columbia University.
“The rhetoric surrounding Medicare Part D’s
potential impact on seniors’ medication use and savings on drug costs
doesn’t match the reality.”
The Medicare Part D drug benefit expanded to all 43
million Medicare beneficiaries beginning in January 2006. Researchers
compared prescription drug use and related costs in the elderly (those
over age 65) and nonelderly population using data from more than 584
million prescriptions filled by Walgreens from September 2004 to
December 2006. Walgreens fills about 1.4 million prescriptions per day,
on average, or about 18 percent of all prescriptions filled in the
United States.
Lichtenberg and coauthor Shawn Sun, a researcher at
Walgreens Health Services, found that Medicare patients paid about 66
cents per day of medication therapy in September 2004.
By December 2006 - after implementation of Medicare
Part D - they paid about 53 cents per day of therapy.
However, with the subsequent increase in
utilization that came after Part D, researchers found that the program
reduced the total amount paid by patients by only 5.6 percent.
The program increased the amount that private
insurers paid by 22.3 percent.
To evaluate the economic impact of the program, the
researchers examined by how much the program reduced private insurance
coverage or spending, commonly known as the crowd-out rate.
The researchers found that every seven
prescriptions paid for by the government crowded out five prescriptions
and resulted in only two additional prescriptions used.
The federal government spent about $203 for each
additional prescription for the elderly, or about 3.5 times as much as
the average price ($57) for a prescription in 2006.
The Congressional Budget Office estimates that the
government spent $32 billion on the new drug benefit in 2006, a level
that is expected to accumulate to $797 billion by 2015.
“Our findings do not necessarily mean that the
Medicare Part D program is economically inefficient, because there are
potential long-term health care savings when people can afford to take
necessary medications,” Lichtenberg said.
“However, we need to think carefully about the
economic implications of this program, which the federal government will
ultimately have to raise taxes to pay for.”
Medicare
Beneficiaries at Highest Risk, Spending More Out Of Pocket On Health
Care
A related study in the November/December issue
shows that the oldest, frailest, and poorest Medicare beneficiaries are
spending a much greater share of their own income on premiums and health
services than others, and that out-of-pocket spending as a share of
income has increased over time for the Medicare population.
Kaiser Family Foundation and University of
California, Los Angeles, researchers found that median out-of-pocket
spending on health care increased by 50 percent, from $1,667 to $2,501,
between 1997 and 2003.
The oldest Medicare beneficiaries, those in poor
health, beneficiaries with low incomes, and those living in nursing
homes were more likely than other Medicare beneficiaries to spend a
large share of their incomes on premiums and health care services,
according to the study.
The top quarter of high-spending beneficiaries
spent almost 30 percent of their income on health care. The top 10
percent spent nearly 60 percent of their income on health care. Four of
10 beneficiaries spent more than 20 percent of their income on health in
2003, researchers Patricia Neuman, Juliette Cubanski, Katherine Desmond,
and Thomas Rice found.
The findings “raise important questions about how
much of their incomes beneficiaries can reasonably be expected to spend
on their health care and whether current out-of-pocket spending levels
are affordable,” the researchers say.
They warn that the overall burden of paying for
health care could continue to rise for beneficiaries, and, as a result,
health care could become less affordable and accessible for all but the
highest-income beneficiaries.
Other Issue Highlights:
Higher Incomes And The Uninsured: Almost 20 percent
of uninsured Americans live in a household with income over $75,000, and
37.8 percent live in a household with income over $50,000, according to
Census Bureau data. But University of Michigan researchers Hanns Kuttner
and Matthew Rutledge point out that measuring income at the household
level groups together those who live under one roof, whether or not they
are related. Family income excludes the income of people not related by
birth, marriage, or adoption.
Kuttner and Rutledge say that the ranks of the
higher-income uninsured include some whose high income reflects
short-term income spikes. In addition, the amount of time one lacks
insurance also affects attitudes toward insurance.
Among the currently uninsured, 9.7 percent were in
the middle of periods without insurance that lasted four months or less,
and 29.1 percent lacked insurance for up to a year. Those in
higher-income households were more likely to go through shorter periods
without insurance.
“Factors other than unwillingness to buy coverage
play a large role in the lack of health insurance among higher-income
Americans,” the researchers write.
Implications of Expanding Disease Definitions
The National Osteoporosis Foundation and American
College of Obstetrics-Gynecology have expanded osteoporosis therapy
recommendations by broadening its treatment threshold for osteoporosis
to include women with denser bones.
These changes increased the number of women for
whom treatment is recommended from 6.4 million to 10.8 million among
women age 65 and older, at a net cost of $28 billion, Dartmouth Medical
School researchers M. Brooke Herndon, Lisa Schwartz, Steven Woloshin,
and H. Gilbert Welch found.
The change also increased from 1.6 million to 4
million the number of women ages 50-64 for whom treatment is
recommended, at a net cost of at least $18 billion.
“Our findings highlight the enormous implications
of seemingly modest changes in the treatment threshold for osteoporosis.
We believe that it is essential for an independent organization (such as
the IOM) to review the evidence and develop an unconflicted definition
of osteoporosis requiring treatment,” the researchers conclude.
Notes:
Health Affairs Commemorates 25th Anniversary. The
November/December issue of Health Affairs features special content to
mark the journal’s 25th anniversary. It includes reflections from more
than a dozen longtime Health Affairs contributors, including a
commentary by Uwe E. Reinhardt, on changes in health care over the past
25 years, related policy debates, advice for those who want to reform
the health care system, and predictions about health care issues in the
next 25 years.
The issue also features an interview with Robert
Wood Johnson Foundation President and CEO Risa Lavizzo-Mourey.
Health Affairs, published by Project HOPE, is the
leading journal of health policy. The peer-reviewed journal appears
bimonthly in print with additional online-only papers published weekly
as Health Affairs Web Exclusives at
www.healthaffairs.org. Copies of the November/December 2007 issue
will be provided free to interested members of the press. Journalists
may also access content on the Health Affairs Web site after the embargo
lifts by using the press username “media” and the password “november”. Address
inquiries to Christopher Fleming at Health Affairs, 301-347-3944, or via
e-mail,
cfleming@projecthope.org.
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