Study Looks At Part D Impact on Drug and Medical Spending

By June 30, 2009Commentary

A study reported in the current issue of the New England Journal of Medicine, vol. 361, page 52, looks at the impact of Medicare Part D coverage on drug and medical spending by several categories of enrollees.  Part D, which covers prescription drugs, became effective in 2006 and provided a fairly good level of coverage.  Prior to Part D, some Medicare recipients had a comprehensive level of drug coverage, some had no coverage and some had limited coverage, such as $150  or $350 per quarter.  Most had copayments of $10-20 per prescription.  The study compared drug and medical spending between the group which had comprehensive coverage before Part D and the no coverage and limited coverage cohorts.   It also looked specifically at the number of prescriptions related to diabetes and high cholesterol.

Drug spending by the no-coverage group in the first two years of the program increased by 74% relative to the comprehensive coverage enrollees.  For the $150 cap cohort, spending increased 27% and for the $350 cap set,  by 11%.  So getting better coverage had a substantial effect on drug spending, and the lower the previous coverage, the stronger the effect of receiving coverage.   The no-coverage group also received 44% more prescriptions for hyperlipidemia and diabetes than did the comprehensive coverage cohort.  This strongly suggests large unmet need prior to Part D.

The actual dollar increase in monthly drug spending by the no-coverage group as compared to the group which previously had comprehensive benefits was $41, but this no coverage group also showed a $33 a month relative decrease in medical spending.  Similarly, the $150 coverage cap group increased monthly drug spending by $27 but decreased medical spending by $41.  The $350 cap cohort increased drug spending by $11 but also increased medical spending by $30.  Overall, the increase in drug spending was roughly offset by the decrease in medical spending.

Some conclusions that might be gleaned from the report’s findings include the likelihood that many people who do not have drug coverage or have a low level of prescription drug benefit are either not getting or not filling prescriptions that they need.   Not receiving these drugs appears to cause them to incur higher levels of medical spending than they would if they had adequate prescription coverage.  There may also be an effect that if coverage exists, providers are more likely to write a prescription and some of those may not be really needed.   But the fact that medical spending declined for most of the persons receiving better drug coverage would suggest that the prescriptions were needed and benefical.  Overall, providing good drug coverage appears to have a low to no net cost to the system and would appear to clearly improve the quality of care and health for many.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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