Part D’s Effect on Overall Spending

By August 4, 2011Commentary

The Journal of the American Medical Association carries research on the impact of Part D coverage on spending for other categories of medical care.   (JAMA Article) It has been hypothesized, and to some extent demonstrated by research, that providing drug benefits to patients who previously did not have them may reduce utilization in other health care categories, particularly for patients with chronic diseases such as diabetes, high blood pressure and cardiovascular conditions.  Part D provides fairly good coverage for Medicare beneficiaries who enroll in the option.  Some of those beneficiaries may have already had some form of drug coverage in their Medicare supplement policies.  The research divided enrollees into either limited or generous drug coverage prior to their enrollment in Part D and then tracked the non-drug spending of each group after enrollment in Part D.  The study period was from the initiation of Part D in January 2006 through 2007.

Results were adjusted for various demographic and health characteristics.  There were 2538 participants with generous drug coverage before Part D and 3463 with limited coverage.  Prior to Part D enrollment the limited coverage beneficiaries had non-drug spending that was higher, but not significantly higher, than those beneficiaries with generous coverage.  Following enrollment, the limited coverage group experienced an reduction of about 3.9% in non-drug expenses compared to those with generous coverage, or about $300 a quarter less than expected.   In other words, obtaining better drug benefits appeared to be associated with a greater reduction in spending for this group as opposed to people who already had generous drug coverage.  Most of this reduction was attributed to less inpatient spending.

While the study may reflect reality, it would be nice if it had been carried out for a longer period of time after the implementation of Part D, to ascertain the persistency of the effect.  Also, since the classification of prior drug coverage is based on survey responses, its accuracy might be questioned.  As the authors note, they were not able, for reasons that are unclear, to provide an estimate of total economic effect; that is did the additional cost of the drug coverage offset any non-drug savings.  But it appears to provide good evidence, consistent with other research, that providing patients with drug coverage can increase their use of drugs and adherence to prescriptions in ways that lower use and cost of other health services.

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