Medicare Prescription Drug Benefit Not a Cost Saver

Study finds that Medicare Part D cost saving projections are based on flawed methodology.

The impact of the Medicare Part D prescription drug benefit may be overstated, according to recent analysis pub­lished in Annals of Internal Med­i­cine.

The study noted that since 2006, Part D provided significantly greater access to pre­scrip­tion drugs for approximately 50 mil­lion Medicare sub­scribers, but this has not caused a clear drop in emer­gency room visits, hos­pital stays, inpa­tient costs, or mor­tality.

"We are con­cluding that Medicare Part D did not save the (Medicare) pro­gram any money overall," said study lead and North­eastern asso­ciate pro­fessor Becky Briesacher in a press release. "You have to be real­istic about the fact that giving people access to med­ica­tion is impor­tant, but it's not going to sub­stan­tially save money in other parts of the health care system or keep a sig­nif­i­cant number of people out of the hospital."

Early studies of Medicare ben­e­fi­cia­ries who had no pre­scrip­tion drug cov­erage or poor cov­erage prior to Part D showed these sub­groups had sta­tis­ti­cally sig­nif­i­cant decreases in non­drug med­ical spending and hospitalizations, the researchers noted. However, the current study found these ­groups are not representative of the expe­ri­ences of Medicare sub­scribers overall, as many of these subscribers already had some type of drug cov­erage.

The researchers examined 11 years of data from the Medicare Cur­rent Ben­e­fi­ciary survey, which includes approximately 12,000 Medicare subscribers. The data showed no sig­nif­i­cant change to subscribers indicating they were in poor to fair health 5 years after the launch of Part D.

In 2006, 26.6% of subscribers indicated they were in poor to fair health, which dropped to 24.6% in 2010. During that time frame, emer­gency room visits and inpa­tient ser­vices remained at approximately 13%.

The early Part D studies caused the Con­gres­sional Budget Office to adopt an algo­rithm that operates off the notion that pre­scrip­tion fill increases across the Medicare pop­u­la­tion leads to overall cost-offsets, which estimates spending on med­ical ser­vices typically decreases by 0.2% for each 1% increase in drug pre­scrip­tions filled.

The researchers are concerned by this finding due to Afford­able Care Act provisions to reduce Part D cost-sharing based on the pre­dic­tion that non­drug Medicare spending will drop by $35 bil­lion through cost sav­ings in med­ical ser­vices, specifically declining hospitalizations.

"We'd like the Con­gres­sional Budget Office to re-examine the policy," Briesacher said. "It's about prop­erly scoring the leg­is­la­tion so it doesn't assume these cost-offsets that we can't find."