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Part D cuts drug expense 17%

The Baltimore Sun

CHICAGO -- After a rocky start, Medicare's drug benefit appears to be delivering a lower prescription tab for seniors, along with a whopping bill for the federal government, new research shows.

The Medicare drug benefit led to a 17 percent decrease in out-of-pocket expenses, or $9 a month, for seniors who enrolled in the new Medicare Part D benefit in 2006, the first full year prescription coverage became available in the federal health insurance program for the elderly and disabled.

The savings amounted to an extra 14 days of medicine for those who signed up, or a 19 percent increase in prescription usage, according to a study released this week on the Web site of the Annals of Internal Medicine (, which will publish a print edition Feb. 5.

At the same time, total Medicare spending increased nearly 19 percent in 2006, the fastest annual growth rate in 25 years.

The study is considered by its authors to be the first in-depth, independent examination of the impact of Part D. The authors said the drug program was clearly working, reflecting the experiences of millions of Americans.

"We found that it had a modest but significant effect on both savings and drug use," said Dr. G. Caleb Alexander, assistant professor of medicine at University of Chicago Medical Center and one of the study's authors. "Despite extensive debate, it was not clear to what extent Part D would save people money or allow them to obtain drugs they might not otherwise be able to afford."

The Medicare Modernization Act established the Part D drug benefit for Medicare's more than 43 million beneficiaries. Not all had access to prescription coverage under Medicare before the law. The new drug program became the largest expansion of Medicare since it began more than four decades ago.

Unlike studies that have focused largely on those who are covered under the Part D drug benefit, researchers say their work compared out-of-pocket costs and the number of pills bought by those who were eligible with patients age 60 to 63 who were not.

They also compared those eligible for Part D who enrolled with those who did not sign up. Part D enrollment "stabilized" after the May 15, 2006 sign-up deadline, and the study looked at the first year's usage to determine the $9 a month prescription savings. Distributed across the entire pool of Medicare beneficiaries, the drug benefit led to a 13.1 percent decrease in out-of-pocket expenses, or $5 a month, and a 5.9 percent increase in prescription use.

Alexander said some may consider such savings "insufficient and not worth the money," but other research shows increased drug usage may lead to fewer visits to doctors and hospitals and therefore cost savings.

Because the study did not look at such health outcomes, it fell short, said an accompanying "audio editorial" on the Annals' Web site. That, however, was not so much the fault of the authors as of the federal government, which has yet to release Medicare claims data that would help answer questions about the quality of care seniors were receiving with their new benefit and whether drugs were being used appropriately.

The study, the editorial noted, looked at prescription usage and not drug usage, which is different because some seniors are known to not take their prescribed medicines.

Still, Medicare's drug benefit, which overcame initial computer glitches and some confusion by consumers, made prescriptions available to an estimated 10 million seniors who had no drug coverage, said the Centers for Medicare & Medicaid Services.

Critics of the drug benefit have noted that it has caused runaway growth in total Medicare spending.

Full implementation of the new Medicare drug benefit contributed to an 18.7 percent increase in total Medicare spending in 2006.

While such growth is not a surprise given the creation of a new entitlement, it was the fastest growth rate since 1981 and double the increase in 2005, federal officials wrote in a report, published in the January/February issue of Health Affairs.

Medicare spending increased to $401.3 billion in 2006 compared with $338 billion in 2005, according to the report by researchers for the Centers for Medicare & Medicaid Services, which administers the Medicare program.

The benefit helped drive total U.S. prescription spending up 8.5 percent in 2006. That, however, is below the average annual rate of increases of 13.4 percent between 1995 and 2004.

Bruce Japson writes for the Chicago Tribune.

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