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With Medicare Plan, Drug Spending May Be Up

Researchers suspect overuse as a cause, but note that other costs are down

WEDNESDAY, July 1 (HealthDay News) -- Older people who signed up for Medicare's prescription drug coverage, called Part D, spent more on drugs after enrolling than they had before but less on other types of medical care, researchers have found.

Their study, in the July 2 issue of the New England Journal of Medicine, also found that spending varied depending on the type of drug coverage participants had before enrolling in Part D.

Although the report was not designed to look at improvements in health, another study on Part D, presented at the AcademyHealth meeting in Chicago, did.

That research, from the University of Maryland School of Pharmacy and funded by Novartis Pharmaceuticals, found "small but statistically significant" improvements in health status, based on daily activity levels, of those enrollees who previously had no prescription drug coverage. This seemed to correlate with an improvement in greater ability to afford medications, the study found.

Medicare Part D, implemented at the beginning of 2006, was intended to help relieve the burden of prescription drug costs for seniors on Medicare.

Architects of the plan hoped that better adherence to medication regimens would, in turn, result in better health outcomes and lower overall health costs.

At the time, 18 percent of people nationwide who were on Medicare had no drug coverage.

"The primary goal of Medicare Part D was to reduce beneficiaries' financial burden and improve medication use," explained Yuting Zhang, lead author of the NEJM study and an assistant professor of health economics at the University of Pittsburgh Graduate School of Public Health. "Some people also argued that if medication compliance improved, maybe that would potentially save the other non-drug medical-care spending. That was the motivation, but no one has looked at definite results."

Zhang and her fellow researchers compared spending on prescription drugs by about 35,000 people enrolled in the Medicare Advantage plan in Pennsylvania in the two years before implementation of Part D and the two years after.

People were classed in one of four groups: those who had no drug coverage before Medicare Part D; those who had drug coverage but with a cap of $150 a quarter (considered limited coverage); those who had a cap of $350 a quarter; and those who received uncapped drug coverage from their former employer for the entire four years of the study, considered the control group. People in the first three groups all switched to Part D as of 2006.

"The impact of Part D on medical spending really depended on prior drug coverage," Zhang said.

People who'd had no drug coverage increased their spending on drugs, on average, by 74 percent ($41 a month), those with a cap of $150 increased spending by 27 percent ($27 a month) and those with a $350 quarterly cap increased spending by 11 percent ($13), compared with the control group.

At the same time, each of the groups also decreased the amount spent on other medical care by $33, $46 and $30, respectively. This probably was due to better medication adherence and, thus, better control of medical conditions, the researchers stated.

One surprise was that drug spending actually went up in the group that had the most coverage before joining Part D.

The study suggested that drug overuse might have been partly responsible in this group and, to a lesser extent, in the other two groups.

"This shows that those who didn't have drug coverage, once they did get it, accessed the medication they needed and that kept them out of doctors' offices and emergency rooms," said Joseph Baker, president of the Medicare Rights Center, who was not involved in the study. "We always said there would be savings in other parts of the system. Where the study didn't go was whether or not those who were using medications hit the 'doughnut hole' [and] went back to their old ways."

The so-called doughnut hole is a gap in coverage that occurs when Medicare beneficiaries reach a limit in their spending.

"This shows that having drug benefits is the right thing to do for patients, but we shouldn't have a doughnut hole in our benefits," Baker added. "We can make it better and get more savings and, of course, keep people's health better maintained."

More information

The U.S. government has more on the Part D prescription benefit program.

SOURCES: Yuting Zhang, Ph.D., assistant professor, health economics, department of health policy and management, University of Pittsburgh Graduate School of Public Health, Pittsburgh; Joseph Baker, president, Medicare Rights Center, New York City; University of Maryland at Baltimore, news release; July 2, 2009, New England Journal of Medicine

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