The effect of Medicare Part D on drug and medical spending

Abstract

Background: It is not known what effect the increased use of prescription drugs by enrollees in Medicare Part D has had on spending for other medical care.

Methods: We compared spending for prescription drugs and other medical care 2 years before the implementation of Part D in January 2006 with such expenditures 2 years after the program's implementation in four groups of elderly beneficiaries: Medicare Advantage enrollees with stable, uncapped, employer-based drug coverage throughout the study period (no-cap group), those who had no previous drug coverage, and those who had previous limited benefits (with either a $150 or a $350 quarterly cap) before they were covered by Part D in 2006.

Results: Between December 2005 and December 2007, as compared with the increase in the no-cap group, the increase in total monthly drug spending was $41 higher (95% confidence interval [CI], $33 to $50) (74%) among enrollees with no previous drug coverage, $27 higher (95% CI, $20 to $34) (27%) among those with a previous $150 quarterly cap, and $13 higher (95% CI, $8 to $18) (11%) among those with a previous $350 cap. The use of both lipid-lowering and antidiabetic medications rose in the groups with no or minimal previous drug coverage. As compared with expenditures in the no-cap group, monthly medical expenditures (excluding drugs) were $33 lower (95% CI, $29 to $37) in the group with no previous coverage and $46 lower (95% CI, $29 to $63) in the group with a previous $150 quarterly cap, whereas medical spending was $30 higher (95% CI, $25 to $36) in the group with a previous $350 cap.

Conclusions: Enrollment in Medicare Part D was associated with increased spending on prescription drugs. Groups that had no or minimal drug coverage before the implementation of Part D had reductions in other medical spending that approximately offset the increased spending on drugs, but medical spending increased in the group that had more generous previous coverage.

Figure 1. Time-Series Analysis of Monthly Drug Spending

For graphic purposes, the data points show 2-month rather than monthly averages of spending after adjustment with propensity-score weighting. The data points for the no-cap group have been weighted with the use of propensity scores calculated in the comparison of the no-cap group with the no-coverage group. The dollar values are the predicted spending levels from a regression analysis of the monthly data after propensity-score weighting. After the implementation of Part D in 2006, spending in the no-coverage group jumped immediately by $17 (95% CI, $9 to $25), as compared with the spending in the group without a cap on coverage (no-cap group). From December 2005 through December 2007, the average monthly drug spending in the no-coverage group increased by $41 (95% CI, $33 to $50), as compared with that in the no-cap group; spending in the $150-cap group increased by $27 (95% CI, $20 to $34), and that in the $350-cap group increased by $13 (95% CI, $4 to $22).

Figure 2. Effect of Implementation of Part D on the Use of Lipid-Lowering and Antidiabetic Drugs

The data points represent the quarterly averages of the number of prescriptions that were filled per month from January 2004 through December 2007 for 10,285 patients with hyperlipidemia (Panel A) and 4778 patients with diabetes (Panel B). The numbers in the center of the panels denote the estimated numbers of monthly prescriptions in December 2005, before the implementation of Part D. During the next 2 years, the number of monthly prescriptions for lipid-lowering drugs in the no-coverage group increased by 0.21 (95% CI, 0.15 to 0.27), as compared with that among Medicare enrollees who had no cap on their coverage (no-cap group); the number of prescriptions in the $150-cap group increased by 0.18 (95% CI, 0.13 to 0.23), and those in the $350-cap group increased by 0.11 (95% CI, 0.05 to 0.17). The number of monthly prescriptions for antidiabetic drugs in the no-coverage group increased by 0.27 (95% CI, 0.19 to 0.35), as compared with that in the no-cap group, and the number of prescriptions in the $150-cap group increased by 0.11 (95% CI, 0.03 to 0.19). No significant changes were observed in the number of prescriptions for antidiabetic drugs in the $350-cap group. The absolute decline in the use of oral antidiabetic drugs in the no-cap group may reflect a number of factors, including an increase in the use of insulin and a decrease in the use of thiazolidinediones.

Figure 3. Time-Series Analysis of Monthly Nondrug Medical Spending

The data points show 2-month averages of spending, rather than monthly averages, for graphic purposes, from January 2004 through December 2007. As compared with Medicare enrollees who had no cap on drug coverage (no-cap group), monthly spending on non-drug medical services decreased by $33 (95% CI, $29 to $37) in the group that had no drug coverage before the implementation of Part D (Panel A), decreased by $46 (95% CI, $29 to $63) in the group that had a previous $150 quarterly cap (Panel B), and increased by $30 (95% CI, $25 to $36) in the group that had a previous $350 quarterly cap (Panel C).

Figure 4. Effect of the Implementation of Part D on Drug and Medical Spending after 2 Years

The bars indicate the average changes in drug spending, medical spending, and a combination of the two categories 2 years after the implementation of Part D in a group of Medicare enrollees who previously had no drug coverage and in groups with previous quarterly caps ($150 or $350), as compared with a group of enrollees who had no cap on drug coverage (no-cap group). The I bars represent 95% confidence intervals.