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TESTIMONY OF
JOHN A. POISAL, STATISTICIAN
OFFICE OF STRATEGIC PLANNING
HEALTH CARE FINANCING ADMINISTRATION
ON
PRESCRIPTION DRUG COVERAGE
BEFORE THE HOUSE WAYS & MEANS SUBCOMMITTEE ON HEALTH
MARCH 27, 2001
Chairman Johnson, Congressman Stark, distinguished Committee
members, thank you for inviting me here today to discuss
an analysis of data on prescription drug use and spending
patterns of Medicare beneficiaries recently published in
Health Affairs, "Growing Differences Between Medicare
Beneficiaries With and Without Drug Coverage, Volume 20,
Number 2. Prescription drugs provide a vital tool for our
nation's young and old in treating both chronic and acute
medical conditions. In 1998, total spending for prescription
drugs in the United States totaled $91 billion, more than
double the total 10 years ago.
The research, as presented in the article, is based on
data collected by the Health Care Financing Administration
through the Medicare Current Beneficiary Survey (MCBS) from
1998, as well as survey data collected in prior years. The
MCBS is an ongoing survey of a representative sample of
the entire Medicare population. Survey respondents are interviewed
every four months and are asked to record their drug purchases
and save their medicine containers to assist them in recalling
their drug purchases.
The research resulted in two main findings regarding drug
coverage among the Medicare beneficiary population. First,
the proportion of Medicare beneficiaries with prescription
drug coverage at some point in the year did not change between
1997 and 1998, after having increased annually over a number
of years. Second, the differences in the levels of use of
prescription drugs and total spending on prescription drugs,
in 1998, widened between beneficiaries with drug coverage
and those without.
PRESCRIPTION DRUG COVERAGE
Since Medicare currently provides very limited coverage
of outpatient prescription drugs, Medicare beneficiaries
obtain coverage from a variety of sources. For example,
many beneficiaries receive coverage through Medigap plans,
their employer-sponsored retiree insurance plan, as well
as through enrollment in Medicare HMOs, the Medicaid program,
or State-sponsored prescription drug assistance programs.
The MCBS collects information on the number of Medicare
beneficiaries with prescription drug coverage and the sources
of that coverage.
Since 1992, the first year of the MCBS, the data have shown
that the prescription drug coverage rate for Medicare beneficiaries
has risen steadily. From 1995 to 1997, the level of estimated
drug coverage increased, but in 1998 coverage levels remained
flat. As indicated in Chart 1, in 1998, 73 percent of non-institutionalized
Medicare beneficiaries had drug coverage at some point during
the year. On the other hand, slightly more than 27 percent
of beneficiaries, about 10 million, had no drug coverage
whatsoever. These findings are identical to what was found
in the 1997 survey data.
The increase in the proportion of beneficiaries with drug
coverage in the mid-1990s appears to most likely be a result
of increased beneficiary enrollment in Medicare HMOs offering
an additional drug benefit (Chart 2). During the mid- to
late 1990s, Medicare HMO enrollment was growing at about
30 percent annually. The provision of drug benefits by Medicare
HMOs during this period, as well as the increase in beneficiary
enrollment resulted in more than 15 percent of all Medicare
beneficiaries receiving drug coverage from a Medicare HMO
in 1998, an increase of 2 percent since 1997, and of 7 percent
since 1995.
Although a fairly high proportion of Medicare beneficiaries
had some type of supplemental prescription drug coverage
in the 1990s, a month-by-month analysis of the data revealed
that this coverage was far from stable. For instance, only
46 percent of beneficiaries were covered for all 24 months
of 1995 and 1996. In 1997, only 54 percent of beneficiaries
had drug coverage for the entire year, and 27 percent had
no coverage at any time (Chart 3)
PRESCRIPTION DRUG USE AND SPENDING
The trends in use and spending for beneficiaries with and
without prescription drug coverage differed for the first
time in 1998. The 1998 data showed that beneficiaries without
drug coverage purchased fewer medications than they purchased
the year before, filling an average of 16.7 prescriptions,
a 2.4 percent decline from 1997. At the same time, those
same beneficiaries spent an average of about $550 on their
prescription purchases, nearly identical to their expenditures
the previous year.
Beneficiaries with coverage continued the trend of increases
in both utilization and total expenditures. They purchased
a little more than 24 prescriptions per person, up 9 percent
from 1997, and total expenditures, including out-of-pocket
and payments from drug insurance coverage, increased 14
percent, totaling $999. The gap in utilization between the
two populations grew from an average difference of 5 prescriptions
in 1997 to 8 in 1998. The difference in total expenditures
between the two populations also increased from about $330
in 1997 to $453 in 1998. In addition, the survey data have
been consistent in demonstrating gaps in utilization between
beneficiaries in both populations for almost every demographic
category including age, race, health status, and income.
These differences in utilization and expenditures were
particularly notable in certain sub-groups. The differences
were greatest for disabled beneficiaries under age 65, a
group that has a high level of drug use. Disabled beneficiaries
under age 65 without drug coverage used less than one-half
as many prescriptions (16 prescriptions), as disabled beneficiaries
with coverage used (33 prescriptions). In addition, total
drug expenditures for disabled beneficiaries without drug
coverage were only one-third as high ($493) in per capita
spending as disabled beneficiaries with drug coverage ($1483).
Utilization differences between beneficiaries, with or
without drug coverage, with varying levels of chronic conditions
also increased in 1998, by approximately two prescriptions
per beneficiary. For example, the utilization gap between
beneficiaries, with or without coverage, who had five or
more chronic conditions, grew from eight prescriptions in
1997 to 10.8 in 1998. Differences in total expenditures
for beneficiaries with and without drug coverage also increased
by about 70 percent for beneficiaries with five or more
chronic conditions and by approximately 30 percent for all
other beneficiaries with chronic conditions.
In 1998, total drug expenditures for beneficiaries in poor
health with drug coverage were $910 higher than total expenditures
for beneficiaries in poor health without drug coverage.
This represented a 30 percent increase over the 1997 difference
of $695. Average drug expenditures for beneficiaries in
excellent health were $250 higher for those with coverage
than for beneficiaries with identical self-reported health
status who were without coverage. In 1997, the difference
in expenditures between these two groups was $203.
Utilization and total expenditures, for all levels of income,
were higher for beneficiaries with drug coverage than for
those without such coverage. Differences in utilization
and total expenditures were greatest between beneficiaries
with and without drug coverage below the poverty line and
reached a difference of almost 14 prescriptions per beneficiary
in 1998.
Beneficiaries without drug coverage spent more out-of-pocket,
than those with coverage, but continued to receive fewer
medications. Beneficiaries without drug coverage had to
pay an average of $546 out-of-pocket in 1998, compared to
$325 for beneficiaries with coverage. In other words, beneficiaries
without drug coverage paid an average of $33 per prescription
compared to $13 for beneficiaries with drug coverage (Chart
4).
For beneficiaries without drug coverage, out-of-pocket
expenditures, which are equal to their total expenditures,
were virtually unchanged from 1997 to 1998, while out-of-pocket
and total expenditures for beneficiaries with drug coverage
increased by almost 18 percent. Moreover, beneficiaries
with drug coverage paid a slightly larger portion of their
total drug expenditures (33 percent) in 1998 than they did
in 1997 (31 percent). Beneficiaries in Medicare HMOs with
drug coverage and those enrolled in individually purchased
supplemental plans experienced the greatest out-of-pocket
cost increases between 1997 and 1998.
CONCLUSION
Prescription drugs continue to play an increasingly important
role in the health care of Medicare beneficiaries. The research
presented in the Health Affairs article demonstrates that
beneficiaries with drug coverage used more drugs and had
higher total expenditures than beneficiaries without coverage,
and the gap in expenditures and utilization between those
with and without coverage increased. Clearly, having prescription
drug coverage makes a difference in beneficiary drug use
and spending, particularly for low-income seniors and those
with many chronic health problems.
