The impact of Medicare Part D on prescription drug use by the elderly

Health Affairs

Volumn 26, Issue 6, 2007, Pages 1735-1744

  Lichtenberg, Frank R ^a,b   Sun, Shawn X ^c  

^a Och Spine at New York Presbyterian Hospitals   (United States)

^b NATIONAL BUREAU OF ECONOMIC RESEARCH   (United States)

^c Walgreens Health Services   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

AGED; ARTICLE; DRUG COST; ECONOMICS; FINANCIAL MANAGEMENT; HEALTH CARE COST; HEALTH INSURANCE; HUMAN; MEDICARE; PRESCRIPTION; STATISTICS; UNITED STATES;

AGED; DRUG COSTS; FINANCING, PERSONAL; HEALTH EXPENDITURES; HUMANS; INSURANCE, PHARMACEUTICAL SERVICES; MEDICARE PART D; PRESCRIPTIONS, DRUG; UNITED STATES;

EID: 36849059199     PISSN: 02782715     EISSN: 02782715     Source Type: Journal    
DOI: 10.1377/hlthaff.26.6.1735     Document Type: Article

References (25)

1. For details, see Appendix Exhibit 1, online at http://content. healthaffairs.org/cgi/content/full/26/6/1735/DC1.
2. Also see Congressional Budget Office, "Projection of Spending for the Medicare Part D Benefit," 9 February 2005, http://www.cbo.gov/showdoc. cfm?index=6076&sequence=0 (accessed 28 January 2007).
3. Centers for Medicare and Medicaid Services, "Prescription Drug Coverage - General Information: Overview," 23 May 2007, http://www.cms.hhs.gov/PrescriptionDrugCovGenIn/01_Overview.asp (accessed 13 August 2007).
4. M.V. Pauly, "Medicare Drug Coverage and Moral Hazard," Health Affairs 23, no. 1 (2004): 113-122. Others have made predictions about the impact of Part D. For example, Bruce Stuart and colleagues predicted that Part D would cover less than half of the annual drug bills for enrollees with high or catastrophic costs in 2006-2008. However, only Paulymade predictions about the effects of Part D on overall user costs and use.
5. B. Stuart et al., "Riding the Rollercoaster: The Ups and Downs in Out-of-Pocket Spending under the Standard Medicare Drug Benefit," Health Affairs 24, no. 4 (2005): 1022-1031.
6. D. Cutler and J. Gruber, "Does Public Health Insurance Crowd Out Private Insurance?" Quarterly Journal of Economics 111, no. 2 (1996): 391-430.
7. D. Card and L. Shore-Sheppard, "Using Discontinuous Eligibility Rules to Identify the Effects of the Federal Medicaid Expansions on Low Income Children," Review of Economics and Statistics 86, no. 3 (2004): 752-766.
8. Medicare versus non-Medicare differences are about 5.3 percent ([1/(97.4 percent - 2.4 percent)] - 1) larger than elderly versus nonelderly differences.
9. F.R. Lichtenberg, "The Effects of Medicare on Health Care Utilization and Outcomes," Forum for Health Economics and Policy, Frontiers in Health Policy Research 5, Article 3, 2002, http://www.bepress.com/ fhep/5/3 (accessed 28 January 2007).
10. The pharmacy chain is Walgreens, operated by Walgreen Co., Deerfield, Illinois. As of 30 November 2006, Walgreens had 5,580 retail pharmacies throughout the United States.
11. See Appendix Exhibit 2, online as in Note 1.
12. Maryland Health Care Commission, "Prescription Drug Spending," Spotlight on Maryland, December 2000, http://mhcc.maryland.gov/spotlight/drug. pdf (accessed 3 May 2007). More recent data are not available.
13. Total amount paid per day of therapy was lower for elderly patients; the elderly paid for a larger fraction of their prescription drug costs.
14. U.S. Department of Health and Human Services, "Nearly Twenty-four Million Medicare Beneficiaries Now Have Prescription Drug Coverage," Press Release, 17 January 2006, http://www.hhs.gov/news/press/2006pres/20060117.html (accessed 13 August 2007);
15. and HHS, "Thirty-seven Million Medicare Beneficiaries Now Receiving Prescription Drug Coverage," Press Release, 10 May 2006, http://www.hhs.gov/news/press/2006pres/20060510.html (accessed 13 August 2007). The CMS figure implies that about 57 percent (24 million out of 42.4 million) of Medicare beneficiaries had prescription drug coverage in January 2006. However, Stuart and colleagues estimated that in 1998, 75.3 percent of all community-dwelling Medicare beneficiaries had prescription drug coverage, and the CBO estimated that in 2000, 73 percent of beneficiaries (including institutionalized beneficiaries) had coverage. CBO data, as reported in Douglas Holtz-Eakin, director, Congressional Budget Office, "Prescription Drug Coverage and Medicare's Fiscal Challenges," Statement before the House Committee on Ways and Means, U.S. House of Representatives, 9 April 2003.
16. See Section I of the Technical Appendix, online as in Note 1.
17. See Section II of the Technical Appendix; ibid.
18. Estimates based on data just for the second halves of 2005 and 2006 are very similar.
19. See Appendix Exhibit 3, online as in Note 1.
20. Robert Wood Johnson Foundation, "Public Program Crowd-Out of Private Coverage: What Are the Issues?" Research Synthesis Report no. 5, http://www.rwjf.org/pr/synthesis/reports_and_briefs/issue5.html (accessed 13 August 2007).
21. J. Gruber and K. Simon, "Crowd-Out Ten Years Later: Have Recent Public Insurance Expansions Crowded Out Private Health Insurance?" NBER Working Paper no. 12858 (Cambridge, Mass.: National Bureau of Economic Research, January 2007).
22. The general definition of the crowd-out rate is 1 minus the ratio of change in total insurance coverage or spending to change in public insurance coverage or spending. Estimates of Medicaid expansion crowd-out have generally been based on changes in insurance coverage: 1 minus the ratio of change in total insurance coverage to change in public insurance coverage (where total insurance coverage includes both public and private). Our estimate of Medicare Part D crowd-out is based on changes in spending: 1 minus the ratio of change in total drug spending to change in public drug spending - in this case, 1-($9 billion/$32 billion), or 72 percent.
23. The excess burden of taxation, also known as the distortionary cost or deadweight loss of taxation, is the economic loss society suffers as the result of a tax, over and above the revenue it collects. See the Wikipedia entry on "Excess Burden of Taxation," http://en.wikipedia.org/wiki/ Excess_burden_of_taxation (accessed 13 August 2007). To the extent that Medicare Part D was financed by government borrowing, rather than current taxation, the excess burden may fall on future taxpayers.
24. "Estimating the size of the excess burden of taxation is an empirical task that requires us to look at how people respond in their labor supply or effort decisions to increased taxes. ...Empirical measurement of the excess burden of taxation has provided different answers." A.L. Hillman, Public Finance and Public Policy: Responsibilities and Limitations of Government (Cambridge: Cambridge University Press, 2003), 136.
25. D.P. Goldman, G.F. Joyce, and P. Karaca-Mandic, "Varying Pharmacy Benefits with Clinical Status: The Case of Cholesterol-Lowering Therapy," American Journal of Managed Care 12, no. 1 (2006): 21-28.