Monday, April 26, 2004

Insurance Coverage Increases Drug Spending
By Mike Upchurch

DCRI researchers are helping flesh out the economic effect of the planned Medicare prescription drug benefit. Their analysis, published in the May issue of the journal Medical Care, shows that elderly people with prescription coverage spend more total dollars on drugs than those without. Though their insurance covers the majority, their out-of-pocket expenses are still high.

Previous research suggested that the presence of prescription drug insurance was linked to an increase in the amount of money spent on drugs, but these studies had limitations. They were conducted before the advent of several so-called “blockbuster” drugs, multibillion-dollar sensations in the 1990s like Zantac and Prozac. The analyses also relied on patients to report accurately their own prescription drug use and spending.

Lead author Lesley Curtis, PhD, and her DCRI team brought these findings up to date and under more thorough scrutiny by analyzing data from the Medical Expenditure Panel Survey (MEPS), a sweeping 1997 study of healthcare spending that included both patient-reported data and pharmacy surveys. This wealth of information provided a representative and comprehensive look at just how Americans were spending their healthcare dollars.

Dr. Curtis and her colleagues chose to concentrate on people 65 or older so that their results could best be extrapolated to the current Medicare prescription benefit debate. These patients accounted for more than 36% of all prescription drug spending in the U.S. in 1997. More than 34 million seniors were included in the study and about one third of them had no insurance coverage for prescription drugs.

In addition to their drug spending, the investigators also noted the patients’ demographic information (age, sex, income, etc.) and their self-reported health status, characterized as excellent, very good, good, or fair/poor.

After controlling for chronic illnesses and demographic risk factors that could increase the need for prescription drugs, the researchers found that the presence of drug insurance increased spending on prescription drugs by $183 per person. Extending the average benefit seen in the study to those uninsured would cost another $2.3 billion, an increase of just under 10%. However, as the authors point out, the average level of coverage in this study is less than that offered through a Medicare benefit, so this figure could go up under a Medicare prescription drug plan.

Some of the significant findings in the DCRI analysis were:

• Even with insurance, 44% of drug expenses are still paid out of pocket by the elderly. As the authors point out, “this finding underscores that prescription drug coverage for the elderly is not generous."
• Total spending for those without coverage was an average of $280 lower than for those with coverage.
• However, out-of-pocket expenses were 48% higher for those without coverage.
• Those without drug coverage filled an average of 6 fewer prescriptions than those with insurance.

Not surprisingly, lower health status translated to increased drug spending. Those reporting “fair/poor” health spent an average of $680 more than those with excellent or very good health. The presence of insurance did not seem to increase this gap.

Joining Dr. Curtis from the DCRI on this study were Kevin Anstrom, PhD and Kevin Schulman, MD.