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Seniors with access to affordable prescription drugs require less spending on emergency and short-term nursing care, according to a study of Medicare Part D released Tuesday.
Published in the Journal of the American Medical Association, the report shows that the federal program — which subsidizes prescription drugs for seniors — “significantly” reduces non-drug medical costs for those who had limited coverage before the program began in 2006.
The report is the latest in a string that indicate Part D gives seniors better access to the drugs they need, increases their adherence to medication instructions and reduces their out-of-pocket costs. But this is the first major report to show that better drug care translates to a drop in spending on acute and post-acute care, including hospitalizations and short-term nursing home stays.
To examine the impact of the program, researchers from Harvard Medical School and Brigham and Women’s Hospital looked at survey data and linked Medicare claims between 2004 and 2007. Excluding drug costs, health care spending for the 2,538 beneficiaries who already had generous benefits was about the same as would be expected if Medicare Part D didn’t exist.
The 3,463 seniors with limited prescription drug benefits — those who stood to benefit most from the program — experienced a decreased need for emergency treatment and rehabilitation, even as their access to routine doctor visits and other outpatient services remained roughly the same. In real terms, their non-drug health care costs dropped $1,200 per year below what would have been expected without Part D, according to the report.
Dr. J. Michael McWilliams, lead author of the study, hopes the findings will encourage more coordination among Medicare’s branches. The current practice of paying doctors and other health care providers for individual services offers little incentive for Medicare Part D to coordinate care with parts A and B, which pay for inpatient and outpatient care, he said.
“The fact that drug spending can substitute for non-drug spending suggests we could be doing a better job of aligning incentives,” he said.
The report may also lend credence to the health reform law’s plan to close the despised Medicare Part D “doughnut hole” by 2020. The gap requires seniors to pay 100 percent of their drug costs after they’ve spent $2,840 on prescription drugs. They continue to pick up the next $3,608 out-of-pocket until they become eligible for catastrophic coverage and Medicare kicks back in.
McWilliams, a practicing general internist at Brigham and Women’s Hospital, has seen chronically ill patients drop all but the most crucial prescriptions or stretch their drugs by skipping doses — two factors that can lead to increased emergency costs, he said.
“Our findings suggest that even though closing the doughnut hole will cost the nation in spending, there is likely to be some savings in non-drug care. In other words, it may not cost as much as we expected,” McWilliams said. “And for seniors, it may keep them out of the hospital.”
Released just as lawmakers fiercely debate the future of Medicare, analysts from both sides of the aisle found something to like in the news about Part D.
Edwin Park, vice president for health policy for the liberal think tank Center on Budget and Policy, said he agrees the prescription plan should be aligned more closely with inpatient and outpatient health care.
“In fact, the problem with Part D that a number of us had when it was enacted is that it was specifically set apart, instead of being folded into the fee-for-service system,” he said. “Generally, this report has some application to showing how important coverage is, especially during the debt and deficit debate and all of the talk going on right now about the value of health reform. Coverage matters.”
Conservatives tout the results for a much different reason. Because Part D is run through private plans, they point to the program as an example of a competitive system that improves care while bringing down costs. Joseph Antos, a scholar in health care and retirement policy at the conservative American Enterprise Institute, called the study “a significant but an obvious one.”
“This is the reason all other private plans have covered prescription drugs for decades — they’re effective,” he said. “But one cannot jump to the conclusion that because of Part D, the off-setting savings represent a net program savings for Medicare across the board. It’s almost certainly not the case.”