Medicare's Drug Plan Has Cut Health Care Costs

July 26, 2011 -- Non-drug-related health care costs have been reduced for elderly patients who gained better prescription drug coverage under Medicare Part D, according to a new study.

Researchers found non-drug health care costs have decreased by nearly 4%, or an average of about $306 per quarter, among elderly Medicare beneficiaries who had limited drug coverage prior to implementation of Medicare Part D in January 2006 and now receive more generous prescription drug benefits through the government program.

Most of those health care cost savings were thanks to reduced inpatient and skilled nursing facility care spending, but reductions in costs were also seen in doctor visits.

The study is published in The Journal of the American Medical Association.

"In concert with previous studies, these findings suggest that increased medication use and adherence achieved through expanded drug coverage for seniors have been associated with decreased spending for non-drug medical care," write researcher J. Michael McWilliams, MD, PhD, of Harvard Medical School and Brigham and Women's Hospital in Boston, and colleagues.

Impact of Medicare Part D

Researchers say studies have shown that implementation of Medicare Part D was followed by an increase in medication use, reduced out-of-pocket costs, and improved adherence to essential medications for the elderly. But its impact on non-drug health care costs has not been defined.

In the study, researchers analyzed non-drug health care costs linked to Medicare claims from 2004 to 2007 among 6,001 elderly Medicare beneficiaries. The participants included 2,538 people whose medications were mostly or completely covered and 3,463 with limited prescription drug coverage before Medicare Part D implementation in 2006.

The results showed that total non-drug medical spending was 3.9% lower after Jan. 1, 2006, for those who had limited prescription drug coverage compared with those whose medications were mostly or completely covered before Medicare Part D.

The health care cost savings were largely due to reductions in inpatient and skilled nursing facility care, totaling $204 per quarter and a smaller decrease in physician services $67.

"The economic and clinical benefits suggested by these reductions may be enhanced by further expansions in prescription drug coverage for seniors, improvements in benefit designs for drug-sensitive conditions, and policies that integrate Medicare payment and delivery systems across drug and nondrug services," write the researchers.