Unbiased Analysis of Today's Healthcare Issues

Does Prescription Drug Coverage Save Money?

Written By: Jason Shafrin - Aug• 30•11

Many experts have claimed that increasing Medicare beneficiary’s access to prescription drugs through Medicare Part D is cost saving.  Even if it does increase cost, by increasing patient adherence to various prescription drugs, Medicare could prevent certain expensive hospitalizations and emergency room visits.

The only problem is that it doesn’t.

According to Liu et al. (2011) :

After adjustment, Part D was associated with a U.S.$179.86 (p=.034) reduction in out-of-pocket costs and an increase of 2.05 prescriptions (p=.081) per patient year. The associations between Part D and emergency department use, hospitalizations, and preference-based health utility did not suggest cost offsets and were not statistically significant.

In fact, increased drug coverage could increase the number of prescriptions the elderly take and lead to a higher number of harmful drug interactions, leading to increased hospitalizations.

Another paper, however, disagrees.  Afendilus et al. (2011) use HCUP data and and find that for selected ambulatory care sensitive conditions:

…our point estimates suggest that Part D reduced the overall rate of hospitalization by 20.5 per 10,000 (4.1 percent), representing approximately 42,000 admissions, about half of the reduction in admissions over our study period…The increase in drug coverage associated with Medicare Part D had positive effects on the health of elderly Americans, which reduced use of nondrug health care resources.

The debate rages on.

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6 Comments

  1. Devon Herrick says:

    There is an old, tired, bogus argument among public health advocates and socialized medicine wonks that somehow giving free health insurance, free care and free drugs to the masses is just so money-saving in the form of lower hospital costs and higher productivity that it should be a no-brainer! Purportedly, society would be so much richer from the investment.

    The problem is with their calculation of social benefits. They include benefits that are internalized to individuals and attribute them to society. Yet, for reasons that don’t make any sense, advocates want society to pay the cost of obtaining these dubious social (individual) benefits. Why would I want to pay for someone else to be healthy and more productive if they capture all the benefits? The economist in me sees the efficiency in internalizing the costs and benefits and letting them both accrue to the individual rather than make the dubious claim that health care is somehow a social good or a public good.

  2. Svillagedoctor says:

    I’m guessing yes. Because a toxicology report shows all drugs in the system. You don’t sit there and do two different drug test for legal and illegal drugs ROFL. All of that would of showed up. Since they blantantly ignored to tell people that there was no ILLEGAL drugs in her system is was most definitely prescribed drugs.
    Rather it be liver failure from mixing alcohol with vicodin or anything else containing APAP or she took too many other pills and died from respiratory failure or cardiac arrest.

  3. I think the drug companies would have us all believe that without the medications we all would suffer. If only we banned advertising and patents just think how much less our drugs would cost and really help seniors.

  4. Pall says:

    As an insurance agent working primarily with seniors on Medicare, I seriously doubt whether Part D has done anything except add to our national debt. Just because we make drugs more affordable to the individual does NOT necessarily translate to either a better quality of life or savings to the health care system. Why not rather encourage lifestyle changes such as exercise and better nutrition-a lot less expensive AND with proven positive results. As a good friend once asked “Is free sickness a good deal?”

  5. Joe says:

    As a retired CFO with a list of meds a mile long, I compared my drugs cost with and without Part D coverage through AARP. I would pay less simply walking up to the counter at my local pharmacy than dealing with Medicare coverage. Any premium cost simply makes the comparison worse.

    Anyone who assumes allowing the US Government will help reduce medical cost is a fool.

  6. Ruth Titus says:

    I agree with Joe. I am fiscally better off using the Walgreen’s prescription savings card at a cost of $20. per year than any Medicare part D pharmacy plan I could find. My copay for my most expensive drug would be $75.00 per month with one AARP plan and the monthly cost for that plan is $87 dollars! I now pay $81. for that prescription with no insurance. MEDICARE PART D IS a ripoff and seniors are duped into thinking they’re saving money. Likewise medicare replacement HMO’s which still charge copays more than what I pay with regular Medicare! Insurance companies are scamming the country.

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