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Medicare Outpatient Prescription Drug Benefit Fact Sheet

(This “Fact Sheet” is based upon statistics and summaries researched and made available through the Bilateral Commission on the Future of Medicare, the Health Care Financing Administration, and the Agency for Health Care Policy and Research. The numbers are from the latest government fiscal years that have been publicly reported. The “findings” reflect the views of these government agencies and do not necessarily reflect the position or the policies of the National Data Corporation. This “Fact Sheet” is made available as a courtesy by health-politics.com to its customers and friends.)

The current Medicare benefit package does not include outpatient prescription drug coverage. The Bureau of Labor Statistics estimates that 80% of persons employed in medium and large firms have prescription drug coverage.

Prescription Drug Supplemental Coverage

In 1995, 65% of Medicare beneficiaries had prescription drug coverage through employer-sponsored retiree plans (43.7%), Medicare HMOs (10.0%), Medicaid (16.9%), Medigap (16.0%), and/or other programs. (1)

Eighty-four percent of beneficiaries with employer-sponsored supplemental insurance have drug coverage.

Ninety-five percent of Medicare HMO enrollees have prescription drug coverage. (2)

Sixty percent of Medicare HMOs have a maximum benefit on prescription drug coverage with lower copayments than Medigap plans and no deductibles. (3)

Twenty-nine percent of beneficiaries with individually purchased private Medigap plans had drug coverage from the Medigap plan. Three of the ten standardized Medigap plans offer prescription drug coverage with $250 deductibles, 50% coinsurance, and maximum benefit payments of $1,500 ($3,000 under plan J).

At least eleven states have implemented special programs to provide drug coverage for low-income elderly or persons with disabilities. (4)

High-income beneficiaries ($50,000+ incomes) are more likely than low-income beneficiaries (-$10,000) to have prescription drug coverage, 71% versus 36% in 1995. (5)

Spending on Prescription Drugs Among the Elderly

The average drug expenditures per beneficiary in 1995 was $600. Total average spending per person for those with drug insurance was 60% higher than for persons without coverage ($691 versus $432). The lowest average level of total spending per persons with insurance was for beneficiaries enrolled in Medicare risk HMOs ($458). (6)

Out-of-pocket spending was lower for people with insurance ($232 versus $432 for people without coverage), but because the research has not included premium payments in the calculation, it is an inadequate comparison.

Medicaid paid the highest average drug insurance payment per person ($577) while Medigap plans paid the lowest ($112). (7)

The average Medicare beneficiary paid half of the cost of prescription drugs in 1995. By contrast, for the entire U.S. population, the national average share of prescription drug expenses paid out-of-pocket was 34 percent. Beneficiaries with drug coverage pay about 34% out-of-pocket.

According to AARP, beneficiaries averaged $440 out-of-pocket for prescription drugs in 1997. (8)

Purchasing prescription drugs accounted for 11% of beneficiaries’ out-of-pocket medical expenses. (9)

New, expensive prescription drugs are likely to increase beneficiaries’ out-of-pocket expenses, especially those beneficiaries with chronic conditions and severe disabilities.

Beneficiaries without coverage pay more for prescription drugs than most Americans because insurers negotiate discounts with pharmaceutical companies. (10)

Prescription drug expenditures are expected to continue growing at a relatively high rate due to increased investment in pharmaceutical research and development, growth in FDA new drug approvals, reduced FDA approval time, direct-to-consumer advertising, and bolstered marketing efforts. (11)

According to The Lewin Group’s analysis of 1995 MCBS data, 19% of beneficiaries had no drug expenditures, 28% spent between $1 and $99, 35% of beneficiaries spent between $100 and $499, and 11% of beneficiaries spent between $500 and $999. Seven percent spent over $1,000. Bear in mind that because this data is several years old and is not adjusted for possible under-reporting, it likely understates expenditures for many beneficiaries today. The Lewin Group notes that past studies of self-reported prescribed medication use have found substantial under-reporting between 23 and 34% of expenditures.

Prescription Drug Utilization

In 1995, 86% of Medicare beneficiaries used at least one prescription drug. (12)

Beneficiaries with drug coverage averaged 20.3 prescriptions per year, whereas those with no drug coverage averaged 15.3 prescriptions per year. (13)

Beneficiaries risk their health by not buying or rationing their prescribed medications because they cannot afford to buy the appropriate supply. (14)

Source

(1) Davis, Margaret, et al., “Prescription Drug Coverage, Utilization, and Spending Among Medicare Beneficiaries,” Health Affairs, January-February, 1999, p.23

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(2) Davis, p.231

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(3) Davis, p.241

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(4) Davis, p.233

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(5) “Current Knowledge of Third-Party Outpatient Drug Coverage for Medicare Beneficiaries,” The Lewin Group, November 9, 1998, p.8

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(6) Davis, p.238

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(7) The Lewin Group, p.11. The analysis did not include coverage provided by 11 state only Medicaid programs for low-income beneficiaries.

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(8) “FYI: Outpatient Prescription Drug Coverage Among Medicare Beneficiaries,” AARP.

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(9) OACT, based upon the 1995 Current Beneficiary Study. Out-of-pocket includes Part B, supplemental insurance and HMO premiums.

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(10) National Journal, October 31, 1998.

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(11) Smith, Sheila et al., “The Next Ten Years of Health Spending: What Does the Future Hold?,” Health Affairs, Vol. 17, No. 5, pp.135–136.

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(12) Davis, p.237

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(13) Davis, p.237

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(14) Stuart, Bruce and James Grana, “Ability to pay and the Decision to Medicate,” Medical Care, Vol. 36, No. 2, pp.202–211.

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Mid-Year Report on State Prescription Drug Discount, Bulk Purchasing, and Price Limitation Legislation for 2003

(July 7, 2003)

For 2003, most state legislatures continue to have a substantial interest in or focus on prescription drug access and costs. This year, state budget shortfalls collide with goals of improved coverage or access through state programs.

Medical and economic reports released in recent months confirm the continued rapid growth in spending and use of prescription drugs. The Congressional Budget Office states that 17 percent of the elderly will have more than $4,000 in drug expenses this year. (1) A survey released in February cites a 16.9 percent increase in 2002, and 14.5 percent increase in 2003, in overall private market transactions. (2) Some state-sponsored programs, such as Massachusetts, reported the increase in expenditures has been 30 percent or higher for a single year.

At the start of 2003, 26 states already had laws providing for state subsidies for certain people, while some 16 states had discount or bulk purchasing programs.

For the 2003 sessions, 49 states have more than 270 bills filed to create, expand or substantially change state pharmaceutical programs and policies. In a separate tally, another 34 bills would affect pharmaceutical marketing or advertising. In addition, 25 states considered non-binding resolutions urging the U.S. Congress to take action. In broad terms, the legislation examined in this report includes one or more of the following purposes:

• To use state funds to assist or subsidize the cost of pharmaceuticals for elders, low-income residents or others. These include authorizations for waivers seeking federal matching funds.
• To achieve new discounts or reduced prices for eligible residents, through state law, or by combining "bulk" purchases among programs, agencies or states.
• To achieve cost savings to the state and/or eligible state residents, by changing pharmaceutical purchasing policies. These proposals include plans related to use of generic products, prioritized or preferred drug lists, cost-sharing, state-only rebate programs, state coordination of free or discount programs, and other measures related to marketing, labeling, long-distance sales and charitable reuse programs.

This report reflects bills filed or considered early in the 2003 sessions. The list is a work-in-progress, with new material added on a regular basis. Since bills still are being filed, withdrawn and changed, consider the legislation listed as examples rather than an exhaustive listing of every measure filed.

Laws Signed:

So far this year, substantive state pharmaceutical laws have been enacted in Connecticut, Illinois, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Nebraska, New Mexico, Montana, North Dakota, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington and Wyoming. In addition, non-binding resolutions have passed in Maine, Montana and Vermont.

Medicaid-only:

health-politics.com is tracking Medicaid-only pharmaceutical policy changes separately. Recent Medicaid state laws and regulations are contained in a separate report,

2003 LEGISLATION BY TYPE

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Note that individual bills often have different approaches, and may modify an existing program, mandate an evaluation, or permit agency action, rather than simply establish a new policy. Many states have more than one bill on a single topic. In some states special sessions can reconsider bills not passed in a regular session; in about 25 states rules allow for carry-over or continuation to 2004.

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Footnotes:

(1) Congressional Budget Office, as cited in “Medicare Drug Benefit Plan Is Proposed,” New York Times, April 2, 2003

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(2) “Mercer's National Survey of Employer-Sponsored Health Plans,” by Chris Watts, Denver, February 20, 2003

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2003 LEGISLATION BY STATE (click link to view table)

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editorial content: © 2003 health-politics.com; all rights reserved