U.S. Department of Health and Human Services

The Graying of Medicare’s Disabled Population: Implication for a Medicare Drug Benefit

Executive Summary

Dennis Shea
Penn State University

Becky Briesacher, Bruce Stuart and Jalpa Doshi
University of Maryland, Peter Lamy Center

March 28, 2002

This report was prepared under contract #HHS-100-01-0023 between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and the University of Maryland. For additional information about this subject, you can visit the DALTCP home page at http://aspe.hhs.gov/_/office_specific/daltcp.cfm or contact the office at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, S.W., Washington, D.C. 20201. The e-mail address is: webmaster.DALTCP@hhs.gov. The Project Officer was Andreas Frank

The opinions and views expressed in this report are those of the authors. They do not necessarily reflect the views of the Department of Health and Human Services, the contractor or any other funding organization.

The policy debate over a Medicare drug benefit has focused almost exclusively on the needs of Medicare’s elderly beneficiaries. While they represent more than 85 percent of the Medicare population, it is important to remember that Medicare also covers almost 5 million recipients of Social Security Disability Insurance (SSDI). If a drug benefit is to meet the needs of the entire Medicare population it must address the particular circumstances and needs of the disabled as well as the aged. There are actually two groups of Medicare disabled that warrant attention. First, there are the SSDI recipients themselves who, by statute, are all under 65 years of age. The second group comprises Medicare beneficiaries who are 65 and older, but who originally qualified for Medicare under SSDI. There are currently over 2 million beneficiaries who have aged out of SSDI, but still retain the characteristics and needs associated with younger disabled beneficiaries. We refer to this group as the “disabled aged.”

This report is intended to provide policymakers with critical information on prescription coverage, use, and cost for both younger and older disabled Medicare beneficiaries using data from the 1995 through 1998 Medicare Current Beneficiary Surveys. Our key findings are summarized below.

• Spending: Prescription drug spending among SSDI disabled and disabled aged beneficiaries is substantially higher than for the remainder of the Medicare population. SSDI beneficiaries, on average, spent more than $1,200 annually on prescription drugs, 40 percent more than the overall mean for Medicare beneficiaries in 1998. Disabled aged beneficiaries spent almost $1,300 on drugs that year. During the period 1995 to 1998 prescription spending among all Medicare beneficiaries rose 45 percent. The rate of increase for SSDI beneficiaries was also 45 percent, but for the disabled aged it was 60 percent.

• Coverage: SSDI and disabled aged Medicare beneficiaries are slightly more likely than the overall Medicare population to have prescription drug benefits, but they rely much more heavily on Medicaid and other public sources. The SSDI and disabled aged are less likely to receive employer coverage than other Medicare beneficiaries. While coverage expanded for both disabled groups from 1995 to 1998, the trends differ between them. SSDI beneficiaries had rising levels of employer and Medicare Health Maintenance Organization (HMO) coverage, with declining coverage from Medicaid. Disabled aged beneficiaries saw reductions in employer coverage and rising levels of coverage from Medigap and Medicare HMOs.

• Burden: While out-of-pocket spending on prescription drugs among SSDI beneficiaries is just 1 percent higher than for the general Medicare population, the low income of disabled beneficiaries means their drug spending as a percentage of income is much greater. In 1998, nearly two in five SSDI beneficiaries spent over 10 percent of their annual incomes on prescription drugs, up from fewer than one in three in 1995. The situation is even worse for disabled aged Medicare beneficiaries, of whom 43 percent spent more than 10 percent of their income on drugs in 1998.