Performance Improvement 2001. Healthcare Financing



Report to the President: Prescription Drug coverage, Spending, Utilization, and Prices.

Although the use of prescription drugs are increasingly improving health outcomes and quality of life, these drugs, and in particular new drugs, are not available to everyone. The elderly and disabled Medicare beneficiaries in particular have either inadequate or no coverage for drugs. The purpose of this study is to examine drug costs and trends for Medicare beneficiaries, using a combination of public and private databases, data on coverage, effects of coverage on spending and utilization, and prescription drug prices. The principal findings are:

  • although 85% of Medicare beneficiaries use at least one prescription drug annually, only 54% were covered for a full year during 1996, and 25% had no coverage. Most sources of drug coverage for these individuals are unstable; and drug benefits are becoming less generous.
  • the very old, those who live outside a metropolitan area, and those at the higher end of the poverty spectrum are the least likely to be covered.
  • rates for prescriptions are currently higher for those with five or more chronic conditions.
  • there are very significant differences in drug utilization and out-of-pocket spending between those with coverage and those without, regardless of health status.
  • prescription drugs represent a significant source of spending, taking up about one-sixth of all health spending by the elderly (cash customers pay more for drugs than do those with third party payments).

The study provides a detailed examination of multiple factors related to coverage, utilization, and spending for prescription drugs, particularly for the Medicare population.