Performance Improvement 2005. Impact of Prescription Drug Coverage on Medicare Program Expenditures - a Case Study of the Evaluation of the Umwa


This report addressed how prescription coverage influenced the use of medical care when drug therapy substituted for or complemented other medical services. The research had three specific aims: (1) To examine the impact of drug coverage on drug expenditures and other expenditures covered by the Medicare program from 1995 to the latest available data of 2000. (2) To explore critical research design issues (most importantly statistical techniques for selecting comparison groups) that will be encountered in any evaluation of the prescription drug benefit currently available to members of the United Mine Workers of America (UMWA) Health and Retirement Funds. (3) To assess the predictability of drug expenditures and the performance of Medicare’s current risk adjustment methodology (the HCC/DCG). Essential findings included: (A) Drug coverage induced additional spending on prescribed medications by Medicare beneficiaries where higher spending on drugs among those with coverage appeared to have little aggregate impact on spending for Medicare-covered services; and drug coverage may potentially produce cost offsets for persons with particular medication-sensitive conditions. (B) Research may be difficult to find a credible comparison group for the Funds’ beneficiaries, and the study estimated rates of insurance coverage. (C) It would be possible to develop a case-mix adjustment methodology for privately provided drug benefits mitigating a substantial proportion of case-mix risk, and there was a need for very careful design of policies intended to improve beneficiaries’ access to drug insurance via free markets.

PIC ID: 8089; Agency Sponsor: CMS-ORDI, Office of Research, Development, and Information; Goody, Brigid, 410-786-6640; Performer: Abt Associates Inc., Cambridge, MA

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