Report to the President: Prescription Drug Coverage, Spending, Utilization, and Prices.. 2.6 What We Know and Need to Know

04/01/2000

This section reviews what is known as well as that which remains unanswered in the context of the bolded questions presented throughout the discussion above. There are some common themes. The first crosscutting theme is that the literature focuses on drug use and spending almost as if “prescription drugs” were a single homogeneous product. A few studies have analyzed utilization at the level of the therapeutic class, but there has been virtually no research on the nexus between insurance coverage and appropriate or inappropriate drug use. The presumption is that lack of drug coverage is a barrier to appropriate drug therapy and impacts access to medications. It is also possible that lack of coverage reduces exposure to inappropriate drug use and thereby reduces the incidence of adverse drug events. More research is needed to clarify this issue as adverse drug events contribute to additional health expenditures through hospitalizations to treat these events as well as the costly cycle of prescribing additional drugs to treat the side effects of many previously prescribed drugs. Further research is also warranted to identify the relevant elements in insurance contracts that demonstrate empirical evidence of assuring quality and safety in drug use.

A second common theme in the literature is the focus on aged Medicare beneficiaries to the near exclusion of the disabled and beneficiaries with ESRD. Nearly all of the studies reviewed here focus strictly on the elderly or simply subsume the disabled in with the aged. Twelve percent of Medicare beneficiaries or approximately 5 million individuals receive their program entitlement from disability insurance. These beneficiaries are (by definition) all under age 65 and have very different characteristics and prescription drug needs than their aged peers. For example, there is a much higher prevalence of mental illness among the disabled compared to the elderly, making behavioral medicine a critical issue for this population group. Also, the disabled do not have the same access to private Medigap supplements as those over 65 years of age.

Another common characteristic of the literature on drug use and spending by Medicare beneficiaries is that it is largely descriptive rather than analytical. Making public policy on the basis of means, frequency distributions, and cross-tabulations can be perilous given the interdependence of factors relating to drug coverage, use, and spending in this population. There is a need for additional multivariate research in each of the areas addressed in this review as identified below.

What factors explain drug spending by Medicare beneficiaries? This issue is paid considerable attention in the literature, but the studies are predominantly descriptive. We know that beneficiaries in poor health are high spenders, but we have little knowledge of the drugs they use or the illnesses they treat with them. We know that white beneficiaries spend more in total for prescription medicine than blacks, but we do not know whether the explanation is racial or is due to some other co-varying factors such as income or education.

Do Medicare beneficiaries pay more for their prescriptions than other Americans do? There is scant research on this topic and even fewer answers. The question is important, as limitations in prescription drug policies place many beneficiaries with private insurance at risk of significant out-of-pocket purchases. The “best price” practices reserved for large purchasers of prescription drugs means that Medicare beneficiaries who buy prescriptions without the benefit of group volume discounts will tend to pay higher prices. It would be useful to know whether Medicare beneficiaries with supplemental prescription coverage are reaching maximum expenditure caps earlier in the year because of drug price increases. Research is also needed to examine the extent of generic drug use by age and how this is influenced by rising drug prices and drug benefit design.

What are the characteristics of Medicare beneficiaries with and without drug coverage? We know who has drug coverage but not why. Here is another instance where lack of analytic studies hinders interpretation of the descriptive statistics about which beneficiaries maintain coverage and which do not. A particularly important question yet to be answered is whether beneficiaries with the greatest need for coverage find it easy or difficult to obtain it. An equally important question is how stable the prescription coverage is for those who have it.

Will the trends in prescription coverage of Medicare beneficiaries witnessed in the early and mid 1990s continue? Most commentators think not, but the evidence to date is strictly anecdotal. Reliance on the Medicare Current Beneficiary Survey as the primary data source on Medicare drug coverage, means that the most up to date information is almost four years old before it is published.

Does drug coverage encourage Medicare beneficiaries to use more outpatient prescription medications? The answer is yes, but additional studies are critical to improve the precision of the estimated size of the “insurance effect.” Also needed is research that examines the characteristics of beneficiaries most strongly influenced by prescription coverage as well as drug regimens they use (or would use if given the opportunity). We need to know whether the observed difference in utilization rates between the insured and the uninsured arises because the uninsured fail to fill prescriptions or because the insured are simply prescribed more medications.

Does drug coverage influence the type and cost of the medications used? There is little known about this important issue. Research is needed on the potential influence that drug coverage plays on the patient-physician relationship. For example, do Medicare beneficiaries without drug coverage visit the doctor less often (and thereby avoid the problem of getting prescriptions that they would not fill anyway)? Are doctors less likely to prescribe medications to those without coverage? Are they more likely to prescribe less expensive generic drugs to these clients?

What factors make Medicare beneficiaries most vulnerable to high out-of-pocket drug costs? This is perhaps the best understood of all the major issues raised in this review. Although the research to date is descriptive, the range of comparisons is large enough to give a clear profile of which groups of beneficiaries are at greatest economic peril from out-of-pocket drug costs.

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