Report to the President: Prescription Drug Coverage, Spending, Utilization, and Prices.. Distribution of Spending

04/01/2000

Table 2-14 and Figure 2-10 show the distribution of spending by beneficiaries with and without drug coverage in 1996. Only 4 percent of Medicare beneficiaries accounted for almost a quarter of all beneficiaries’ drug spending in 1996, and the top third of beneficiaries spent three-fourths of the total spent on drugs. The distribution of spending is different for covered beneficiaries compared to those without coverage. Compared to beneficiaries with coverage, those without coverage were almost twice as likely to spend nothing, and about half as likely to spend over $1,000.

Table 2-14. Distribution of Medicare Beneficiaries with and without Drug Coverage by Amount of Prescription Drug Spending, 1996
Spending on Prescription Drugs Percent of population Percent of Spending
Total Covered Not covered Total Covered Not covered
             
Total 100% 100% 100% 100% 100% 100%
             
No Spending on Drugs 13% 11% 20% 0% 0% 0%
$1 – 249 27% 26% 29% 4% 4% 6%
$250 – 499 17% 16% 19% 9% 8% 15%
$500 – 749 12% 12% 11% 11% 10% 15%
$750 – 999 9% 9% 8% 11% 10% 15%
$1,000 - 1,249 6% 6% 4% 9% 9% 9%
$1,250 - 1,499 4% 5% 3% 8% 8% 8%
$1,500 - 1,749 3% 3% 2% 6% 7% 5%
$1,750 - 1,999 2% 3% 2% 7% 7% 8%
$2000 - 2,499 3% 3% 2% 9% 10% 7%
$2,500+ 4% 5% 1% 24% 28% 10%
Source: Information and Methods Group, Office of Strategic Planning, Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)): Medicare Current Beneficiary Survey Cost and Use File, 1996.

 

Figure 2-10. Distribution of Medicare Beneficiaries and Prescription Drug Expenditures by Amount of Spending, 1996

Source: Information and Methods Group, Office of Strategic Planning, Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)): Medicare Current Beneficiary Survey Cost and Use File, 1996.


Tables 2-15 through 2-17 provide a fuller picture of the characteristics of the subset of Medicare beneficiaries with the highest spending. They compare the 20 percent of the population with the highest spending (those with annual expenditures over $1,066) with the total population. The top 20 percent group is referred to as the “highest drug spenders” in these tables. Overall, 24 percent of covered beneficiaries fell into this group, and 12 percent of noncovered beneficiaries. Of the high spenders, 82 percent had drug coverage, compared to 69 percent of all beneficiaries.

The data show that, in general, the differences explored in this report between Medicare beneficiaries with and without drug coverage do not appear to be driven by high spenders. In other words, the gaps in spending and utilization between Medicare beneficiaries with and without drug coverage do not appear to result because of unique characteristics of those with higher spending. Differences in source of supplemental coverage for high spenders with and without drug coverage mirror the differences seen between all beneficiaries with and without drug coverage, as shown in Table 2-15. Overall, the highest spenders are more likely to have employer based insurance or Medicaid, and less likely to have individually purchased insurance or be in a risk HMO.

Table 2-15. Medicare Beneficiaries with and without Drug Coverage, as Share of Total Population and Share of the Highest Drug Spenders, by Primary Source of Supplemental Coverage, 1996
Primary Medicare supplement Covered Not covered Total
Percent of all beneficiaries Percent of highest drug spenders Percent of all beneficiaries Percent of highest drug spenders Percent of all beneficiaries Percent of highest drug spenders
             
TOTAL 100% 100% 100% 100% 100% 100%
             
Risk 15% 10% 2% * 11% 8%
Medicaid 17% 19% 4% 5% 13% 17%
Employer Sponsored 47% 50% 13% 18% 36% 44%
Individually Purchased 16% 16% 54% 61% 28% 24%
Other 5% 5% 2% * 4% 5%
FFS Medicare 0% 0% 25% 14% 8% 3%

*Less than 1 percent; sample is too small to produce a stable estimate.

Source: Information and Methods Group, Office of Strategic Planning, Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)): Medicare Current Beneficiary Survey Cost and Use File, 1996.

For the demographic characteristics shown in Table 2-16, the highest spenders do not differ very much from the general Medicare population. Across the total population with and without drug coverage, high spenders’ income distribution is similar; so is their age distribution, except that high spenders are slightly more likely to be nonelderly. Their distribution by race, sex, and metropolitan residence is also comparable. Within both the covered and the non-covered categories, the highest spenders are also similar to the general population of Medicare beneficiaries, except that people without coverage who are below poverty are less likely to be high spenders. This suggests that beneficiaries in all income and socioeconomic groups are at risk of having high drug spending, but that both health status and drug coverage can influence that spending.

In contrast, as might be expected, the highest spenders tend to have poorer health than other Medicare beneficiaries, as measured by each of the indicators used. Table 2-17 shows that these beneficiaries are more likely to report poorer health status, multiple chronic conditions, and more functional limitations, and they are more likely to have had an inpatient admission. This is true for beneficiaries with and without coverage.

Table 2-16. Medicare Beneficiaries with and without Drug Coverage, as Share of Total Population and Share of the Highest Drug Spenders, by Selected Demographic Characteristics, 1996
  Covered Not covered Total
Percent of all beneficiaries Percent of highest drug spenders Percent of all beneficiaries Percent of highest drug spenders Percent of all beneficiaries Percent of highest drug spenders
             
Total 100% 100% 100% 100% 100% 100%
             
Poverty/Income            
<Poverty 21% 22% 23% 18% 22% 22%
Poverty-135% 11% 11% 15% 17% 12% 12%
136-150% 4% 3% 6% 7% 5% 4%
151-175% 7% 7% 8% 7% 7% 7%
176-200% 7% 8% 9% 9% 8% 8%
201-300% 20% 21% 19% 20% 20% 21%
301-400% 12% 12% 9% 9% 11% 12%
>400% 17% 16% 12% 13% 16% 16%
             
Age            
0-44 4% 5% 4% 2% 4% 5%
45-64 8% 13% 7% 11% 8% 13%
65-69 27% 23% 23% 18% 25% 22%
70-74 24% 21% 23% 23% 23% 21%
75-79 18% 18% 19% 17% 18% 18%
80-84 12% 12% 14% 16% 12% 13%
85+ 8% 8% 11% 12% 9% 8%
             
Sex            
Male 45% 40% 42% 39% 44% 40%
Female 55% 60% 58% 61% 56% 60%
             
Race            
White 85% 88% 88% 92% 86% 88%
Black 9% 8% 9% 6% 9% 8%
Other 6% 4% 4% 2% 5% 4%
             
Metro status            
Metro 78% 77% 64% 62% 73% 74%
Nonmetro 22% 23% 36% 38% 26% 25%
Source: Information and Methods Group, Office of Strategic Planning, Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)): Medicare Current Beneficiary Survey Cost and Use File, 1996.

 

Table 2-17. Medicare Beneficiaries Reporting Selected Measures of Health Status, as Share of Total Population and Share of the Highest Drug Spenders, by Drug Coverage, 1996
  Covered Not covered Total
Percent of all beneficiaries Percent of highest drug spenders Percent of all beneficiaries Percent of highest drug spenders Percent of all beneficiaries Percent of highest drug spenders
             
Health Status            
Excellent 16% 7% 17% 3% 17% 6%
Very Good 26% 17% 27% 17% 27% 17%
Good 30% 30% 30% 32% 30% 30%
Fair 18% 28% 17% 31% 17% 28%
Poor 10% 18% 9% 17% 9% 18%
             
Functional Status            
No Limitations 76% 65% 77% 63% 77% 64%
IADL Only 4% 8% 4% 8% 4% 8%
1 or 2 ADLs 12% 16% 12% 17% 12% 17%
3+ ADLs 7% 11% 7% 12% 7% 11%
             
Chronic Conditions            
0 9% 2% 11% 2% 10% 2%
1-2 44% 30% 46% 26% 45% 30%
3-4 36% 45% 34% 50% 35% 46%
5+ 11% 22% 8% 21% 10% 22%
             
Inpatient Stay            
No 82% 74% 82% 67% 82% 73%
Yes 18% 26% 18% 33% 18% 27%
Source: Information and Methods Group, Office of Strategic Planning, Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)): Medicare Current Beneficiary Survey Cost and Use File, 1996.

The distribution of drug spending is even more concentrated for the non-Medicare population. Table 2-18 shows the distribution for the non-Medicare population in three coverage groups: coverage other than Medicaid, Medicaid, and no coverage. The highest spenders account for much of the spending in each category. Among individuals with Medicaid or with other drug coverage, the top 5 percent account for over half of total spending. The top 5 percent of individuals without drug coverage account for almost three-quarters of total spending for people without drug coverage. People with Medicaid are somewhat more likely than people with other coverage to have had no drug spending during the year, while people without coverage are much more likely to have had no drug spending.

Table 2-18. Distribution of Non-Medicare Individuals with and without Drug Coverage by Amount of Prescription Drug Spending, 1996
Amount of prescription drug spending Percent of population Percent of total spending
Covered Medicaid Not covered Covered Medicaid Not covered
Total 100% 100% 100% 100% 100% 100%
$0 29% 36% 66% 0% 0% 0%
$1-250 51% 50% 29% 16% 16% 27%
$250-500 9% 4% 2% 14% 8% 13%
$500-1,000 6% 4% 2% 19% 17% 18%
$1,000 -2,000 3% 3% 1% 20% 24% 19%
$2,000+ 2% 2% <1% 32% 34% 24%

Note: The total includes persons with negative family income. Percents may not add to 100 because of rounding.

Source: Center for Cost and Financing Studies, Agency for Healthcare Research and Quality: Medical Expenditure Panel Survey Household Component, 1996.

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