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

04/01/2000

As was discussed earlier, MEPS produces higher estimates of Medicare beneficiaries who had drug coverage than MCBS for three basic reasons. First, MEPS assigns coverage to larger numbers of people who did not report having drug coverage but who were found to have a third-party payment for a prescription. Second, MEPS treats all Medicaid and Medicare risk HMO enrollees as having drug coverage, although in fact not all do. Third, MCBS screens out beneficiaries whose reported coverage is inconsistent with their payment history. Each of these differences has potential implications for estimates of relative spending by covered and noncovered beneficiaries.

While the availability of payment-source data from pharmacies increases the coverage estimates under MEPS relative to those under MCBS, the method necessarily misses people with drug coverage who failed to report it and who did not have any drug expenditure during the year. These people remain in the noncovered group, while the people assigned to coverage on the basis of a drug expenditure are by definition all utilizers of drugs. This biases utilization and spending estimates upward for the population treated as covered and downward for the noncovered group, widening differences between the two groups.

This effect is partially offset by the MEPS assignment of drug coverage to all Medicaid beneficiaries and Medicare HMO enrollees. MCBS finds lower utilization by beneficiaries in these groups who did not have a drug benefit. Their inclusion in the MEPS counts of covered people thus depresses the MEPS estimates of spending for people with coverage.

Finally, MCBS treats as noncovered those beneficiaries who reported having coverage but paid more than $250 out of pocket and reported no insurance payment, while MEPS leaves these beneficiaries in the covered category. The effect is to raise the MEPS estimates of out-of-pocket spending for covered people and to lower the estimates for noncovered people. This effect does not appear to be very large.

In combination, these factors mean that MEPS data show larger utilization and spending differences between covered and noncovered beneficiaries than those shown in the MCBS data used in chapter 2. This would merely reinforce the key point of that chapter, that insurance has an important effect on use of prescription drugs. The MEPS data would also show a larger proportion of covered beneficiaries, and a smaller proportion of noncovered ones, receiving any prescription drugs at all.

MEPS and MCBS also differ in their estimates of out-of-pocket spending by Medicare beneficiaries. They are close in their estimates of the proportion of total spending that is paid out of pocket, 47 percent under MCBS and 50 percent under MEPS. However, MCBS finds beneficiaries with coverage paying about 33 percent of their own expenses, compared to 43 percent under MEPS. This difference is partially attributable to the differences in coverage estimates described above. However, the difference persists for groups, such as those with employer coverage, for whom the MEPS and MCBS coverage estimates are quite close. Further investigation will be needed to fully account for this difference. Use of the MEPS data would have shown smaller differences in out- of-pocket spending for people with and without coverage than are shown in chapter 2. As a corollary, however, MEPS data show that many people who have coverage have insurance that leaves them exposed to high out-of-pocket costs.

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