Report to the President: Prescription Drug Coverage, Spending, Utilization, and Prices.. Health status and other health indicators

04/01/2000

Not surprisingly, as health status worsens, beneficiaries use more drugs. However, Table 2-7 and Figure 2-7 show that while utilization rises, a gap remains between beneficiaries with and without coverage. Within each health status category, beneficiaries with coverage are more likely to fill at least one prescription, and fill more prescriptions when they do use drugs. Beneficiaries without coverage who are in fair or poor health are as likely to fill no prescriptions as covered beneficiaries in very good health.

Table 2-7. Medicare Beneficiaries Filling at Least One Prescription and Number of Prescriptions Filled, by Drug Coverage and Self-Reported Health Status, 1996
  % filling at least one prescription Number of prescriptions filled by users
  Covered Not covered Covered Not covered Ratio, covered/ not covered
Excellent 80% 67% 13.76 11.42 1.20
Very Good 86% 79% 17.18 15.45 1.11
Good 92% 84% 22.40 20.36 1.10
Fair 96% 86% 33.22 26.44 1.26
Poor 96% 86% 39.67 31.43 1.26
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 2-7. Percentage of Medicare Beneficiaries with and without Drug Coverage Filling at Least One Prescription, by Health Status, 1996

Figure 2-7. Percentage of Medicare Beneficiaries with and without Drug Coverage Filling at Least One Prescription, by Health Status, 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.


Table 2-8 and Figure 2-8 show that spending follows the utilization pattern: as Medicare beneficiaries report poorer health, their spending on prescription drugs increases. Again, within each health status category, beneficiaries with drug coverage have higher spending than the noncovered. Spending for beneficiaries in poor health who had drug coverage was $590 more than for those who lacked coverage; for beneficiaries with fair health, the difference was $480. Beneficiaries spent nearly twice as much out of pocket as those who had coverage unless they were in excellent health.

Table 2-8. Average Total Spending and Out-of-pocket Spending for Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, by Self-Reported Health Status, 1996
  Covered Not Covered Ratio, Covered/Not Covered
Self-reported health status Average total spending Average out-of-pocket spending Out-of-pocket as % of total spending Average total spending (all out-of-pocket) Average total spending Average out-of-pocket spending
Total $769 $253 33% $463 1.66 0.55
Excellent $414 $141 34% $207 2.01 0.68
Very Good $554 $190 34% $382 1.45 0.50
Good $759 $256 34% $497 1.53 0.51
Fair $1,120 $350 31% $640 1.75 0.55
Poor $1,340 $423 32% $749 1.79 0.56
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 2-8. Out-of-pocket and Insurer Spending for Medicare Beneficiaries with and without Drug Coverage, by Health Status, 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.

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 2-9 shows that the same patterns are reinforced when beneficiaries are split according to the duration of their drug coverage. Beneficiaries who always had drug coverage had nearly twice the spending of beneficiaries who never had drug coverage at any time during the year, regardless of health status. Those in fair or poor health who were covered for only part of the year had total spending slightly closer to those who never had coverage.

Table 2-9. Average Total Spending and Out-of-pocket Spending for Prescription Drugs by Medicare Beneficiaries by Duration of Drug Coverage and Self-Reported Health Status, 1996
  Always Covered Sometimes Covered Never Covered
Self-reported health status Average total spending Average out-of-pocket spending Out-of-pocket as % of total spending Average total spending Average out-of-pocket spending Out-of-pocket as % of total spending Average total spending (all out-of-pocket)
Total $828 $219 26% $626 $358 57% $468
Excellent/Good $655 $184 28% $480 $282 59% $386
Fair/Poor $1,327 $318 24% $1,003 $552 55% $732

Source: Bruce Stuart, Dennis Shea, and Becky Briesacher, “Prescription Drug Costs for Medicare Beneficiaries: Coverage and Health Status Matter,” New York, Commonwealth Fund Issue Brief, January 2000.

That spending and utilization differences persist across different health statuses suggests that the overall difference in spending for covered and noncovered people cannot simply be attributed to different levels of need for prescription drugs between those with and without drug coverage. However, self-reported health status is not necessarily a good indicator of relative need for drugs or other health services. Table 2-10 uses three other indicators to compare spending by covered and noncovered Medicare beneficiaries: number of chronic conditions, number of functional limitations, and use of inpatient services during the year.

Table 2-10. Average Total Spending and Out-of-pocket Spending for Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, by Other Indicators of Health Status, 1996
  Covered Not covered Ratio, covered/not covered
Average total spending Average out-of-pocket Spending Out-of-pocket as % of total spending Average total spending (all out-of-pocket) Average total spending Average Out-of-pocket Spending
             
Total $769 $253 33% $463 1.66 0.55
             
Chronic Conditions            
0 $222 $83 37% $148 1.50 0.56
1-2 $600 $191 32% $342 1.76 0.56
3-4 $932 $325 35% $617 1.51 0.53
5+ $1,401 $412 29% $944 1.48 0.44
             
Functional status            
No Limitations $662 $218 33% $415 1.60 0.53
IADL Only1 $1,160 $394 34% $666 1.74 0.59
1 or 2 ADLs2 $1,051 $348 33% $582 1.80 0.60
3+ ADLs2 $1,190 $378 32% $674 1.77 0.56
             
Inpatient use            
No admission $699 $230 33% $412 1.70 0.56
Admission $1,097 $361 33% $694 1.58 0.52
1 Beneficiaries who need assistance with one or more instrumental activities of daily living, such as meal preparation or managing money.

2Beneficiaries who need assistance with activities of daily living, such as bathing, dressing, toileting, or eating.

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.

On all three measures, the pattern is the same as for self-reported health status. Beneficiaries who report more chronic conditions, worse functional status, or a hospital stay during the year spend more on drugs whether or not they have coverage. In each category, beneficiaries with drug coverage spend much more than uncovered beneficiaries in the same category; at the same time, their out-of-pocket spending is much lower.

Because spending rises so dramatically with worsening health status, the dollar gaps between the covered and the noncovered rise with poorer health. For example, among beneficiaries with five or more chronic conditions, those with coverage had average total spending $457 higher than that for beneficiaries without coverage, while the difference for beneficiaries with no chronic conditions was only $74. Out of pocket spending for uncovered beneficiaries with five or more chronic conditions was $532 higher than for those with coverage. Drug insurance clearly makes an important difference for people with severe health problems.

Table 2-11 provides MEPS data for the total population (including people with and without Medicare) by self-reported health status. The figures include only people who used any prescription drugs. Again, spending rises with poorer health status for both the covered and the noncovered population,11 and the dollar difference in spending is greatest for those in poor health.12

Table 2-11. Average Number of Prescriptions and Average Total Spending for Prescription Drugs by Prescription Drug Users with and without Drug Coverage, by Self-Reported Health Status, 1996
  Covered Not covered Ratio, covered/not covered
Average number of prescriptions Average annual spending Average number of prescriptions Average annual spending Average number of prescriptions Average annual spending
TOTAL 12.59 $427.75 8.77 $269.04 1.43 1.59
Excellent 6.00 $175.75 4.34 $144.38 1.38 1.22
Very good 10.22 $339.21 7.66 $220.50 1.33 1.54
Good 14.59 $528.28 8.09 $221.31 1.80 2.39
Fair 25.11 $875.10 16.80 $584.61 1.49 1.50
Poor 37.86 $1,309.97 25.80 $793.25 1.47 1.65
Source: Center for Cost and Financing Studies, Agency for Healthcare Research and Quality: Medical Expenditure Panel Survey Household Component, 1996.

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