Analysis in this report is based chiefly on two household surveys conducted in 1996, the Medicare Current Beneficiary Survey (MCBS) and the Medical Expenditure Panel Survey (MEPS), and on data from pharmacy audits conducted by IMS Health. The following is a brief overview of these data sources. More detail on methodologies for MCBS and MEPS is provided in Appendix B.
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MCBS and MEPS
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For this report, coverage, utilization, and spending data for the Medicare population are drawn from MCBS. MCBS is a continuous, multipurpose survey of a representative sample of the Medicare population.1 Work on the MCBS is done under the direction of HCFA(now known as CMS)’s Office of Strategic Planning through its contractor, Westat, Inc. The 1996 survey included approximately 16,000 beneficiaries either in or joining the continuing sample, plus an additional one-time over-sample of approximately 2,000 beneficiaries in areas with high Medicare risk HMO penetration. Each continuing sample person, or an appropriate proxy respondent, is interviewed three times a year over a four-year period, regardless of whether he or she resides in the community or in an institution. In 1996, the sample for the Cost and Use component used in this report totaled 11,884 individuals; after excluding people who were institutionalized for the entire year, the sample includes 10,869 beneficiaries. The analysis of trends also drew upon the MCBS for 1992 through 1995.
For this report, coverage, utilization, and spending data for the non-Medicare population, along with some prescription price data for the entire population, are drawn from MEPS. MEPS, co-sponsored by the Agency for Healthcare Research and Quality and the National Center for Health Statistics (NCHS), is conducted to provide nationally representative estimates of health care utilization, expenditures, sources of payment, and insurance coverage.2 The MEPS has several components, of which two were used for this report: the Household Component (HC), a representative survey of the U.S. civilian noninstitutionalized population, and the Pharmacy Component (part of a broader Medical Provider Component), which contacts pharmacies reported by HC participants to supplement and validate information on prescription drug use and spending. The HC collects data through an overlapping panel design. In this design, data are collected through a preliminary contact followed by a series of six rounds of interviews over a two-and-a-half year period. Two calendar years of medical expenditures and utilization are collected from each household, along with information about insurance coverage. Data for 1996 are used in this report, based on a sample of 21,571 individuals.
The MCBS data used here include people who were in institutions only if they spent at least part of the year in the community. The MEPS HC is limited to noninstitutionalized people.3 This report therefore contains no information about drug coverage, utilization, or expenditures for the 1.6 million Americans, mostly elderly, who were living in nursing homes for the entire year of 1996, or for other people living in institutional settings such as long-term hospitals. Although facility residents are often heavy users of prescribed drugs, coverage and payment arrangements for these drugs are different from those for community residents. For example, drug costs may be included in a nursing home bill, rather than charged separately by a retail pharmacy. As a result, collection of comparable information for the community and institutionalized populations is not possible.
Three features common to the two surveys should be considered in interpreting the results:
- Both surveys found that some participants who failed to report having drug coverage actually had a prescription during the year for which payment was made by a third party. Payment source information might be supplied by the respondent in either MCBS or MEPS; in the case of MEPS, information could also be obtained through the pharmacy follow-back. In both surveys, the individual was deemed to have had drug coverage if self identified. In MCBS, however, there is an exception if a beneficiary reports drug coverage but has high out-of- pocket payments and no third party payments. In MEPS, the individual was also deemed to have drug coverage if identified in the pharmacy data.
- When a person reported or was otherwise identified as having more than one source of drug coverage during a year, he or she was assigned to one source of coverage. In MEPS, people with multiple sources of coverage were assigned to the type of coverage they had for the longest time during the year. If they had multiple sources for the same length of time they were assigned according to the following hierarchy: private group insurance, private nongroup insurance, private “other” group insurance, Medicaid, and Medicare HMO. MCBS also has a hierarchy: Medicare risk HMO, Medicaid, employer-sponsored, individually purchased, and other public. In MCBS, unlike MEPS, beneficiaries are assigned to the first relevant category in this listing regardless of how many months they spent in which categories.
- Both the MEPS and the MCBS analyses reported here treat individuals who reported coverage at any time during the year as covered. In fact, many people had drug coverage only for a part of the year. Data on duration of coverage for Medicare beneficiaries will be presented later in this report.
Further discussions of survey methodology can be found in Appendix B.
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IMS Health
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IMS Health conducts pharmacy audits to produce estimates of national sales of all pharmaceutical products sold through retail pharmacies. For each individual prescription drug, the IMS data provide information on total units sold during a given period, the acquisition costs paid by pharmacies, and the retail prices paid by three categories of purchasers: those who paid cash (for whom no insurance payment was made at the point of sale), those for whom payment was made by Medicaid, and those for whom payment was made by a third-party insurer. (Note that these categories reflect the source of payment to the pharmacy itself. If someone paid cash for a drug and was later reimbursed by an insurer, as is common under indemnity insurance plans, the transaction falls into the cash category.)
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Other Data Sources
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In addition to these three basic surveys, this report draws on findings from two other community-based surveys. The first is the ongoing Consumer Expenditure Survey (CES) conducted by the Bureau of Labor Statistics, which collects information on household income and spending. The second is the 1997 National Health Interview Survey (NHIS) conducted by the NCHS at the Centers for Disease Control and Prevention.
Trend estimates for aggregate U.S. drug spending are derived from the National Health Expenditures Series developed by HCFA(now known as CMS), which provides longitudinal information on aggregate spending by different payers for various categories of health services and supplies.
Finally, representatives of the Office of the Assistant Secretary for Planning and Evaluation and HCFA(now known as CMS) conducted a series of informal interviews with outside sources to collect background information for this report. These sources included representatives of drug manufacturers, pharmacy benefit managers, pharmacies, benefit consultants, consumer groups, and researchers familiar with the drug industry. They were asked for their insights on how the drug distribution system works, important trends in the industry, and any information that they could share about drug coverage, utilization, spending, and pricing.
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Standard Errors and Statistical Significance Tests for Reported Results
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Standard errors were produced for all of the survey-based results to ensure that the estimates derived from the surveys are robust – meaning that the reported estimates are not likely to be highly different from the values that would be produced if the entire population, rather than a sample, had been used to calculate the result. As a general rule, standard errors of greater than 30 percent of the reported result indicate that the estimate is unreliable. In these (relatively few) cases, the report will indicate that high standard errors preclude reporting the result.
Wherever possible, results noted in the text of this report have been subjected to statistical significance tests, to ensure that they are likely to be real, and not attributable to chance. The approach taken throughout this report is to indicate in a footnote only the few cases in which a result was not statistically significant. Thus, unless otherwise noted, results discussed in the text are statistically significant (at the 0.05 level, based on a two-tailed test).
The only results that were not subjected to significance tests were results based on the IMS data. The unique nature of the way IMS collects and reports its data does not allow for statistical testing of results from these audits. However, given the large sample sizes used by IMS (over 70 percent of US prescriptions filled at retail pharmacies), all results reported based on IMS data are highly likely to be statistically significant.
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