Report to the President: Prescription Drug Coverage, Spending, Utilization, and Prices.. Overall differences

04/01/2000

Table 2-1, drawn from 1996 MCBS data, compares drug utilization and spending for Medicare beneficiaries with and without drug coverage. As in the previous chapter, beneficiaries are included in the covered category if they had drug coverage at any point during the year. The next section of this chapter will explore the differences in spending and utilization depending on the duration of their coverage.

Table 2-1. Utilization and Spending for Prescription Drugs By Medicare Beneficiaries with and without Drug Coverage, 1996
  All Medicare beneficiaries Beneficiaries who filled at least one prescription
Covered Not covered Ratio, covered/ not covered Covered Not covered Ratio, covered/ not covered
Percent who filled at least one prescription 89.4% 80.3% 1.11 100% 100% 1.00
Average # of prescriptions 21.14 16.01 1.32 23.64 19.93 1.19
Average annual spending $768.90 $463.15 1.66 $859.99 $576.43 1.49
Retail price per prescription $36.37 $28.93 1.26 $36.37 $28.93 1.26
Average out-of-pocket spending $252.65 $463.15 0.55 $282.58 $576.43 0.49
% out-of-pocket 33% 100% 0.33 33% 100% 0.33
Average out-of-pocket per prescription $11.95 $28.93 0.41 $11.95 $28.93 0.41
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 table shows that:

  • Beneficiaries who have prescription drug coverage fill nearly one-third more prescriptions than those who do not have coverage, and total drug spending for beneficiaries with coverage is nearly two-thirds higher.
  • The cost of prescriptions filled by beneficiaries with coverage is higher on average than the cost of prescriptions filled by beneficiaries without coverage. This is not because the price of any specific medication is higher for people with coverage. Instead, the difference seems to come from the fact that people with drug coverage receive a different mix of drugs than noncovered people receive, or different size prescriptions. The next chapter will show that for a given prescription, prices are generallyThe cost of prescriptions filled by beneficiaries with coverage is higher on average than the
  • Beneficiaries with coverage pay out of pocket for 33 percent of their total spending on prescription drugs; those without coverage, of course, pay 100 percent. For each prescription they fill, beneficiaries without coverage pay on average more than twice as much out of pocket as those who have coverage. Overall, their annual out-of-pocket costs are nearly twice as high -- $200 more -- even though they use fewer medications (see Figure 2-1).

Figure 2-1. Out-of-pocket and Insurer Spending on Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, 1996

Figure 2-1. Out-of-pocket and Insurer Spending on Prescription Drugs by Medicare Beneficiaries with and without Drug Coverage, 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.


  • Beneficiaries with coverage are more likely to fill at least one prescription. The differences between those with and without coverage persist even when looking only at beneficiaries who fill prescriptions (see Figure 2-2).

Figure 2-2. Medicare Beneficiaries Who Filled a Prescription and Number of Prescriptions Filled, by Coverage Status, 1996

Figure 2-2. Medicare Beneficiaries Who Filled a Prescription and Number of Prescriptions Filled, by Coverage 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 2-2 presents similar information for the non-Medicare population.1 The differences in utilization and total spending are much greater. This is because a very large number of non-Medicare individuals without coverage — nearly two-thirds — receive no prescription drugs at all. In contrast, only 13 percent of Medicare beneficiaries fill no prescription during the year.2 If one considers only users of prescription drugs, the patterns are more similar to those shown in table 2-1. Those who have coverage receive more, and more costly, prescriptions.3 Those without coverage pay over twice as much out-of-pocket for each prescription they fill (see Figure 2-3).

Table 2-2. Utilization and Spending for Prescription Drugs By Non-Medicare Individuals with and without Drug Coverage, 1996
  Total non-Medicare population People who filled at least one prescription
Covered Not covered Ratio, covered/ not covered Covered Not covered Ratio, covered/ not covered
Percent who filled at least one prescription 70.0 33.9 2.06 100% 100% 1.00
Average # of prescriptions 6.80 2.02 3.36 9.73 5.92 1.64
Average annual spending $222.01 $58.94 3.77 $317.64 $172.64 1.84
$ per prescription $32.65 $29.17 1.12 $32.65 $29.17 1.12
Average out-of-pocket spending $80.59 $58.94 1.37 $115.30 $172.64 0.67
% out-of-pocket 36% 100% 0.36 36% 100% 0.36
Average out-of-pocket per prescription $11.85 $29.17 0.41 $11.85 $29.17 0.41
Source: Center for Cost and Financing Studies, Agency for Healthcare Research and Quality: Medical Expenditure Panel Survey Household Component, 1996.

Figure 2-3. Out-of-pocket and Insurer Spending on Prescription Drugs by Non-Medicare Beneficiaries with and without Drug Coverage, 1996

Figure 2-3. Out-of-pocket and Insurer Spending on Prescription Drugs by Non-Medicare Beneficiaries with and without Drug Coverage, 1996

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


It should be emphasized that, throughout this chapter, “out-of-pocket costs” include only the net costs to an individual, after any insurance payments, for any prescriptions received. Premiums paid for insurance coverage are not included. This analysis excludes premiums because it is difficult with survey data to separate drug premiums from overall insurance premiums. In fact, in many cases, calculating truly separate drug premiums would be impossible even with complete information. In many benefit packages, prescription drugs are considered a key piece, and the interactions with other benefits make it difficult to separate the incremental cost of a drug benefit from the package as a whole.4 Moreover, the insurance that these premiums buy has a value in and of itself, even if there is no drug utilization.

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