Report to the President: Prescription Drug Coverage, Spending, Utilization, and Prices.. Spending Trends for Medicare Beneficiaries

04/01/2000

Table 2-31 shows MCBS data on changes in drug utilization and spending for Medicare beneficiaries between 1992 (the first year of MCBS) and 1996, results that are generally consistent with the National Health Expenditures estimates for the total population. Total per beneficiary drug spending (including both third-party and out-of-pocket spending) rose at an annual rate of 9 percent in this period. Utilization grew 4.1 percent a year, slightly faster than the 3.9 percent annual growth in total retail prescriptions over the same period (NACDS). Spending per prescription grew 4.7 percent — well above general inflation, which averaged 2.8 percent from 1992 to 1996. Figure 2-17 shows that expenditures per Medicare beneficiary grew more rapidly than prescriptions per beneficiary throughout this period.

As it did for the total population, out-of-pocket spending on prescription drugs by Medicare beneficiaries grew less rapidly than total spending. This is due both to a growth in prescription drug coverage and particularly to shifts into managed care, including expanding Medicare risk HMO enrollment and increased use of managed care in retiree health benefit plans. Thus, this slower growth in out-of-pocket spending by Medicare beneficiaries may not reflect current or future trends.


Figure 2-17. Growth in Drug Spending and Number of Prescriptions per Medicare Beneficiary, 1993-1996

Figure 2-17. Growth in Drug Spending and Number of Prescriptions per Medicare Beneficiary, 1993-1996

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, 1992-1996.

Table 2-31. Growth in Utilization and Spending for Prescription Drugs by Medicare Beneficiaries, 1992-1996
  1992 1993 1994 1995 1996 Average Annual Change
Per Capita Total Expenditures $477 $513 $550 $600 $674 9.0%
Per Capita Out-of-pocket $277 $284 $287 $303 $318 3.5%
Per Capita Scripts 16.62 16.94 17.60 18.52 19.54 4.1%
Total Exp./Script $28.66 $30.30 $31.22 $32.39 $34.47 4.7%
Out-of-pocket/Script $16.67 $16.77 $16.28 $16.34 $16.29 -0.6%
Percent Out-of-pocket 58% 55% 52% 50% 47% -5.1%
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, 1992-1996.

Table 2-32 shows changes in spending between 1995 and 1996, by primary source of supplemental coverage and whether or not the beneficiary had drug coverage. Total spending and out-of-pocket spending both grew more rapidly between 1995 and 1996 than in the preceding two years. Spending growth was highest for enrollees in risk HMOs and for Medicaid beneficiaries, and enrollees in other public programs. Spending actually declined for beneficiaries with no supplemental coverage.

Table 2-32. Percent Change in Average Expenditures and Out-of-pocket Expenditures for Prescription Drugs for Medicare Beneficiaries with and without Drug Coverage, by Primary Medicare Supplement, 1995-19961
Primary Medicare Supplement Growth in per capita total drug expenditures Growth in per capita out-of-pocket drug expenditures
Total Covered Not covered Total Covered Not covered
             
All Beneficiaries 12.3% 11.6% 7.0% 5.2% 8.5% 7.0%
             
No Supplemental Coverage (FFS Medicare only) -7.2% na -7.2% -7.2% na -7.2%
Supplemental Coverage:            
Medicare Risk HMO 17.9% 19.7% * -4.8% -4.1% *
Medicaid2 17.0% 16.4% 38.5% 16.1% 11.4% 38.5%
Employer-sponsored3 11.1% 10.2% 10.6% 4.5% 5.9% 10.6%
Individually-purchased only 10.3% 6.1% 11.2% 11.7% 16.3% 11.2%
All other4 27.9% 25.4% 45.1% 24.7% 21.6% 45.1%

1Each person has been assigned to one supplementary insurance category but they may or may not obtain their drug insurance coverage from that source.

2 Includes beneficiaries receiving full Medicaid benefits, as well as QMBs and SLMBs.

3 Includes those who only had employer-sponsored supplemental insurance and those who had both employer-sponsored and individually-purchased supplemental insurance.

4 Includes other public programs such as VA, DOD, and State Pharmaceutical Assistance Programs for low-income elderly, as well as non-risk HMOs (cost and HCPP plans).

* Number is unreliable because of small sample size.

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, 1995 and 1996.

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