Health Care Costs and Financing

Researchers examine trends in spending on drugs for Medicare beneficiaries and insurance coverage for children

Findings from a new study by researchers at the Agency for Healthcare Research and Quality show that higher priced new drugs are playing a significant role in boosting expenditures by Medicare beneficiaries for prescription medicines. Two other studies by AHRQ researchers provide evidence on the progress of Federal efforts to provide low-income children with access to health care. All three studies, which appear in the September-October issue of Health Affairs, are described here.

Reprints of these staff-authored articles are available from the AHRQ Publications Clearinghouse

Moeller, J.F., Miller, G.E., and Banthin, J.S. (2004, September-October). "Looking inside the Nation's medicine cabinet: Trends in outpatient drug spending by Medicare beneficiaries, 1997 and 2001." Health Affairs 23(5), pp. 217-225.

John F. Moeller, Ph.D., formerly with AHRQ, and AHRQ researchers G. Edward Miller and Jessica Banthin, Ph.D., found that Medicare drug spending increased by nearly 72 percent between 1997 and 2001 when adjusted for inflation. During that period Medicare drug spending rose from $31.5 billion to $54 billion per year. The surge was primarily driven by a 26 percent escalation in the average prescription price and a nearly 24 percent growth in the average number of medications used per beneficiary. The approximately 10 percent rise in the number of seniors using prescription drugs played a smaller role.

Total spending increased the most for drugs to control cholesterol levels, diabetes medications, proton pump inhibitors, COX-2 inhibitors, antipsychotic medications, and antidepressants. Spending more than doubled for each of these classes of drugs between 1997 and 2001. Moreover, by 2001, relatively new, high-priced drugs dominated the market, with no or declining competition from generic drugs. The highest price increases occurred in antipsychotic medications and diabetes drugs.

Contributing to the rapid growth in spending for several classes of drugs was a dramatic increase in the number of Medicare beneficiaries who used them, especially cholesterol-lowering drugs, proton pump inhibitors, and COX-2 inhibitors. For example, the number of Medicare beneficiaries who used a cholesterol-lowering drug more than doubled from 4.9 million in 1997 to 10.5 million in 2001. During the same period, the number of Medicare beneficiaries using proton pump inhibitors jumped from 2.1 to 5 million, while those using COX-2 inhibitors surged from none to 5.5 million.

Within the larger class of all cardiovascular drugs, findings show that by 2001, Medicare beneficiaries were more likely to be taking more than one type of medication than in 1997. The overall annual spending increase for all cardiovascular drugs during this period—from $12.2 billion to $18.9 billion—resulted primarily from a 21 percent increase in the number of Medicare beneficiaries using prescription medicines and a 15 percent increase in the number of prescriptions per user. In addition, the average price per prescription for different types of cardiovascular drugs increased 11 percent over the same period.

The largest increases in the number of Medicare beneficiaries who used a cardiovascular drug of any type involved cholesterol-lowering drugs, beta-blockers, combinations of high blood pressure drugs, and ACE inhibitors.

Reprints (AHRQ Publication No. 04-R064) are available from the AHRQ Publications Clearinghouse.

Selden, T.M., Hudson, J.L., and Banthin, J.S. (September-October 2004). "Tracking changes in eligibility and coverage among children, 1996-2002." Health Affairs 23(5), pp. 39-50.

AHRQ researchers led by Tom Selden, Ph.D., found that dramatic progress has been made in the provision of public health insurance for children. The study found that the percentage of children who were eligible for free or highly subsidized health insurance rose from 29 percent in 1996 to 47 percent in 2002, primarily due to the enactment of the State Children's Health Insurance Program (SCHIP).

Expanding children's eligibility for coverage has not always led to increasing enrollment, however. In 1996, children made eligible through Medicaid expansions had a take-up rate of only 61 percent. One result of low take-up (enrollment) rates was that 4.6 million uninsured children were eligible for public coverage in 1996 but had not enrolled. By 2002, the take-up rate among this same group of Medicaid eligible children had risen to 77 percent. Take-up rates also rose sharply with SCHIP, from 44 percent in 1998 to 60 percent in 2002.

According to the authors, improved enrollment in available programs likely reflects the major public and private efforts launched in the mid-1990s to reach out to eligible but uninsured children. They say that while great progress has been made, outreach efforts must be sustained and enhanced if the problem of uninsurance among children is to be solved. During the first part of 2002, a total of 10 million children were uninsured in the United States and of this total, 6.2 million, or 62 percent, were eligible for public coverage but not enrolled. Somewhat more than half of these uninsured children were eligible for Medicaid but not enrolled (3.4 million), while the remaining 2.8 million uninsured children were eligible for SCHIP but not enrolled. Although increased outreach efforts yielded impressive enrollment gains over the period studied, as of 2002, the problem of uninsurance among children remained as much a problem of participation as of eligibility, say the authors.

Reprints (AHRQ Publication No. 04-R067) are available from the AHRQ Publications Clearinghouse.

Cunningham, P., and Kirby, J. (2004, September-October). "Children's health coverage: A quarter-century of change." Health Affairs 23(5), pp. 27-38.

Peter Cunningham, Ph.D., of the Center for Studying Health System Change in Washington, DC, and AHRQ researcher James Kirby, Ph.D., tracked changes in the rates of uninsured children and those with private or public coverage between 1977 and 2001. They found that the percentage of children without health insurance of any type increased sharply between 1977 and 1987, but by 2001 it had dropped to nearly what the rate was in 1977. The researchers also found that the percentage of children with public coverage rose significantly during the period, while, conversely, the percentage of children with private health insurance declined.

Reprints (AHRQ Publication No. 04-R065) are available from the AHRQ Publications Clearinghouse.

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