Health Care Costs and Financing

The Medicare Part D prescription drug benefit has modestly boosted drug use and reduced average out-of-pocket expenses

The Medicare Part D prescription drug benefit, begun in 2006, saved elderly participants about $9 a month and gave them an average extra 14 days of pills, estimates one of the first studies of the drug benefit. Researchers found that prescription drug use by the elderly increased by nearly 6 percent and out-of-pocket expenditures decreased 13 percent. The study used data on Medicare beneficiaries from a national pharmacy chain from September 2004 to April 2007 to examine the impact of the Part D drug benefit on drug use and costs. They compared drug use and expenses for persons age 66 to 79 years, who were eligible for the Part D benefit, with a control group of persons aged 60 to 63 years, who were ineligible for the benefit. The effects of Part D were modest on average, but nevertheless substantial for those who enrolled.

Persons who enrolled the earliest had the largest decrease in drug expenditures and largest increases in prescription drug use. The finding that late enrollees experienced small decreases in expenditures, but large jumps in drug use, may be due to unmet demand among these seniors before Part D, suggest the researchers.

During the penalty-free Part D enrollment period (January to May 2006), average monthly drug use increased by 1.1 percent and out-of-pocket expenditures decreased by 8.8 percent. After enrollment stabilized (June 2006 to April 2007), average monthly drug use increased by 5.9 percent and out-of-pocket expenditures decreased by 13.1 percent. Compared with eligible nonenrollees, enrollees had higher out-of-pocket expenditures and use at baseline, but experienced significantly larger decreases in expenditures and increases in drug use after enrollment. The study was supported in part by the Agency for Healthcare Research and Quality (HS15699).

See "The effect of the Medicare Part D prescription benefit on drug utilization and expenditures," by Wesley Yin, Ph.D., Anirban Basu, Ph.D., James X. Zhang, Ph.D., and others, in the February 2008 Annals of Internal Medicine 148(3), pp. 169-177.

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