Today’s Managing Health Care Costs Number is $76 billion
The mid-June issue of Annals of Internal Medicine had an article: “Did Medicare Part D Affect National Trends in Health Outcomes or Hospitalizations?”
This is a question that really matters. The Medicare Part D program fixed a huge gap in the Medicare plan when it was passed in 2003. There’s no reasonable health insurance plan that would include no coverage for ambulatory medications – drugs represent some of the most important advances in medical care. Drug coverage is especially are especially important for the elderly, who have suffer from more chronic diseases.
The Medicare Part D program costs $76 billion in public subsidies a year (about 1/7 the total cost of Medicare), serves 37 million Americans, and has been widely heralded as a success. It was sponsored by the George W. Bush administration, and barely passed the House of Representatives after voting was extended beyond the time allowed by House rules. Signups were initially plagued by confusion and chaos, but costs ended up lower than Congressional Budget Office projections, and currently Medicare beneficiary satisfaction with the program is high.
There are reasons to believe that increasing access to drug therapy could lower costs. Treat hypertension to prevent future heart attacks and strokes. Give asthmatics preventive drugs and they won’t go to the emergency room for treatment.
This study didn’t find that. There were no differences in measured health outcomes or hospitalizations over the three year study period, despite dramatic increases in access to pharmaceutical therapies.
Five years after Part D implementation, no clinically or statistically significant reductions in the prevalence of fair or poor health status or limitations in ADLs or instrumental ADLs, relative to historical trends, were detected. Compared with trends before Part D, no changes in emergency department visits, hospital admissions or days, inpatient costs, or mortality after Part D were seen. Confirmatory analyses were consistent. (Note ADL is “activities of daily living”)
An accompanying editorialsuggests that this lack of effect might have been caused by
- Higher population illness rates over this time period
- Lag between decreasing risk and actual improvement in health or costs, and measurement of some metrics unlikely to be helped by drug therapy
- Many beneficiaries (72%) had previous drug coverage, which could lead to an underestimate of the impact of Medicare Part D.
I suspect there are other reasons why this study did not show cost savings associated with the beginning of the Medicare drug benefit.
1. Drugs got more expensive during this time period. This is true of both brand names, especially specialty medications, and generic medications. This unit price increase is partially due to innovation and is also due to the decreased price sensitivity due to insurance, and because Medicare Part D has a severely fragmented purchaser community (more than 1000 different Medicare Part D plans), and the legislation prohibited Federal price negotiations
2. Drugs have been responsible for absolutely HUGE improvements in quality (and quantity) of life. However, pharmaceutical companies are good at pricing so that any cost saving benefit is captured by themselves. For instance, hepatitis C drugs will certainly prevent deaths, and will certainly prevent liver transplants. But the cost of those drugs is greater than the potential transplant savings. That’s true over any time horizon.
3. If drugs prolong lives, they might lead to more hospitalization and higher medical costs - but they are still providing real value.
I’m more surprised that Medicare Part D was not associated with a decrease in hospitalizations, although that could come at a later point. I don’t believe that during the study period (2010 compared to 2000) there were changes in practice that should have led to increases in hospital utilization that would have offset decreases due to Medicare Part D.
There are few drugs that are cost saving outside of tiny subpopulations. The obvious class of drugs that are cost saving are generic oral contraceptives; these are not relevant in the Medicare population. Most drugs for chronic conditions are ‘cost effective,’ meaning that we get quality adjusted life years from them for a “reasonable price.” That’s not the same as cost saving. So perhaps it was unrealistic to think that offering a drug benefit would lower health care costs.
I support the Medicare drug benefit, and it’s not because it saves money. I support Medicare Part D because you can’t give a patient excellent clinical care in 2015 if they don’t have access to a drug benefit. Medicare Part D could be improved, and the program could negotiate lower unit costs. But don’t interpret this study to suggest we don’t need a Medicare drug benefit.
Note that bullet point 3 above and the note on increased generic prices are courtesy of one of my colleagues, and added mid-day 7/2.
Note that bullet point 3 above and the note on increased generic prices are courtesy of one of my colleagues, and added mid-day 7/2.
