Spending on Medicare Part D

Study suggests that Medicare drug spending may lower other medical expenses

A study of Pennsylvania seniors found that many who enrolled in the Medicare drug program spent more on prescription drugs but less on doctor visits and hospital stays.

Listen: [audio:090702temedicare.mp3]

Julie Donohue is a health policy researcher at the University of Pittsburgh. She co-authored the study.

Donohue: It shows that there is a relationship between what Medicare spends on prescriptions drugs and what it spends on hospital and physician services. And that you can’t look at one part of Medicare in isolation from the others.

Donohue says for seniors with little or no drug coverage, better access to medication may translate to better health. For that group, higher drug spending was offset by lower medical costs in other areas.

The results may bolster President’s Obama’s bid to offer more generous Medicare drug benefits. But critics question his plans to pour more money into the health plan. Analysts say the Medicare trust fund could be bankrupt within 10 years.

Harvard health economist Joseph Newhouse led the study. He says for some Medicare enrollees, spending more on medication saved money elsewhere.

Newhouse: That did save money in hospital and physician services, and the savings in hospital and physician services roughly equaled the increased cost of the drugs.

Jerry O’Donnell works for Highmark Blue Cross and co-authored the study. He says the study results were different for seniors who already had generous prescription coverage when they joined the Medicare drug plan.

O’Donnell: Individuals that have rich medical benefits and pharmacy benefits, they tend to use perhaps more services than the average person even though you may not need everything that you are getting.

For those people, expanded drug coverage led to more medication spending and more medical spending elsewhere.