NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Medicare Part D, Prescription Drug Utilization, and the Health of the Elderly

Gaining prescription drug insurance through Medicare Part D was associated with [a] 63 percent increase in the number of annual prescriptions.

The Medicare Modernization Act of 2003, which has come to be known as "Medicare Part D," provided a drug subsidy to all Medicare enrollees. In Medicare Part D and its Effect on the Use of Prescription Drugs, Use of Other Health Care Services and Health of the Elderly (NBER Working Paper No. 16011), Robert Kaestner and Nasreen Khan estimate the effect of gaining prescription drug insurance through Part D on the use of prescription drugs, the use of other medical services, and individual health. Their estimates are based on the behavior of the approximately 12,000 people surveyed by the nationally representative Medicare Current Beneficiary Survey (MCBS) in the years 2000 to 2007. The survey does detailed face-to-face interviews of panels of non-institutionalized Medicare beneficiaries aged 65 to 85 four times per year for four years.

The authors find that for the entire sample, "gaining prescription drug insurance through Medicare Part D was associated with [a] 63 percent increase in the number of annual prescriptions." The increase in prescriptions filled had no discernable effect on the use of other health care services or on health status as measured by functional status or self-reported health.

In a sample limited to the chronically ill, drug use increased by 56 percent, but health status was unaffected. However, outpatient visits by the chronically ill declined by about three per year, suggesting that prescription drugs may substitute for outpatient care.

The authors find little evidence that the large increase in prescription drug use created by the passage of Part D was associated with any change in outpatient service use, hospitalization, functional health, or general health status for most of those affected. They conclude that "much of the additional use of prescription drugs that results from gaining prescription drug insurance is [of] relatively low value in terms of health benefits," although they cannot conclusively rule out small improvements.

-- Linda Gorman

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