American Adults More Likely Than Europeans To Be Diagnosed With, Treated For Chronic Diseases

Higher U.S. Disease Rates Contribute Up To $150 Billion In Annual Health Care Spending

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Christopher Fleming

New Study: Medicare Part D Increases Medication Consumption By 158 Million Prescriptions, Costs Federal Government $32 Billion

Related Study Shows Medicare Beneficiaries Spending More On Health As Share of Income Over Time

Health Affairs Celebrates 25 Years With Perspectives On Range Of Health Topics From Leaders In The Field

Bethesda, MD -- A new study examining the effect of the new Medicare prescription drug benefit on the elderly shows that it led to the consumption of an additional 158 million prescriptions in 2006 at a cost of $32 billion to Medicare. Many seniors already had prescription drug coverage, so the new benefit reduced the average amount paid by seniors per day of therapy by 18.4 percent, and increased the elderly’s prescription drug use by only 13 percent, say researchers in a study published today in the 25th anniversary issue of the journal Health Affairs.

“The rhetoric surrounding Medicare Part D’s potential impact on seniors’ medication use and savings on drug costs doesn’t match the reality,” said study coauthor Frank Lichtenberg, a business professor at Columbia University. “The increase in drug utilization and decrease in cost to the elderly was relatively minor,” he added.

The Medicare Part D drug benefit expanded to all 43 million Medicare beneficiaries beginning in January 2006. Researchers compared prescription drug use and related costs in the elderly (those over age 65) and nonelderly population using data from more than 584 million prescriptions filled by Walgreens from September 2004 to December 2006. Walgreens fills about 1.4 million prescriptions per day, on average, or about 18 percent of all prescriptions filled in the United States.

Lichtenberg and coauthor Shawn Sun, a researcher at Walgreens Health Services, found that Medicare patients paid about 66 cents per day of medication therapy in September 2004. By December 2006 -- after implementation of Medicare Part D -- Medicare patients paid about 53 cents per day of therapy. However, with the subsequent increase in utilization that came after Part D, researchers found that the program reduced the total amount paid by patients by only 5.6 percent. The program increased the amount that private insurers paid by 22.3 percent.

To evaluate the economic impact of the program, the researchers examined by how much the program reduced private insurance coverage or spending, commonly known as the crowd-out rate. The researchers found that every seven prescriptions paid for by the government crowded out five prescriptions and resulted in only two additional prescriptions used. The federal government spent about $203 for each additional prescription for the elderly, or about 3.5 times as much as the average price ($57) for a prescription in 2006. The Congressional Budget Office estimates that the government spent $32 billion on the new drug benefit in 2006, a level that is expected to accumulate to $797 billion by 2015.

“Our findings do not necessarily mean that the Medicare Part D program is economically inefficient, because there are potential long-term health care savings when people can afford to take necessary medications,” Lichtenberg said. “However, we need to think carefully about the economic implications of this program, which the federal government will ultimately have to raise taxes to pay for.”

What’s in the issue. The November/December issue of Health Affairs,, features special content to mark the journal’s 25th anniversary. It includes reflections from more than a dozen longtime Health Affairs contributors, including a commentary by Uwe E. Reinhardt, on changes in health care over the past 25 years, related policy debates, advice for those who want to reform the health care system, and predictions about health care issues in the next 25 years. The issue also features an interview with Robert Wood Johnson Foundation president and CEO Risa Lavizzo-Mourey.

Other highlights include the following:

Medicare Beneficiaries At Highest Risk, Spending More Out Of Pocket On Health Care. The oldest, frailest, and poorest Medicare beneficiaries are spending a much greater share of their own income on premiums and health services than others, and out-of-pocket spending as a share of income has increased over time for the Medicare population.

Kaiser Family Foundation and University of California, Los Angeles, researchers found that median out-of-pocket spending on health care increased by 50 percent, from $1,667 to $2,501, between 1997 and 2003. The oldest Medicare beneficiaries, those in poor health, beneficiaries with low incomes, and those living in nursing homes were more likely to spend a large share of their incomes on premiums and health care services than other Medicare beneficiaries, according to the study.

The top quarter of high-spending beneficiaries spent almost 30 percent of their income on health care. The top 10 percent spent nearly 60 percent of their income on health care. Four of 10 beneficiaries spent more than 20 percent of their income on health in 2003, researchers Patricia Neuman, Juliette Cubanski, Katherine Desmond, and Thomas Rice found.

The findings “raise important questions about how much of their incomes beneficiaries can reasonably be expected to spend on their health care and whether current out-of-pocket spending levels are affordable,” the researchers say. They warn that the overall burden of paying for health care could continue to rise for beneficiaries, and, as a result, health care could become less affordable and accessible for all but the highest-income beneficiaries.

Higher Incomes And The Uninsured. Almost 20 percent of uninsured Americans live in a household with income over $75,000, and 37.8 percent live in a household with income over $50,000, according to Census Bureau data. But University of Michigan researchers Hanns Kuttner and Matthew Rutledge point out that measuring income at the household level groups together those who live under one roof, whether or not they are related. Family income excludes the income of people not related by birth, marriage, or adoption.

Kuttner and Rutledge say that the ranks of the higher-income uninsured include some whose high income reflects short-term income spikes. In addition, the amount of time one lacks insurance also affects attitudes toward insurance. Among the currently uninsured, 9.7 percent were in the middle of periods without insurance that lasted four months or less, and 29.1 percent lacked insurance for up to a year. Those in higher-income households were more likely to go through shorter periods without insurance.

“Factors other than unwillingness to buy coverage play a large role in the lack of health insurance among higher-income Americans,” the researchers write.

Implications Of Expanding Disease Definitions. The National Osteoporosis Foundation and American College of Obstetrics-Gynecology have expanded osteoporosis therapy recommendations by broadening its treatment threshold for osteoporosis to include women with denser bones. These changes increased the number of women for whom treatment is recommended from 6.4 million to 10.8 million among women age 65 and older, at a net cost of $28 billion, Dartmouth Medical School researchers M. Brooke Herndon, Lisa Schwartz, Steven Woloshin, and H. Gilbert Welch found. The change also increased from 1.6 million to 4 million the number of women ages 50-64 for whom treatment is recommended, at a net cost of at least $18 billion.

“Our findings highlight the enormous implications of seemingly modest changes in the treatment threshold for osteoporosis. We believe that it is essential for an independent organization (such as the IOM) to review the evidence and develop an unconflicted definition of osteoporosis requiring treatment,” the researchers conclude.



Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at


©2007 Project HOPE–The People-to-People Health Foundation, Inc.