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Health Care Costs and Financing

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Medicare drug benefits with high out-of-pocket costs might not be effective for low-income beneficiaries with chronic diseases

The Medicare Modernization Act of 2003 added a Medicare prescription drug benefit to begin in 2006, along with other changes. Prior to passage of the Act, Thomas Rector, Ph.D., and Patricia Venus, M.A., of the Center for Health Care Policy and Evaluation in Minnesota, surveyed a random sample of 1,500 elderly people with chronic diseases about their health, medication use and costs, and income. The study participants were enrolled in one of eight Medicare+Choice plans in five States in 2002. The plans had a zero-premium, $200 to $300 annual drug benefit, and no deductible.

Nearly one-third (32 percent) of enrollees with common chronic diseases did not fill prescriptions or used less medication than prescribed because of the out-of-pocket costs they incurred under the small supplemental drug benefit. Significantly more enrollees stinted when the drug benefit was limited to $200 rather than $300. Also, enrollees who had the lowest household income were most likely to stint, according to the study, which was supported by the Agency for Healthcare Research and Quality (contract 290-00-0012).

Drug benefits with high out-of-pocket costs may not be adequate for Medicare beneficiaries who have chronic medical conditions, especially those with low incomes, conclude the researchers. Three-quarters of those surveyed reported an income of $2,000 per month or less, and almost one-third reported an income of less than $1,000 per month. Nearly 40 percent rated their health as fair or poor, and each beneficiary had about five (4.7) different prescription drugs listed on pharmacy claims during the 9 months prior to the survey.

For more information, see "Do drug benefits help Medicare beneficiaries afford prescribed drugs?" by Dr. Rector and Ms. Venus, in the July 2004 Health Affairs 23(4), pp. 213-222.

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