Skip Navigation U.S. Department of Health and Human Services
Agency for Healthcare Research Quality
Archive print banner

Long-term Care

This information is for reference purposes only. It was current when produced and may now be outdated. Archive material is no longer maintained, and some links may not work. Persons with disabilities having difficulty accessing this information should contact us at: Let us know the nature of the problem, the Web address of what you want, and your contact information.

Please go to for current information.

Prescription drug benefits limits for Medicare beneficiaries are associated with less use of prescription drugs, worse clinical outcomes, and higher hospitalization costs

The caps placed on Medicare drug benefits are associated with less use of prescription drugs and poor clinical outcomes, without any net cost savings, concludes a new study. In elderly patients with chronic diseases, the caps were associated with poorer adherence to drug therapy and poorer control of blood pressure, lipid levels, and glucose levels. The differences in use of prescription drugs for those with caps were substantially larger during the months after they exceeded the cap than during earlier months. Beneficiaries whose benefits were capped had higher rates of non-elective hospitalizations, visits to the emergency department, and death than those whose benefits were not capped.

Thus, the savings in drug costs from the cap were offset by increases in the costs of hospitalization and emergency department care. These findings suggest a need to closely monitor the effects of the new Medicare drug benefits and, possibly, to modify cost sharing for drugs that are effective in treating chronic diseases, suggests John Hsu, M.D., M.B.A., M.S.C.E., of Kaiser Permanente. He and fellow researchers at Kaiser, Harvard University, and the University of California, San Francisco compared the clinical and economic outcomes in 2003 among 157,275 elderly Medicare+Choice beneficiaries, whose annual drug benefits were capped at $1,000, and 41,904 beneficiaries whose drug benefits were unlimited because of employer supplements.

Those with capped benefits had pharmacy costs for drugs applicable to the cap that were 31 percent lower than those whose benefits were not capped, but their total medical costs were comparable (with a non-significant 1 percent difference). Among those who used drugs for hypertension, high cholesterol, or diabetes in 2002, those whose drug benefits were capped were 30 percent, 27 percent, and 33 percent more likely, respectively, to be nonadherent to long-term drug therapy in 2003. These subgroups also had higher respective blood pressure, cholesterol, and blood-sugar levels in 2003 than their counterparts without drug benefit caps. The study was supported in part by the Agency for Healthcare Research and Quality (HS13902 and HS10803).

See "Unintended consequences of caps on Medicare drug benefits," by Dr. Hsu, Mary Price, M.A., Jie Huang, Ph.D., and others, in the June 1, 2006, New England Journal of Medicine 352(22), pp. 2349-2359.

Return to Contents
Proceed to Next Article

The information on this page is archived and provided for reference purposes only.


AHRQ Advancing Excellence in Health Care