Medicare Part D Saved $1.5 Billion a Year

Good news about Medicare Part D from a study done by the Johns Hopkins Bloomberg School of Public Health and the University of Illinois at Chicago:  The prescription coverage saved expenditures totaling $1.5 billion annually for the first four years and also significantly reduced hospital admissions. The data were published in March 2014 by the National Bureau of Economic Research

A release from Johns Hopkins reports that the study wa the largest and most rigorous impact analysis of Medicare Part D to date. The researchers found that gaining prescription drug insurance through Medicare Part D reduced hospitalizations by 8%, decreased annual Medicare expenditures for hospitalization by 7% and reduced hospital charges associated with hospitalization by 12% during the program's first four years. Also, the study estimates that the aggregate savings from reduced hospital expenditures associated with expanded Medicare Part D prescription drug coverage totaled approximately 2.2% of the total $67.7 billion cost of Medicare Part D in 2011.

The release quotes G. Caleb Alexander, MD, MS, associate professor of Epidemiology and Medicine and co-director of the Johns Hopkins Center for Drug Safety and Effectiveness, as saying, "Medicare Part D requires a substantial investment from the Federal Government, and the million dollar question has been, 'Does this investment help to pay for itself by improving the health of seniors who have gained coverage? The answer to that question may seem self-evident, but it is not. Our study provides some of the most rigorous evidence to date regarding the degree to which increased prescription coverage is associated with decreases in downstream health care use and cost."

The expansion of prescription coverage under Medicare Part D in 2006 represented one of the most significant changes to the healthcare landscape since Medicare was introduced in 1966. In the span of several years, the number of elderly — age 65 and older — with prescription coverage grew from 66% to 90% and extended to 11 million seniors. The Affordable Care Act (ACA) will expand the reach of the program by closing the gap in coverage known as "the donut hole." The Congressional Budget Office estimates that the ACA increase in coverage will increase the cost of the Medicare Part D program by $51 billion from 2013 to 2022. Given the difficult fiscal times, any savings from Medicare Part D is clearly important and underscores the significance of the research team's findings.