Part D shifts drug spending to Medicare

ALEXANDRIA, Va. —As predicted, the Medicare Part D drug benefit program has shifted much of the spending by federal and state government agencies for prescription drugs from Medicaid to Medicare since the program’s launch in January 2006.

A new study from two healthcare policy experts connected with the National Association of Chain Drug Stores confirms the massive shift in drug spending and volume from Medicaid to Medicare in the wake of the Medicare drug benefit program.

Tracking the change were NACDS senior economist Laura Miller and former policy staff member Brian Bruen, who now is with the Washington-based healthcare policy research firm Avalere Health. Miller and Bruen reported their findings in the December/January edition of the journal Health Affairs.

The article, “Changes In Medicaid Prescription Volume And Use In The Wake Of Medicare Part D Implementation,” examined the impact of Medicaid prescription spending and volume, generic dispensing rates and a shift in the mix of drugs used by Medicaid beneficiaries.

According to the study, total payments to pharmacies by Medicaid fell by nearly 50 percent in 2006, from $38.5 billion in 2005 to $20.9 billion in the inaugural year for Part D. The number of Medicaid-paid prescriptions dropped 49 percent—from 543 million to 278 million.

The figures are a direct result of the shift of coverage for prescription drugs from Medicaid to Medicare, the authors noted. Before the Medicare drug benefit went into effect, state Medicaid programs accounted for nearly one-fifth of U.S. prescription drug spending, and coverage for dual eligibles—beneficiaries eligible for both Medicare and Medicaid—was about half of all Medicaid prescription drug spending.

Following the implementation of Part D, some state Medicaid programs still pay for drugs that are not covered under Part D, but Medicare now is the primary source of drug coverage for those dual eligibles.

Miller and Bruen also found a big jump in generic dispensing rates in Medicaid programs in 2006, up 4.6 percentage points nationally. Behind the gain: the increasing availability of generic drugs for common therapies in Medicaid and other drug benefit programs, as well as efforts to encourage more use of generics, they noted.

The launch of Part D also triggered a shift in the kinds of drugs dispensed under Medicaid. The shift, noted the researchers, reflects the younger makeup of the population that remains eligible for Medicaid prescription drug benefits, and who are less likely to have chronic health problems.