Study reveals Part D shifted government spending from Medicaid to Medicare

ALEXANDRIA, Va. Much of the spending by federal and state government agencies for prescription drugs has shifted from Medicaid to Medicare following the rollout of the Medicare Part D benefit in 2006, a new study reveals.

National Association of Chain Drug Stores senior economist Laura Miller tracked a major shift of prescription drug spending and volume from Medicaid to Medicare in the wake of the Medicare drug benefit program. Miller reported the findings in an article she co-authored 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,” examines the impact of Medicaid prescription spending and volume, generic dispensing rates and a shift in the mix of drugs used by Medicaid beneficiaries. The article was based on a study conducted by Miller and Brian Bruen, former policy staff member of NACDS who is now at the Washington-based health policy research firm Avalere Health.

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 note. 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 is now the primary source of drug coverage for those dual eligibles.

Miller and Bruen also found a significant 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, and 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.

“Medicare Part D had a critical impact on Medicaid’s drug benefit and patients,” Miller noted. “This article is an example of one of the many detailed studies and policy analyses that NACDS conducts to ensure that lawmakers understand how policies impact pharmacists and the patients they serve.”

Miller said the group would “continue to seek opportunities to add a voice to policy debates that impact pharmacy.”