Medicare Part D Cuts Costs, Study Finds

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NEW YORK (MainStreet) -- The Journal of the American Medical Association is taking dead aim at critics who say that Medicare Part D is too costly, despite how helpful it is. A new study, published in today's issue of the journal, set out to measure variations in health care spending following the 2006 rollout of Medicare Part D for Medicare patients with limited prior prescription drug coverage.

Its conclusion? While Medicare Part D led to more use of prescription medications, the new program did cut out-of-pocket costs, and led to more Medicare patients taking the right medications, which also helped cut costs.

The study included 6,0001 Medicare patients, splitting the study into two roughly equal groups: Medicare recipients with “generous” prescription drug benefits and recipients with “limited” prescription drug benefits.

Researchers found that savings related to Medicare D were significant after its implementation on Jan. 1, 2006, for patients with limited prescription drug coverage, compared to beneficiaries that the study deemed had extensive coverage.

Here is how the authors break down the variables in terms of prescription drug spending under Medicare Part D: The study found a reduction in spending on inpatient and skilled nursing facility care, a reduction in spending on physician services, no changes either way in Medicare D prices based on outpatient visits, and reduced spending on inpatient physician services for beneficiaries with limited prior drug coverage.

AMA researchers say that fears Medicare Part D would be more trouble than it was worth, at least from a financial point of view, were largely overblown. In fact, Medicare patients with fewer prescription drug options were found to have spent less than $1,200 on prescription drugs after Medicare D was introduced – not an insignificant sum as the U.S. economy was heading into recession.

That helps consumers and Uncle Sam save money, especially, as the JAMA study notes, because proper prescription drug programs can help keep elderly Americans out of hospitals and nursing homes.

“(Medicare Part D) has a direct budgetary implication,” explains Dr. J. Michael McWilliams, an assistant professor of health care policy and medicine at the Harvard Medical School and the lead author of the study, “Medicare Part D probably did not cost us as much as was originally thought.”

The report may quite critics who dubbed Medicare Part D as too costly – even President Obama is on record as saying that the program is “simply adding to our nation’s credit card” and that it’s an “expensive prescription drug program”.

So score one for Medicare D, which may be helping keep health care costs down more than even the experts thought.

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