Implementation of Medicare Part D and Nondrug Medical Spending for Elderly Adults with Limited Prior Drug Coverage

While Medicare Part D has reduced out-of-pocket expenses and increased medication use and adherence since its implementation in 2006, little is known about whether the prescription drug benefit has reduced medical spending in other areas.

The authors analyzed data from 6,001 elderly Medicare beneficiaries participating in the Health and Retirement Study and linked Medicare claims from 2004 through 2007. The participants were sorted into two groups: 2,538 Medicare recipients who had generous drug coverage before 2006 and 3,463 recipients who had limited drug coverage before 2006. The authors created an analytical model to assess how Medicare Part D affected the nondrug medical costs of these two groups after 2006.

Key Findings:

  • Total nondrug spending after 2006 dropped by $306/quarter for beneficiaries with prior limited drug coverage relative to beneficiaries with generous pre-2006 coverage.
  • The relative decrease in spending was largely due to decreases in inpatient and skilled nursing costs, not from changes in costs due to outpatient physician visits.

This research suggests that Medicare recipients who received more comprehensive prescription drug coverage may have increased their medication use and adherence, resulting in lower demand for inpatient and skilled nursing care.