Medicare Part D Cuts Costs, Study Finds

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.

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