The US government’s Medicare prescription drug benefit saved the nation $1.5 billion a year during its first four years,  due to significantly reduced hospital admissions and Medicare spending, says new research.

Adding the prescription drug benefit – known as Part D – to the Medicare health insurance programme for seniors and some people with disabilities reduced hospitalisations 8%, decreased annual Medicare spending for hospitalisations 7% and cut associated hospital charges 12% during the benefit’s first four years, finds the study, which is published by the National Bureau of Economic Research (NBER).

Aggregate savings from reduced hospital savings associated with expanded Medicare Part D prescription drug coverage totalled around $1.5 billion a year, or approximately 2.2% of the total $67.7 billion cost of Medicare Part D in 2011, say the researchers, from the Johns Hopkins Bloomburg School of Public Health and the University of Illinois at Chicago.

In the span of several years following the introduction of Medicare Part D in 2006, the number of US citizens aged 65 and over with prescription drug coverage grew from 66% to 90% and extended to 11 million seniors. And the Congressional Budget Office (CBO) estimates that the Affordable Care Act (ACA)’s closing of the “donut hole” gap in coverage, further expanding the reach of the programme, will increase the cost of Part D by $51 billion during 2013-22. 

“Medicare Part D requires a substantial investment from the federal government, and the million-dollar question has been: ‘does this investment help to pay for itself by improving the health of seniors who have gained coverage?’  Our study provides some of the most rigorous evidence to date regarding the degree to which increased prescription coverage is associated with decreases in downstream healthcare use and cost,” said study co-author Dr G Caleb Alexander, co-director of the Johns Hopkins Center for Drug Safety and Effectiveness.

The study analysed admissions data for serious conditions, including congestive heart failure (CHF), stroke and chronic obstructive pulmonary disease (COPD) during 2002-09, and found that reductions in hospital admissions varied across the conditions. For example, prescription drug insurance coverage was associated with significant decreases in admissions for CHF (18%), coronary atherosclerosis (13%) and COPD (32%). It also found a 20% decrease in admissions for dehydration and a 13% drop in admissions for coronary artery disease.

The results also suggest that gaining prescription drug insurance affected resource-intensive admissions more than those that were low-cost.

“The questions we examine are fundamental ones that policymakers have grappled with since the design of Part D a decade ago,” report Robert Kaestner, professor of economics at the University of Illinois at Chicago. “These results are of high relevance to federal and state policymakers as they design programmes to enhance Americans’ access to prescription drugs.”