CBO Investigates Prescription Drug Use Link to Medicare Spending

12.05.2012


“Offsetting Effects of Prescription Drug Use on Medicare’s Spending for Medical Services,” a new report from the Congressional Budget Office (CBO), reveals a connection between the use of prescription drugs and demand for medical care services generally.

Noting that its previous analyses of the budgetary effect of prescription drugs did not find sufficient evidence of an “offsetting” effect, the CBO cites “dozens of newer studies” in concluding that it now supports “a link between changes in prescription drug use and changes in the use of and spending for medical services.” The body of the report focuses on eight studies in three categories:

The CBO acknowledges that these studies have similarities, but “used different methodologies and examined different populations.” The CBO therefore synthesized the results and conformed the various evidence into its overall conclusion regarding the appropriateness of including “offset” in future impact analyses.

The CBO report concludes that, “Prescription drugs affect people’s health and their need for medical services.” This is by no means a unidirectional affect. The CBO notes, for example, that, “overuse or inappropriate use of prescription drugs may raise the risk of adverse reactions, triggering a need for medical treatment.” The potential for increased medical service needs from the addition aspect are not mentioned in the report.

Conversely, an antibiotic may prevent a more severe infection, and adhering to a drug regimen for a chronic condition such as diabetes or high blood pressure may prevent complications. In either of those circumstances, taking the medication may avert hospital admissions and thus reduce the use of medical services.

The CBO concludes that these effects should be included in the analysis of legislative proposals that would alter access to prescription medications in programs such as Medicare. To do so, the CBO will “apply an offsetting effect on medical spending.”  Essentially, this means that future budgetary affect analysis will include both the projecting of savings or costs related specifically to the medication, and whether decreased or increased access to prescriptions will likely increase or decrease spending on other medical services.

The report confirms that the offset will only be applied in settings in which proposed policies would “change the quantity of prescriptions filled,” and not in situations that would not affect prescription demand, “and therefore the consumption of prescription drugs.”

By example, the report says a proposal for a Medicare recipient prescription copay “might save $4 billion” annually and could lead to less prescriptions being filled. Thus, the suggestion is that recipients asked to pay a portion of their costs would elect instead to go without prescribed medicine. The CBO hypothesizes that such a copay would reduce the volume of prescriptions filled by one percent, and that, “reduction in use would result in a one-fifth of 1 percent increase in the affected population’s total spending for medical services.” Further hypothesizing that the total spending would “otherwise be $250 billion,” the “offset” cost of saving $4 billion would be $0.5 billion if these hypothetical assumptions were true, leaving a net savings of $3.5 billion.

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