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Medicare drug coverage and moral hazard
1Department of Health Care Systems, University of Pennsylvania's Wharton School, Philadelphia, USA.
Health Affairs (Project Hope)
|March 9, 2004
Summary
Expanding Medicare drug coverage will slightly increase drug spending, with minimal health benefits. The primary impact of these coverage expansions is on Medicare's long-term financial stability.
Area of Science:
- Health economics
- Pharmaceutical policy
- Medicare
Background:
- Medicare currently provides limited prescription drug coverage.
- The impact of expanded drug coverage on beneficiary needs and healthcare spending is debated.
Purpose of the Study:
- To analyze the effects of increased Medicare drug coverage on prescription drug utilization and spending.
- To determine if increased drug use meets unmet needs or represents overuse.
- To assess the financial implications for Medicare's future.
Main Methods:
- Econometric analysis of Medicare data.
- Estimation of spending changes associated with drug coverage expansions.
- Evaluation of beneficiary financial barriers and drug access.
Main Results:
- Expanded drug coverage is projected to have a small impact on overall national drug spending.
- Some increased drug use may benefit beneficiaries with existing financial barriers.
- The primary financial consequences are related to Medicare's fiscal health, not necessarily broad health improvements or pharmaceutical revenue increases.
Conclusions:
- The expansion of drug coverage under Medicare has a limited effect on health outcomes and national drug spending.
- The most significant implications of expanded drug coverage are for the long-term financial sustainability of the Medicare program.