A BEJEAP Topics article.

Abstract

Medicare does not have an outpatient prescription drug benefit. Recently, there has been renewed interest in adding a prescription drug benefit to the program. In this paper, we present a microsimulation model to predict drug expenditures in 2001 for a representative cohort of Medicare beneficiaries under the status quo and three different plans: (1) a catastrophic plan modeled on the Medicare Catastrophic Coverage Act (PL 100-360), which was passed in 1988 but repealed one year later after higher-income Medicare beneficiaries protested new premiums, (2) a zero-deductible plan that caps out-of-pocket expenses at $4,000 per year, and (3) a zero-deductible plan that does not cap out-of-pocket expenses. We use data from a representative sample of Medicare Part B beneficiaries from the 1995 Medicare Current Beneficiary Survey (MCBS) Cost and Use file. Under the status quo, drug expenses average $1,459 per beneficiary, out-of-pocket costs average $646, and 8.2% of the population has very high expenses (defined as more than $2,000 out-of-pocket for drugs). Under a catastrophic plan, average annual drug expenses are $1,344, out-of-pocket costs are $645, and 6.8% of beneficiaries have very high expenses. Under a zero-deductible plan that does not cap out-of-pocket expenses average annual drug expenses are $1,395, out-of-pocket expenses are $459, and 5.3% of beneficiaries would have very high expenses. Under a zero-deductible plan that caps out-of-pocket expenses at $4,000 per year, average annual drug expenses are $1,414, out-of-pocket expenses are $442, and 5.5% of beneficiaries have very high expenses.

Submitted: January 8, 2002 · Accepted: February 19, 2002 · Published: April 1, 2002

Originally published in Topics in Economic Analysis & Policy.

Recommended Citation

Goldman, Dana P.; Joyce, Geoffrey F.; and Malkin, Jesse Dylan (2002) "The Costs of A Medicare Prescription Drug Benefit," Topics in Economic Analysis & Policy: Vol. 2 : Iss. 1, Article 3.
Available at: http://www.bepress.com/bejeap/topics/vol2/iss1/art3