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The Effect of Insurance Type on Prescription Drug Use and Expenditures among Elderly Medicare Beneficiaries

Author: SHADI S. SALEH, WENDY WELLER, and EDWARD HANNAN
Published in JHHSA, Vol. 30 No. 1

The debate over the impact of the new Medicare prescription
drug benefit (Part D) has intensified in anticipation of its
implementation. This paper contributes additional information related
to the effect of different types of prescription drug coverage plans on
use and expenditures among elderly Medicare beneficiaries.Cross-
sectional design using data from the 2002 Medical Expenditures Panel
Survey (MEPS). The two dependent variables were (1) prescription
drug use and (2) expenditures. The main independent variable was the
type of drug insurance (Medicare FFS only [no Rx insurance],
Medicare FFS + Rx insurance and Medicare HMO). Bivariate and
multivariate analyses were used to test the effect of insurance type, and
beneficiaries’ characteristics, on likelihood and level of drug use, as
well as expenditures. The findings showed that average total drug
expenditures among Medicare FFS enrollees who had Rx insurance
(non-HMO) were higher ($182.51) than that of Medicare FFS enrollees
with no Rx insurance. In addition, the former group had a higher
likelihood (any use) of using prescribed medications. On the other
hand, no differences in the likelihood of use were detected between
Medicare HMO and Medicare FFS (no Rx insurance) enrollees.
However, Medicare HMO enrollees had a higher level of drug use. In
conclusion, The differences in drug use and expenditures by insurance
type imply that each party (Medicare, Medicare Advantage plans,
employers) will have a different set of dis/incentives for involvement in
Medicare Part D.

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