Medicare and Prescription Drug Spending Chartpack. June 2003

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1 Medicare and Prescription Drug Spending Chartpack June 2003

2 The Henry J. Kaiser Family Foundation is an independent national health philanthropy dedicated to providing information and analysis on health issues to policymakers, the media, and the general public. The Foundation is not associated with Kaiser Permanente or Kaiser Industries

3 Table of Contents Section 1: Total and Out-of-Pocket Prescription Drug Spending, 2003 Section 2: High Utilizers: Who Spends $4,000 or More on Prescription Drugs in 2003? Section 3: Total and Out-of-Pocket Prescription Drug Spending, Section 4: Total and Out-of-Pocket Prescription Drug Spending, 2006 Methods Data and analysis for the chartpack were provided by Actuarial Research Corporation (ARC).

4 Section 1 Total and Out-of-Pocket Prescription Drug Spending, 2003

5 Key Findings Medicare Beneficiaries Drug Spending, 2003 Total Drug Spending, 2003: Medicare beneficiaries are estimated to incur $2,322 in total drug spending, on average, in Total spending includes payments from all sources, including employer plans, Medicaid and other insurers, as well as out-of-pocket payments. Average total spending on prescription drugs per beneficiary varies by source of drug coverage, but is considerably lower for those who lack drug coverage ($1,356) Average drug spending for beneficiaries in fair or poor health ($3,127) is roughly 1.5 times higher than for those in excellent, very good, or good health ($2,001) Out-of-Pocket Drug Spending, 2003: Medicare beneficiaries average out-of-pocket spending is estimated to be $999 in Out-of-pocket spending is influenced by many factors, including beneficiaries health care needs, access to coverage, and the generosity of that coverage. Beneficiaries without any drug coverage have higher average out-of-pocket drug costs ($1,356) than those with any form of drug coverage. Average annual out-of-pocket spending for those in fair or poor health ($1,351) in 2003 is considerably higher than the average for those in excellent, very good, or good health ($858).

6 Figure 1 Total Prescription Spending for Medicare Beneficiaries, by Source of Prescription Coverage, 2003 All Beneficiaries $2,322 Medicaid $2,864 Employer/Retiree $2,775 Other $2,513 Medigap/M+C $2,091 No Drug Coverage $1,356 NOTE: Other refers to Champus, VA, and State pharmacy assistance programs.

7 Figure 2 Average Out-of-Pocket Drug Spending by Medicare Beneficiaries, by Source of Drug Coverage, 2003 All Beneficiaries $999 No Rx Coverage $1,356 Medigap/M+C $1,094 Employer/Retiree $880 Other $761 Medicaid $510 NOTE: Other refers to Champus, VA, and State pharmacy assistance programs.

8 Figure 3 Medicare Beneficiaries Total and Out-of-Pocket Drug Spending, by Health Status, 2003 $3,127 $2,001 $858 $1,351 Total Rx Spending Out-of-Pocket Rx Spending Total Rx Spending Out-of-Pocket Rx Spending Excellent/Very Good/Good Health Status Fair/Poor Health Status

9 Figure 4 Medicare Beneficiaries Total and Out-of-Pocket Drug Spending, by Gender, 2003 $2,195 $2,418 $868 $1,097 Total Rx Spending Male Out-of-Pocket Rx Spending Total Rx Spending Female Out-of-Pocket Rx Spending

10 Section 2 High Utilizers: Who Spends $4,000 or More Out-of-Pocket on Prescription Drugs in 2003?

11 Key Findings High Drug Utilizers, 2003 Eleven percent of beneficiaries have $5,000 or more in total drug spending in These beneficiaries account for 42% of total drug spending among the Medicare population. Nearly four in ten (39%) Medicare beneficiaries have $2,000 or more in total drug spending in Nearly 5 percent of all beneficiaries roughly 2 million have $4,000 or more in out-of-pocket drug spending in When looking at those with $4,000 or more in out-of-pocket drug spending by poverty level: 62% have incomes above 200% poverty (~$18,000/singles in 2003), 20 percent have incomes between 100 and 200% poverty, and 18 percent have incomes below the poverty level. Nearly half (47%) of those with $4,000 or more in out-of-pocket drug spending have no prescription drug coverage. Nearly a quarter have employer-sponsored coverage and more than one-fifth have other private insurance (Medigap and Medicare+Choice). Only 2% of those with $4,000 or more in drug spending are on Medicaid.

12 Figure 5 Distribution of Medicare Beneficiaries and Total Drug Expenditures, 2003 $5, % $3,000-4,999 $2,000-2, % 12.5% 42.4% Average Total Rx Spending: $2,322 $1,000-1, % 26.0% $ % 13.2% 12.3% $0 10.2% 6.1% Beneficiaries: Total 40 million Expenditures: Total $95 billion

13 Figure 6 Distribution of Medicare Beneficiaries and Out-of-Pocket Expenditures, 2003 $4, % $2,000-3,999 $1,000-1, % 15.0% 31.2% Average Out-of- Pocket Rx Spending: $999 $ % 28.1% $ % 21.8% $0 16.2% Beneficiaries 16.5% Expenditures 2.4%

14 Figure 7 Distribution of Medicare Beneficiaries Who Spend $4,000 or More Out-of-Pocket on Drugs, by Poverty Level, 2003 <100% Poverty 18.1% >200% Poverty Level 61.6% 20.2% % Poverty Total = 2 million Medicare beneficiaries spend $4,000 or more out-of-pocket on drugs

15 Figure 8 Distribution of Medicare Beneficiaries Who Spend $4,000 or More Out-of-Pocket on Drugs, by Source of Prescription Insurance Status, % Medicaid Employer Coverage 24.2% Other 4.5% 46.7% No Prescription Coverage 22.5% Other Private Coverage (Medigap/M+C) Total = 2 million Medicare beneficiaries spend $4,000 or more out-of-pocket on drugs NOTE: Other refers to Champus, VA, and State pharmacy assistance programs.

16 Section 3 Total and Out-of-Pocket Prescription Drug Spending,

17 Key Findings Drug Spending per Medicare Beneficiary, Between 2000 and 2003, average annual total drug spending per beneficiary increased from $1,610 to $2,322, and is projected to increase to $3,160 in Between 2000 and 2006, average annual total drug spending is projected to nearly double. Between 2000 and 2003, average annual out-of-pocket drug spending per beneficiary increased from $644 to $999, and is projected to increase to $1,454 in Between 2000 and 2006, average annual out-of-pocket drug spending is expected to more than double.

18 Figure 9 Medicare Beneficiaries Total Prescription Drug Spending, Average annual total drug spending among the Medicare population: $2,322 $3,160 $1,

19 Figure 10 Medicare Beneficiaries Out-of-Pocket Prescription Drug Spending, Average annual out-of-pocket drug spending among the Medicare population: $1,454 $999 $

20 Section 4 Total and Out-of-Pocket Prescription Drug Spending, 2006

21 Key Findings Medicare Beneficiaries Drug Spending, 2006 Total Drug Spending, 2006: Medicare beneficiaries are projected to incur $3,160 in total drug spending, on average, in Total spending includes payments from all sources, including employer plans, Medicaid and other insurers, as well as out-of-pocket payments. Average total spending on prescription drugs varies by source of drug coverage, but is considerably lower for those without any source of drug coverage ($1,974) than for all other beneficiaries. Out-of-Pocket Drug Spending, 2006: Medicare beneficiaries average out-of-pocket drug spending is estimated to be $1,454 in Out-of-pocket spending is influenced by many factors, including beneficiaries health care needs, access to coverage, and the generosity of that coverage. Beneficiaries without any drug coverage have higher average out-of-pocket drug costs ($1,974) than those with any form of drug coverage. High Utilizers, 2006: One in five beneficiaries are expected to have total drug expenditures of $5,000 or more in 2006, accounting for an estimated 58% of total drug spending for all Medicare beneficiaries. Nearly 10 percent of all beneficiaries are expected to have $4,000 or more in out-of-pocket drug spending in 2006.

22 Figure 11 Total Prescription Spending for Medicare Beneficiaries, by Source of Prescription Coverage, 2006 All Beneficiaries $3,160 Medicaid $3,898 Employer/Retiree $3,777 Other $3,420 Medigap/M+C $2,846 No Drug Coverage $1,974 NOTE: Other refers to Champus, VA, and State pharmacy assistance programs.

23 Figure 12 Average Out-of-Pocket Drug Spending by Medicare Beneficiaries, by Source of Drug Coverage, 2006 All Beneficiaries $1,454 No Rx Coverage $1,974 Medigap/M+C $1,592 Employer/Retiree $1,281 Other $1,107 Medicaid $742 NOTE: Other refers to Champus, VA, and State pharmacy assistance programs.

24 Figure 13 Distribution of Medicare Beneficiaries and Total Drug Expenditures, 2006 $5, % $3,000-4, % 57.8% Average Total Rx Spending: $3,160 $2,000-2, % $1,000-1, % $ % 20.8% 7.5% $0 10.2% Beneficiaries: Total: 42 million 10.4% Expenditures: Total $134 billion 3.5%

25 Figure 14 Distribution of Medicare Beneficiaries and Out-of-Pocket Drug Expenditures, 2006 $4, % $2,000-3,999 $1,000-1, % 14.4% 46.9% Average Out-of- Pocket Rx Spending: $1,454 $ % 26.6% $ % 14.2% $0 16.2% 11.1% 1.3% Beneficiaries Expenditures

26 Methods Data analyses were conducted by Actuarial Research Corporation (ARC) for the Kaiser Family Foundation. Estimates of total and out-of-pocket prescription drug spending for the Medicare population in 2003 and 2006 were based on the Medicare Expenditure Panel Survey (MEPS) 1998 Full-Year File, scaled to be consistent with CBO's February 2003 Medicare Prescription Drug Spending Baseline for total spending. Incomes were adjusted to be consistent with the distribution by poverty level shown in CBO's October 2002 Issues in Designing a Prescription Drug Benefit for Medicare. Projections of out-of-pocket spending were based on historical out-of-pocket fractions of total drug spending, from the MCBS, Coverage changes were trended to 2003 and 2006, using historical trends in supplemental coverage, adjusted for the substantial M+C shifts in The resulting distributions are consistent with the CMS projections for CY2002 for the noninstitutionalized Medicare population reported in the "21st Century Medicare: More Choices-Better Benefits," March 3, 2003 White House press release. This analysis assumes no changes in current law. Total drug spending refers to drug spending from all sources including, employer-sponsored plans, Medigap, M+C, Medicaid, state pharmacy assistance programs, and all beneficiary out-of-pocket payments.

27 The Henry J. Kaiser Family Foundation 2400 Sand Hill Road Menlo Park, CA (650) Fax: (650) Washington Office: 1330 G Street, NW Washington, DC (202) Fax: (202) Additional copies of this report (#6087) are available on the Kaiser Family Foundation s website at