Drug caps don't cut costs

August 1, 2006

WASHINGTON, D.C.-There's new evidence that ready access to medications can reduce overall healthcare spending. A study of California Medicare beneficiaries who had a $1,000 annual cap on drug coverage finds that they spent less on drugs, but more on emergency care and hospitalizations. And they had a higher death rate compared with seniors with unlimited drug coverage.

WASHINGTON, D.C.-There's new evidence that ready access to medications can reduce overall healthcare spending. A study of California Medicare beneficiaries who had a $1,000 annual cap on drug coverage finds that they spent less on drugs, but more on emergency care and hospitalizations. And they had a higher death rate compared with seniors with unlimited drug coverage.

The study led by researchers at Kaiser Permanente, Oakland, Calif., and published in the June 1, 2006, New England Journal of Medicine, reports that patients with limited drug benefits were more likely to reduce their use of drugs to treat chronic conditions, such as diabetes, high blood pressure and high cholesterol. The study concludes that the savings in drug costs from the cap were offset by increases in the costs of hospitalization and emergency care, as well as unfavorable clinical outcomes.

The results point to the importance of the new Medicare drug benefit in enhancing healthcare for seniors. But the study also supports those who object to the design of the Medicare program, which requires most seniors to pick up drug costs after they hit a $2,250 coverage limit.