Trends and current drug utilization patterns of Medicaid beneficiaries

Health Care Financing Review, Spring, 2006 by Terry R. Lied, Julio Gonzalez, Wendy Taparanskas, Tejas Shukla

INTRODUCTION

In recent years, the contribution of drugs to the treatment of medical conditions has increased more rapidly than most nonpharmaceutical approaches to disease. This increase is reflected in rapid escalation of expenditures for drugs--expenditures that have increased at a greater rate than most other medical services. Medicaid is now the number one payer of medical care in the United States, having surpassed Medicare recently. (1) Therefore, it is especially important that Medicaid drug utilization and expenditures be carefully tracked to address concerns about drug access, affordability, safety, and effectiveness. The recent passage and implementation of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 has contributed to public attention to these issues.

The MMA provides Medicare beneficiaries with a prescription drug benefit, arguably the most significant change in health care for the elderly in nearly 40 years. Dually eligible individuals, persons with both Medicare and Medicaid eligibility, if they receive full benefits under Medicaid and if they elect to participate in the program, will receive their drug benefits under Medicare beginning in 2006. This legislation is expected to decrease Medicaid expenditures for drugs, because most of the expenditures for full-Medicaid benefit dually eligible individuals will be shifted to Medicare. (2) Even so, States remain concerned about Medicaid drug costs. States will continue to pay their matching portion in full for nondually eligible enrollees and will be required to make a phased down contribution to Medicare for a portion of the drug costs for the dually eligible enrollees starting at 90 percent of estimated costs in 2006 and scaling down to 75 percent of estimated costs by 2015 and beyond.

There are a few recent studies in the literature investigating Medicaid drug utilization, expenditures, and/or cost containment efforts. Baugh et al. (2004) reported an average annual increase of 16.3 percent in Medicaid spending for the dually eligible individuals between 1990 and 2000. They also found that disabled persons experienced a 20-percent average annual increase in drug spending during this time period. Tepper and Lied (2004) reported that Medicaid spending on drugs increased from $2.3 to $24.7 billion between 1985 and 2001 and that Medicaid drug spending nearly doubled from 1997 to 2001. Abramson et al. (2004) analyzed maximum allowable cost (MAC) programs in five States and concluded that expansion of existing MAC programs and creation of new ones could help States in cost containment efforts.

The current study builds on these research efforts by presenting more recent data on Medicaid drug use and expenditures and by systematically examining the trends in utilization over a substantial time period (CYs 1994-2003) in which growth was particularly dramatic. We begin by presenting utilization and expenditure data over this time period, reporting both nominal and inflation-adjusted expenditure data. Then, we examine changes from year to year in mean prescription reimbursements and how these changes compare with changes in the medical consumer price index (MCPI). We compare utilization and expenditures of the top 40 drugs versus all other drugs between CYs 1994-2003. Lastly, we report utilization and payments by drug groups and compare utilization and reimbursements of the top 40 drugs in terms of reimbursements for CYs 1998-2003.

METHODOLOGY

The results presented in this article were obtained using two sources: (1) State Drug Utilization Data Files for 1994-2003 (Medicaid Drug Rebate Program) and (2) the Master Drug Database of Medi-Span (3). The State Drug Utilization Data Files were merged with data abstracted from the master drug database. Using State drug utilization data files from 1994-2003, the percent change in mean reimbursement rates was compared directly to the percent change in the MCPI, (U.S. Department of Labor, Bureau of Labor Statistics, 2005). Trends in mean prescription reimbursement were adjusted to constant 2003 dollar using the MCPI. Constant mean reimbursement was compared side by side to the nominal mean reimbursement. Constant dollar amounts were found using the following formula:

R = (N/MPI) * 100

Where: R = real value (constant dollar)

N = nominal value (current dollar) and

MCPI = medical consumer price index.

Patterns in reimbursement were compared to patterns in utilization for 2003. Using the State Drug Utilization Data Files, total prescriptions, total reimbursements, and mean reimbursement rates were examined by major drug groups. We also investigated the top 40 drugs in terms of reimbursements from CYs 1994-2003, and compared their utilization, reimbursements, and mean prescription reimbursements with the remaining (all other) drugs. For 1998 and 2003, we investigated changes in the top 40 drugs on a specific brand name basis.

RESULTS

Table 1 displays the number of Medicaid drug prescriptions, the total amount reimbursed, and the mean reimbursement per prescription between CYs 1994-2003. Reimbursed amounts in this study are not net of rebates which, overall, reduce total drug reimbursements by about 20 percent. In 1994, the total number of prescriptions was 333 million, the amount reimbursed was $8.4 billion, and the mean reimbursement per prescription was $25.34. By 2003, the number of prescriptions increased to 573 million, the amount reimbursed approximately quadrupled to $34.3 billion, and the mean price per prescription more than doubled to $59.85. The increase in the reimbursed amount for Medicaid prescriptions during this 10-year period was a function of the increase in the number of Medicaid enrollees, the number of prescriptions per enrollee, and the mean price per prescription.