December 4, 2008

Only lowest-income quintiles of seniors saw reduction in prescription drug expenses.

Contact: Alan Barber, (202) 293.5380 x115

WASHINGTON, DC - On the eve of the 5th anniversary of the signing of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), a new study by the Center for Economic and Policy Research (CEPR) analyzes the extent to which various groups of seniors benefited from this legislation.

The report, "The Impact of the Medicare Drug Benefit on Health Care Spending by Older Households," found that most seniors experienced no reductions in their health care spending as a result of the Medicare Drug benefit.

"While the intent of the MMA was to ease the financial burden health care costs imposed on seniors, there is only limited evidence that the Medicare drug benefit provided relief for older households," said Dean Baker, Co-director of CEPR and an author of the report. "In fact, for many seniors, the burden of health care costs actually increased."

The study used data from the Bureau of Labor Statistics Consumer Expenditure Survey (CEX) to compare the changes in spending by older households from 2004 to 2006. The analysis found that only seniors in the lowest income quintiles, those who were most likely to qualify for the additional subsidies that were provided under the MMA , experienced savings on health related expenditures.

While households in the 1st and 2nd quintiles saw the rate of increase in drug expenditures fall or rise at a slower pace as a result of the MMA, households in the higher quintiles saw a more rapid increase in their prescription drug expenditures. The latter may have been associated with greater use of drugs, which could improve health. However, for these families, the MMA was not associated with a lower burden of total health care expenditures.

The full report can be found on the CEPR website here.