The effect of insurance type on prescription drug use and expenditures among elderly Medicare beneficiaries.

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 disincentives for involvement in Medicare Part D.