Medicare Rx Coverage for Seniors Cuts Government Spending on Hospital Costs

Social insurance programs for seniors, such as Medicare , have been one of the primary sticking points between Republicans and Democrats in efforts to come to an agreement on raising the debt ceiling. Republicans argue that the program fuels national debt, while Democrats worry that cutting the program too drastically will negatively impact vulnerable seniors. Despite the argument that social insurance programs add to the nation’s debt problems, a recent study found that after Medicare began covering prescription drugs in 2006 (Medicare Part D), federal spending on nursing home and extended hospital stays dropped for those seniors who had limited prior coverage. Overall, Medicare Part D may save money in the long run, by making it easier for chronically ill seniors to manage their conditions with medication and avoid ending up in the hospital after they become seriously ill.

Dr. Michael J. McWilliams of Harvard Medical School in Boston, the author of the current study, argues that keeping seniors out of hospitals reduces spending, and that providing seniors with a method of obtaining their medications at an affordable price helps to accomplish this goal. In essence, Medicare Part D improves the cost-effectiveness of the Medicare program. It appears that there is some truth to this notion: Dr. McWilliams’ research shows that after Medicare Part D was instituted in 2006, seniors used more medication and followed their prescription instructions more closely. Specifically, Dr. McWilliams and colleagues looked at data from 6,001 beneficiaries of the program, with 42% of those seniors reporting that they were almost or completely covered by Medicare Part D. Those seniors that had limited prescription drug coverage prior to the program were able to afford approximately $306 more in medication costs during each quarter of the year after the implementation of the program.

While the results of the study cannot provide ironclad proof that Medicare Part D reduces overall Medicare spending, Dr. McWilliams in confident that seniors who are able to regularly take their medications experience less severe consequences of their high blood pressure or diabetes, for example, and are less likely to end up in the hospital. Currently, 34.5 million Americans are covered by Medicare Part D, receiving an annual $1,789 in benefits.