1. G. Edward Miller, Jessica S. Banthin and Thomas M. Selden
Prescription Drug Expenditures and Healthcare Burdens in the Medicaid Population
G. Edward Miller, Jessica S. Banthin and Thomas M. Selden
September 23, 2008
The title of my presentation today is Prescription Drug Expenditures and Healthcare Burdens in the Medicaid Population. My co-authors in this research are Jessica Banthin and Tom Selden.

2. Health Care Financial Burdens in the Medicaid Population
All state Medicaid programs provide RX benefits with no premiums or deductibles and nominal copayments.
20 percent of non-elderly adult Medicaid enrollees report difficulty affording RX (Cunningham, 2005).
Medicaid enrollees are 3X more likely than persons covered by ESI to live in families with high health care financial burdens (Banthin and Bernard, 2006).
This research is motivated by several observations regarding coverage, access to services and health expenditures in the Medicaid population.
All state Medicaid programs provide prescription drug benefits to most enrollees which do not have premiums or deductibles and which typically charge only nominal co-payments of 0 to $3.00.
In spite of this generous coverage, evidence from national surveys suggests that as many as twenty percent of non-elderly adult beneficiaries have difficulty paying for at least some needed medications.
Another line of research shows that Medicaid enrollees are more than three times as likely as persons covered by private employment related insurance to live in families with high financial burdens for health care services.
The goal of this research is to examine the role of out of pocket drug expenditures in contributing to these burdens.

3. Medicaid Pharmacy Cost Containment Policies
By 2004, most states had implemented at least some cost-containment policies:
Copayments
Quantity limits (number of prescriptions)
Prior authorization
Generic substitution
Goal is to reduce costs
May affect access (Cunningham, 2005; Soumerai, 1994).
Pharmacy cost-containment policies are one potential contributor to prescription drug access problems for Medicaid enrollees.
By the fall of 2003 (a time just prior to the start of our study) most states had enacted at least some pharmacy cost containment policies.
The goal of these policies is to reduce costs, but previous studies show that they may also affect access to needed medications.
In addition to altering access, cost-containment policies may increase out-of-pocket expenditures for drugs in a number of ways.
First, as Tom’s presentation showed, even modest copayments for prescriptions can be burdensome for families with very low incomes. Moreover, enrollees may pay the full cost of medications in response to quantity limits, in response to delays caused by prior authorization or in cases where a brand name drug is prescribed but a generic is required by Medicaid.

4. Data: Medical Expenditure Panel Survey, 2004-05
The MEPS is an annual survey sponsored by Agency for Healthcare Research & Quality
Nationally representative household survey consisting of 12,000 households and 33,000 individuals
Includes data on insurance coverage, health care utilization and expenditures, health status, medical conditions, & more
Most accurate source of data on out of pocket spending for medical care
Released on public use files, tables, statistical briefs:
Our study uses data from the Medical Expenditure Panel Survey (MEPS) for the years is the most recent year for which expenditure data are currently available. We pool two years of data to increase our sample size.
**You have already heard a lot about the MEPS. I will just emphasize one point on this slide which is that the MEPS is the most accurate source of data available on out-of-pocket spending for medical care----a fact which is central to this research.

5. Sample of ‘Medicaid Families’
Goal: study the extent to which families covered by Medicaid are at risk of having high health care burdens
Medicaid families: individuals are included only if their entire family was covered by Medicaid/SCHIP for the entire year.
Sample includes:
low income parents and their children
non-elderly adults with disabilities
Sample excludes low income elderly:
Medicare coverage affects burden
Since 2006, drug coverage through MMA
Our goal is to study the extent to which families covered by Medicaid and SCHIP are at risk of having high health care burdens.
To isolate the impact of these public programs, we limit our sample to people under age sixty-five that lived in families where all family members were covered by Medicaid or SCHIP for the entire year, or for the entire time that they were in the survey. By limiting our sample in this way we make sure that uninsured persons or those covered by private policies don’t contribute to the financial burdens that we observe.
Our analytical sample includes low income parents and their children and non-elderly adults with disabilities.
Our sample excludes low income elderly persons because they are almost universally covered by Medicare and because, as of January 1, 2006 drug benefits for dual-eligible seniors were transferred from Medicaid to Medicare. Excluding seniors from our analysis, therefore, provides more relevant information for the current Medicaid population.

6. Are cost containment policies associated with:
Research Questions
What percentage of non-elderly Medicaid enrollees live in families with health care spending burdens in excess of 5% (10%) of disposable family income?
What is the contribution of out-of-pocket (OOP) spending for prescription drugs to overall health care burdens?
Are cost containment policies associated with:
higher OOP spending for drugs?
greater level of financial burdens?
This research addresses three types of questions:
First, what percentage of non-elderly Medicaid enrollees live in families with health care spending burdens in excess of 5% (10%) of disposable family income?
Second, what is the contribution of out-of-pocket (OOP) spending for prescription drugs to overall health care burdens?
Third, is there any evidence that cost containment policies are associated with: higher OOP spending for drugs?

7. Method of Calculating Health Care Financial Burdens
Numerator: total out of pocket spending across all individuals in the family.
Denominator: total family income and adjusted for taxes.
We identify individuals living in families that spend more than 5% or more than 10% of disposable family income on out of pocket expenses.
Results are presented in terms of numbers or percent of individuals living in families with high financial burdens.
We define health care burden using a ratio where the numerator is total out-of-pocket spending for health care services and the denominator is total disposable family income. We measure health expenditures and income at the family level, because family members typically share financial resources and are likely to be affected by each other’s medical costs.
People who live in families that spend more than 5 percent of family income on healthcare are defined as individuals with high burdens. Similarly, we use 10 percent as the cutoff for very high burdens.
Each person in our sample is assigned the family-level burden measure but all of our results are reported at the person level, so that our estimates show the proportion of persons living in families with high burdens.

8. 14.6 million non-elderly persons in ‘Medicaid families’
Results: Health Care Financial Burdens Among Medicaid Enrollees:
14.6 million non-elderly persons in ‘Medicaid families’
subset of Medicaid population
‘Medicaid family’ = all persons in the family were continuously enrolled in Medicaid or SCHIP
16.5% have high burdens
Spend 5% or more of income for health care
10.2% have very high burdens
Spend 10% or more of income for health care
Now turning to results:
Our analytical sample is a subset of the Medicaid population that represents an average annual total of 14.6 million individuals who lived in families where every person was covered by Medicaid or SCHIP for the full year
We find that 16.5% of this population lived in families with high healthcare burdens and 10.2% lived in families with very high burdens
In the interest of time, in the remaining slides I will show results only for persons with 5% burdens.. Results for those with 10% burdens are qualitatively similar.

9. Comparison of Families Above/Below 5% Spending Threshold* *
This slide shows a comparison of families above and below the 5% spending threshold and demonstrates that income and out-of-pocket spending both put families at a greater risk of having a high burden.
Specifically, the chart on the left shows that families with high burdens had average disposable incomes of about $6,000 compared to more than $15,000 in families without high burdens. At the same time, family out of pocket expenditures on health care services were about nine times higher for persons with high burdens..
*P < .05 for difference between groups.

10. Components of OOP Spending In Families with High (5%) Burdens
In families with high burdens out of pocket spending on prescription drugs averaged $558 per year, or about 51.6 percent of total annual out-of-pocket expenditures. Office-based visits was the next largest component of spending accounting for 16.6% of expenditures..
1. Percent = (OOP spending for service / Total OOP spending) X 100

11. Contribution of Specific Services to the Risk of High (5%) Burden
Sample = persons with a high (5%) burden
How many would continue to have a high burden if OOP spending for each service was set to zero?
In this slide, we examine the contribution of prescription drug out-of-pocket spending to the risk of incurring a high financial burden. To do this, we limit the sample to the population with a high burden and report the percent of individuals who would continue to experience a high burden when spending for each type of service is set to zero in turn.
For example, the 2nd bar from the right shows that 89.0 percent of individuals with high burdens would continue to experience high burdens if out of pocket expenditures for office visits were set to zero. The effects of setting out of pocket expenditures for emergency room, inpatient hospital, dental, home health or other services are even smaller.
In contrast, only 39.4 percent of individuals would continue to have a high burden if out of pocket prescription drug spending was set to zero.
In other words, more than 60 percent of individuals with high family burdens would change their status and family out of pocket spending would fall below the 5 percent threshold if they did not have any out-of-pocket drug expenditures.

12. Evaluating the Effects of State Cost Containment Policies
We consider: prior authorization, generic substitution, copayments, quantity limits
Many states have multiple policies
Compare mean OOP RX spending in
states with <3 polices
states with 3+ policies
Use “raking post-stratification” weight adjustments to control for differences across policy groups
To examine the effects of state policies we determine whether each state had implemented policies that require prior authorization, generic substitution, cost-sharing, and limits on the number of prescriptions in the time period we are studying---the years 2004 and 2005.
By this time, many states had implemented more than one policy which makes it difficult to disentangle the effects of individual cost-containment measures.
Our approach, therefore, is to summarize state policies using a count of the number of cost containment policies and compare mean out of pocket drug spending in states that have < 3 policies with states that have 3 or more policies.
In comparing mean expenditures, we adjust for differences across these policy groups by using “raking post-stratification” weight adjustments.

13. Association of Cost Containment Policies with OOP Drug Spending* *
The chart on the left shows that in our sample family out of pocket spending for drugs was about 60 higher, on average, for families in states with 3 or more policies than in states with less than three policies.
The chart on the right shows that among persons with high burdens, families in states with 3 or more polices spent about 75% more for drugs on average than families in states with <3 policies.
Note: In 2004, there were 16 states with <3 policies and 27 states with 3+ policies. In 2005, there were only 4 states with <3 policies and there were 33 states with 3+ policies. However, results are qualitatively similar if the sample is restricted to The 2004 estimates are:
full population <3 = 110, 3+ = 151, t = 1.3;
people with 5% burdens <3 = 356, 3+ = 643, t = 2.2;
2004 people with use <3 = 155, 3+ = 211, t = 1.4
people with use <3 = 147, 3+ = 223, t = 2.5
**Finally, in every case, estimates for states with missing legislative variables are in between the estimates for the other two policy groups.**
*P < .05 for difference between groups.

14. reducing pharmacy costs
Conclusion
Many states have responded to financial pressures by implementing Medicaid pharmacy cost containment policies.
In implementing these polices, state programs may face a trade-off between
reducing pharmacy costs
maintaining appropriate access to prescription drugs and shielding Medicaid enrollees from high spending burdens
Many states have responded to financial pressures by implementing Medicaid pharmacy cost containment policies.
Our results are consistent with previous research in suggesting that as they implement these polices, state programs may face a trade-off between reducing pharmacy costs and maintaining appropriate access to prescription drugs and shielding Medicaid enrollees from high spending burdens.