CBO: Measuring the Impact of Prescription Drug Use on Medicare Spending

CBO: Measuring the Impact of Prescription Drug Use on Medicare Spending

11.30.12 | By Rick Smith

Yesterday the Congressional Budget Office (CBO) released a report describing revised methodology for estimating the financial impact of future legislation affecting prescription drug utilization. From this point forward, CBO analysis of Medicare prescription drug-related policies will assume that a 1% increase in the number of prescriptions filled will lead to a 0.20% decrease in medical spending among the Medicare population. This result is based on CBO's review of research involving broad populations; the CBO report noted that studies of specific populations often find larger savings.

After reviewing extensive research citing the positive effects of prescription drug utilization on reducing use of avoidable medical services, CBO concluded that the link was too strong to ignore.

This historic change to CBO methodology represents a significant step forward in evaluating health care policy and reaching common goals of better outcomes and lower costs. The new assumption more accurately reflects how policy changes affect patient behavior and subsequent effects on health status. Notably, other published research has suggested that the savings in avoided hospital and medical costs from implementation of Medicare Part D were about $13 billion, or roughly a quarter of the program's cost, during the program's first year.

It's sometimes been assumed that public policy should work to drive down the use of medicines in order to save money. Now, there is a substantial body of evidence linking the use of prescription drugs to prevention of more costly healthcare services-importantly, achieved through better health outcomes. Accurately accounting for these effects will better inform policy decisions moving forward, particularly in an environment of deficit reduction.

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