Report: Differences in Regional Medicare Part D Expenditures Mostly Due to Cost Per Prescription

Posted 28 February 2012 | By

Differences in the regional cost of Medicare Part D plans have long confounded health economists, even if their basic causes are generally known. A new study by the RAND Corporation published in the New England Journal of Medicine claims to have isolated those basic causes and determined their respective effects on price differences.

RAND analyzed the Medicare claims data of 4.7 million beneficiaries using three popular drug categories-statins, antidepressants and statins. Beneficiaries were adjusted for demographic, socioeconomic and health-status differences.

The difference between the highest-cost plans ($3,008) and the lowest-cost plans ($2,413) were attributed to:

  • Cost per prescription (75.9% of variance)
  • Differences in volume of use (24.1% of variance)

"Although it is unclear what rate of branded-drug use among Medicare beneficiaries would be preferable, our finding that branded-drug use differed by a factor of almost two across regions provides a signal of potentially wasteful prescribing in some regions," wrote the study's authors. "We estimate that the Medicare program and beneficiaries would have saved $4.5 billion if branded-drug use in all HRRs had been similar to that in the lowest quintile."

Read more:

RAND - Sources of Regional Variation in Medicare Part D Drug Spending

NEJM - Sources of Regional Variation in Medicare Part D Drug Spending


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