Earlier this summer, the Medicare Payment Advisory Commission (MedPAC) released a report to the United States Congress that found Medicare Part D spending increased by 26% from 2013 to 2018, with the increase primarily driven by higher drug prices (not increased prescriptions). The report also found that while Part D spending increased, spending on services covered under the physician fee schedule remained relatively constant, increasing only 1%.
Interestingly, this new pattern of growth in Part D spending as a result of higher prices stands in stark contrast to the 2008 through 2013 period, when spending growth was mostly due to an increase in the number of prescriptions filled. The increase in prices since 2013 has been driven primarily by new drugs and biologics.
Changing Demographics
According to the report, the share of Medicare beneficiaries covered under Part D has grown over time. In 2018, 74 percent of beneficiaries received their drug coverage under Part D, up from 69 percent in 2013. At the same time, between 2013 and 2018, beneficiaries who were enrolled in Medicare Advantage plans (rather than traditional FFS) rose from 28 percent to 35 percent. As a result, beneficiaries enrolled in prescription drug plans accounted for 58 percent of all beneficiaries enrolled in Part D, down from 64 percent in 2013.
The report also indicated that there have been some changes in the pattern of Part D enrollment that have resulted in PDP enrollees with different demographic characteristics when comparing 2013 to 2018. For example, in 2018, only 18% of PDP enrollees were disabled beneficiaries under age 65, compared to 22% in 2013. Similarly, a smaller share received the low-income subsidy in 2018 (31 percent, compared with 38 percent in 2013).
There was also variation in per capita drug use depending on geographic factors from 2013 to 2018, with growth per capita ranging from -22% in the Kansas portion of the St. Joseph, Missouri-Kansas geographic area to 40% in the El Centro California geographic area.
Decrease in Clinician Services
The report also found that even with the increase in Part D spending, there was a slight decline in the use of clinician services in Parts A and B, from 24.3% in 2013 to 23.8 in 2018. This indicates that spending on clinician services grew at a rate slower than spending on all Part A and Part B services. The report also noted that because unadjusted Medicare spending reflects various price and payment policies—which distorts any relationship between the use of clinician and other services—comparisons of service use are more meaningful than comparisons of spending when evaluating whether a given service is a complement to or a substitute for clinician services.
“The modest positive correlation between levels of clinician service use and drug use…is consistent with our prior findings.” the report said. “This finding is not surprising, given that most prescriptions are written by clinicians during office visits.”