Research Report No. 5
Peter J. Cunningham
The author would like to thank the following persons for providing helpful comments on earlier drafts of this report: Paul Ginsburg, Len Nichols, Joy Grossman, Richard Sorian, and Alwyn Cassil (all from HSC); Terri Coughlin of the Urban Institute; and Renee Schwalberg of Health Systems Research. Beny Wu of Social Scientific Systems, Inc. provided excellent programming assistance.
Policymakers have devoted much attention recently to expanding outpatient prescription drug coverage for elderly persons. New findings from the 2000-01 Community Tracking Study household survey show that many nonelderly adults also have problems affording prescription drugs. The problem is particularly serious among persons who are uninsured or enrolled in Medicaid, of whom about one out of four in each group reported that they couldnt afford a prescription medication. The high rate of access problems among Medicaid enrollees is particularly significant given that all state Medicaid programs provide coverage for prescription drugs. State efforts to control Medicaid prescription drug costs are also contributing to access problems among beneficiaries.
Policymakers are focusing on ways to extend coverage for prescription medications to millions of elderly Medicare beneficiaries who currently arent covered through the Medicare program and have no other source of coverage. However, it is often overlooked that many nonelderly adults also have problems affording prescription medications. While most nonelderly adults have prescription drug coverage through employer-sponsored health insurance or the Medicaid program, over 26 million lack health insurance coverage for any kind of medical care. This is more than twice the number of elderly Medicare beneficiaries who dont have prescription drug coverage.1
In addition, a high proportion of adult Medicaid enrollees are at high risk for not being able to afford prescription medications due to low incomes and high prevalence of chronic conditions. Despite the fact that the Medicaid program in all fifty states provides coverage for prescription drugs to most Medicaid beneficiaries, there is concern that state efforts to control the escalating costs of prescription medications may harm beneficiary access to prescription medications, especially given the high risk characteristics of the adult Medicaid population.2
In this research report, data from the 2000-01 Community Tracking Study (CTS) household survey are used to estimate the number and proportion of nonelderly adults who do not obtain prescription medications due to cost. The findings show that a much higher percentage of nonelderly adults who are uninsured or enrolled in Medicaid have problems affording prescription medications compared to elderly Medicare beneficiaries. Medicaid beneficiaries experience problems affording prescription medications due largely to their much lower incomes and high prevalence of chronic conditions. The report also examines the effects of state cost control methods on Medicaid beneficiaries access to prescription drugs.
Source of Data
The CTS household survey is designed to produce representative estimates for the U.S. population as well as 60 randomly selected communities. The sample for the surveys was obtained primarily through random digit dialing, supplemented by in-person interviews to represent households without telephones. Three rounds of the survey have been completed, including surveys conducted in 1996-97, 1998-99, and 2000-01. This study is based on the 2000-01 CTS household survey, which was conducted between August, 2000 and September, 2001. The survey contains observations on a total of about 60,000 persons. The sample for this study is based on 39,000 adults age 18-64, including about 1,800 who are in Medicaid or state coverage.3 The response rate for the survey was about 60 percent.
During the survey, respondents were asked the following question: "During the past 12 months, was there any time you needed prescription medicines but didnt get them because you couldnt afford it?" Responses were based on self-reports for all adults (i.e. no proxy reporting).
Problems Affording Prescription Medications
About 23 million American adults—or 12 percent of the adult population—could not afford to get at least one prescription medication in the past year, according to the 2000-01 CTS survey (Table 1). The majority of those who report cost barriers to prescription drugs are nonelderly (age 18-64), and a higher percentage of nonelderly adults reported cost barriers compared to those 65 and over (13 percent for nonelderly adults vs. 8 percent for elderly).
Insurance status. Problems with affording prescription medications among nonelderly adults appear to be concentrated primarily among those who are uninsured or enrolled in Medicaid and other state coverage. More than one-fourth of uninsured persons (29 percent) reported that they did not obtain prescription medications due to cost, the highest percentage among health care coverage categories. This is more than three times the rate reported by those with employment-sponsored health insurance (8 percent). Virtually all employer-sponsored health plans provide some form of prescription drug coverage.4
More surprising, however, is the high rate of cost barriers encountered by persons with Medicaid and other state coverage (26 percent). Unlike uninsured persons who have no coverage for prescription drugs, all state Medicaid programs provide prescription drug coverage for most Medicaid beneficiaries. The high rate of reported cost barriers reflects characteristics of adult Medicaid beneficiaries—especially those with low incomes and high prevalence of chronic diseases—which puts them at high risk for encountering problems in affording prescription medications. These factors—and how they affect cost barriers to prescription drugs—are discussed below.
Income. Cost barriers to prescription drugs for people with low incomes (incomes less than 200% of poverty) are almost five times greater than reported by the highest income group (25 percent for low income persons vs. 6 percent for those with incomes of 400% of poverty or higher). Even among those with employer-sponsored coverage, low income persons were more than four times as likely to report cost barriers to prescription drugs compared to higher income persons with employer coverage (Table 2). Almost one-third of low income uninsured persons experienced cost barriers to prescription drugs, although disparities in access to prescription drugs between uninsured and those with employer coverage are substantially greater among higher income persons.
Health status. Cost barriers to prescription drugs are highest for those persons who likely need them the most—persons with chronic health conditions. Seventeen percent of those with a single chronic health condition reported cost barriers compared to 10 percent for those with no chronic health conditions (Table 3). Among those with 2 or more chronic health conditions, the rate of cost barriers was 2.5 times that of persons with no chronic conditions (25 percent vs. 10 percent). The higher rate of cost barriers reflects in part the greater need for medications, and therefore greater opportunity for incurring significant health care expenses.
Cost barriers are greater for those with chronic conditions across all categories of insurance coverage. Especially striking is the high proportion of Medicaid and uninsured persons with chronic health conditions who report not being able to afford prescription drugs. About 40 percent of those with Medicaid or other state coverage, and more than 60 percent of uninsured persons with 2 or more chronic conditions reported not obtaining prescription medications due to cost.
Medicaid beneficiaries at higher risk
Much of the difference in the rate of cost-barriers between Medicaid beneficiaries and those with employer-sponsored coverage is accounted for by lower incomes and higher rates of chronic diseases among Medicaid beneficiaries, which puts them at much higher risk of experiencing cost barriers to prescription drugs. Half of adult nonelderly Medicaid beneficiaries have incomes below the federal poverty level, and three-fourths have incomes below 200% of poverty (Table 4). By contrast, only 3 percent of those with employer coverage have incomes below the poverty level, and 14 percent have incomes below 200% of poverty.
In addition, Medicaid beneficiaries tend to be sicker. More than half of adult nonelderly Medicaid beneficiaries have a chronic condition, and over one-fourth have 2 or more chronic conditions. Less than one-third of those with employer coverage have a chronic condition, and only 10 percent have 2 or more chronic conditions.
Indeed, when differences in income, health status, and other factors are accounted for, rates of cost barriers to prescription drugs for Medicaid enrollees are similar to those with employer-sponsored coverage, and both groups have much lower rates of cost barriers compared to uninsured persons.5
Nevertheless, the high rate of cost barriers to prescription medications among Medicaid beneficiaries is still troubling since the intent of Medicaid was to reduce or eliminate inequities in access to care arising from high risk factors such as low incomes and poor health status. In fact, Medicaid beneficiaries have achieved greater parity with privately insured persons in other aspects of medical care, including unmet needs for general medical care, having a usual source of care, and contact with a physician in the last year (Table 5). And while Medicaid and uninsured persons experience similar high levels of cost barriers to prescription drugs, Medicaid beneficiaries have substantially better access on other aspects of medical care compared to uninsured persons.
Assessing the Effects of Medicaid Cost-Controls on Beneficiary Access
States have implemented a variety of methods to control escalating prescription drug costs in their Medicaid program. Many of these methods attempt to influence prescribing patterns and utilization, and therefore also have the potential for affecting access to prescription drugs among beneficiaries. Although these methods vary from state to state, the most common include copayments, dispensing limits (limiting the number of prescriptions, refills, or pills per prescription), prior authorization requirements for certain drugs, requirements that generic brands be used, and "step-therapy" protocols (requiring that physicians prove that a lower cost drug is ineffective before prescribing a more costly alternative).6
Do these cost control methods also make it more difficult for beneficiaries to obtain medications? To answer this, we examined whether Medicaid enrollees in states that had implemented these policies were more likely to report not getting a prescription drug due to cost. Information on Medicaid state prescription drug policies was linked to the CTS survey data.7 Variables were constructed for each of the 5 cost control methods described above to indicate whether the individual lived in a state that had implemented that particular method (see Appendix Table 1 for a listing of the specific cost control methods adopted by each of the states in the CTS sample). Variables were also constructed to indicate the number of cost control methods adopted by the state in which the individual lives.
OLS regression was used to examine both the effects of individual cost control methods on beneficiary access, as well as the cumulative effects of these policies when states implemented more than one.8 The sample for this analysis includes persons age 18-64 with Medicaid and other state coverage in states with information on prescription drug policy (about 1,500 persons). Because there may be a high degree of correlation among these measures, separate regressions were run to test the individual effects of each of the state policy variables.
The regression analyses also control for factors that may be correlated with both state Medicaid prescription drug policies and reported cost barriers to prescription drugs. These include person-level age, gender, race/ethnicity, family income, chronic health conditions, self-rated health status, marital status, and family composition. Because rules for prescription drug coverage often differ for those beneficiaries in Medicaid managed care plans, the analysis includes an indicator for whether or not the person is enrolled in an HMO plan (self-reported) as well as a state-level measure for the percent of all Medicaid beneficiaries in Medicaid managed care plans. The number of physicians per 1,000 persons in the county is included as a measure of the supply of medical providers. Indicators for the four Census regions in the U.S., as well as indicators for residence in large metropolitan areas, small metro areas, and nonmetro areas are included to control for any variations in prescription drug use and prescribing patterns that are correlated with geographic region and place of residence (see Appendix Table 2 for a full listing of dependent and independent variables and means).
Results. The results from the regression analyses are summarized in Table 6 (see Appendix Table 3 for the full regression results). The first set of estimates reflect the increase in the probability of experiencing cost barriers associated with each of the state cost control methods. Individually, none of the five cost control measures had statistically significant effects on the probability of experiencing cost barriers, although the probability for at least one of the state policies (step-therapy requirements) was fairly sizeable.
That individual cost control methods do not significantly affect beneficiary access to medications is perhaps not too surprising, since many of the restrictions are fairly nominal and are unlikely to affect very many Medicaid enrollees. For example, copayments amount to no more than a one or two dollars per prescription, which is considerably lower than copayments typically required by private insurance plans. Limits on the number of prescriptions (ranging from about 3 to 10 new prescriptions per month in states that have them) are likely to affect only heavy users, and prior authorization requirements apply to only a limited number of drugs.
However, implementing multiple cost control methods affects beneficiary access to prescription drugs to a greater extent than any single measure. In fact, the probability of reporting cost barriers to drugs in states that had implemented 4 or 5 of these methods was 18 percentage points higher compared to beneficiaries in states with either one or no cost control methods. Other factors being equal, one-third of beneficiaries in states with 4 or 5 cost control methods experienced cost barriers to care, compared to 25 percent in states with 2 or 3 methods, and 15 percent in states with 0 or 1 method (Table 7).9
States that implement multiple cost control methods may be much more aggressive in trying to control Medicaid prescription drug costs. Not only would the cumulative effects of implementing these policies erode access to a greater degree than any single method, but the individual methods themselves may be more stringent (e.g. higher copays, stricter dispensing limits) in states that are more aggressively trying to control costs. While greater cost savings in the Medicaid program may be realized, it appears that a consequence of aggressive cost control policies is a reduction in beneficiary access to prescription drugs.
While the policy focus has been on expanding prescription drug coverage for elderly Medicare beneficiaries, the results in this report suggest that policymakers should not ignore the difficulties that many nonelderly adults have in affording prescription medications. The current policy emphasis on expanding Medicare prescription drug coverage is understandable, given that elderly Medicare beneficiaries in general have higher need for prescription medications, higher utilization, and incur higher costs compared to nonelderly persons.10 However, this report shows that an even greater number of nonelderly adults are vulnerable to cost barriers to prescription medications, either due to a complete lack of health care coverage (i.e. uninsured), or limitations in Medicaid prescription drug coverage relative to the needs of beneficiaries.
In lieu of new federal and state programs to provide assistance for prescription drug expenses, problems with affording prescription medications for many nonelderly persons could grow worse. First, many states are currently experiencing budgetary pressures in their Medicaid programs, due in large part to rising Medicaid prescription drug costs. If these pressures continue or worsen, states could become even more aggressive in trying to control prescription drug expenditures, which could further impair beneficiary access to drugs. While some may justify these cost control methods as being consistent with those used by many private insurance plans (e.g. copayments, generic drug requirements), policymakers should keep in mind that the impact of these methods on Medicaid beneficiaries is likely to be greater given their higher need and lower incomes, compared to most persons with private insurance.
In addition, slow economic growth and rising health insurance costs put more working adults (and their family members) at risk of being uninsured. Although not as medically needy as Medicaid and Medicare beneficiaries, uninsured persons lack coverage for any type of health care service, and therefore perhaps face even more difficult choices about whether to pay for prescription drugs in lieu of other needed medical or non-medical services. Furthermore, uninsured persons usually face higher prices for prescription drugs compared with most insured persons, since public and private health insurance plans typically negotiate price discounts for pharmaceuticals.
Finally, the importance of prescription drugs in medical care is increasing. Both the number of people using prescription drugs and the number of prescriptions per user are increasing.11 Expenditures for prescription drugs now account for about 11 percent of personal health care expenses, up from about 6 percent in 1988.12 The importance and cost of prescription drugs in medical care is likely to increase in the future with the development of new drug products, including from the still nascent field of biotechnology. As drug products increase in both importance and cost, policymakers will be confronted with the challenge of making these both affordable and accessible to all Americans.
Limitations of the study
The primary measure used in this study (i.e. problems affording prescription drugs) is based on self-reports. As such, we cannot determine the medical necessity of the prescription drugs that survey respondents were not able to obtain. However, it is very unlikely that the high rate of cost barriers to prescription drugs among Medicaid beneficiaries (relative to those with employer coverage) is explained by a greater inability to obtain medically unnecessary drugs, especially given the high prevalence of chronic health conditions among adult Medicaid beneficiaries.
In addition, the measure of cost barriers to prescription drugs is based on peoples perceptions and self-assessments of their ability to afford prescription drugs, not the actual level of financial burden. Thus, the higher rate of reported cost barriers to prescriptions drugs among nonelderly adults compared to elderly adults does not necessarily mean that the actual financial burden of obtaining prescription drugs is higher for nonelderly adults. Rather, the lower rate of cost barriers among elderly persons may indicate that they are more willing to incur the costs of obtaining prescription medications than are nonelderly persons.
It should also be noted that there is considerable variation within each of the Medicaid cost control methods in terms of how restrictive they are and which types of drugs are restricted. For example, there is variation in the level of copays among states that use this method (from 50 cents to $2 per prescription). Limitations on the number of new prescriptions also vary across states that use this method (from 3 per month to 10 per month), and different drugs are subjected to preauthorization requirements. However, it is not possible to incorporate all of this detail into the analysis, and it is at least a reasonable starting point to compare individuals in states with any of these types of restrictions to individuals in states without these restrictions.
Finally, there are seven states in the CTS study for which there was no information on Medicaid prescription drug policy, including Arizona, Colorado, Ohio, Oklahoma, Tennessee, Texas, and Wisconsin. It is unknown as to how the exclusion of these states affects the results from the analysis of Medicaid cost control methods, although the rate of reported cost barriers among Medicaid beneficiaries in these states is similar to beneficiaries in other states.
1 Kaiser Family Foundation. Prescription Drug Trends - A Chartbook, July, 2001.
2 Bruen, Brian K. States Strive to Limit Medicaid Expenditures for Prescribed Drugs, Kaiser Commission on Medicaid and the Uninsured, February 2002.
3 Includes state-only programs that provide comprehensive health coverage to eligible individuals, as well as coverage through the State Childrens Health Insurance Program (SCHIP). Few adults were eligible for SCHIP at the time of the survey, and most individuals in this category were covered by Medicaid.
4 Kaiser Family Foundation/Health Research and Educational Trust. Survey of Employer Health Benefits, 1999.
5 This conclusion is based on multivariate regression analysis on the probability of not obtaining a prescription medication due to cost. Along with income and chronic conditions, the analysis also controlled for age, gender, race/ethnicity, self-rated health status, marital status, and family composition. Binary variables for each of the insurance coverage categories in Table 1 were included as independent variables, with "uninsured" as the omitted category.
6 For a more thorough discussion of state Medicaid prescription drug policies, see Schwalberg, Renee, et al., Medicaid Outpatient Prescription Drug Benefits: Findings from a National Survey and Selected Case Study Highlights. Kaiser Commission on Medicaid and the Uninsured, October 2001; and Bruen, Brian K., States Strive to Limit Medicaid Expenditures for Prescribed Drugs, Kaiser Commission on Medicaid and the Uninsured, February 2002.
7 Information on state Medicaid prescription drug policy was obtained from Schwalberg et al., Medicaid Outpatient Prescription Drug Benefits. The analysis is limited to states where there are sample persons included in the CTS household survey. This includes 34 states and the District of Columbia. All of the most populous states have CTS sample persons. However, individuals in seven states that are in the CTS sample but for which the states did not respond to the survey of Medicaid prescription drug benefits are excluded from the analysis. The excluded states are Arizona, Colorado, Ohio, Oklahoma, Tennessee, Texas, and Wisconsin.
8 While probit or logistic regression is normally used with binomial dependent variables, OLS is used in this analysis because the coefficients reflect probabilities, and therefore are easier to interpret. Further analysis shows that results based on logistic regression analysis are very similar to OLS results.
9 These are based on regression-adjusted means, computed from the regression coefficients and sample means of the population with Medicaid and other state coverage.
10 Cohen JW, Machlin SR, Zuvekas SH et al. Health care expenses in the United States, 1996. Rockville (MD): Agency for Healthcare Research and Quality; 2000. MEPS Research Findings 12. AHRQ Pub. No. 01-0009.
11 Merlis M, "Explaining the Growth in Prescription Drug Spending: A Review of Recent Studies". Report prepared for the U.S. Department of Health and Human Services, Conference on Pharmaceutical Pricing Practices, Utilization, and Costs, August 2000.
12 Levit K, Smith C, Cowan C, et al., "Inflation Spurs Health Spending in 2000," Health Affairs 23(1): 172-181, 2002.
Table 1—Percent not obtaining prescription drug due to cost.
Table 2—Percent not obtaining prescription drug due to cost, by insurance coverage and income for nonelderly adults (ages 18-64).
Table 3—Percent not obtaining prescription drugs due to cost, by insurance coverage and chronic condition status for nonelderly adults (ages 18-64).
Table 4—Health and income characteristics by insurance type (age 18-64).
Table 5—Selected measures of access to care, by insurance status.
Table 6—Summary of the effects of state Medicaid prescription drug policies on beneficiaries access to prescription drugs.
Table 7—Summary of Effects of State Medicaid Cost-Control Methods on Beneficiaries Access to Prescription Drugs
Appendix Table 1—Summary of Medicaid prescription drug policies in states that are included in the CTS survey (as of October, 2001).
Appendix Table 2—Means of dependent and independent variables used in regression analysis for the effects of cost control methods on prescription drug access (Persons age 18-64 with Medicaid or other state coverage).
Appendix Table 3—Full regression results for the effects of multiple cost control methods on the probability of not getting prescription drugs due to cost.