Since passage of President Obama's health care law in 2010, 5.8 million Medicare patients have saved $5 billion through prescription-drug discounts, and the government can now predict lower health care costs based on increased use of these cheaper drugs.
The savings are a continuation of the law's attempt to close the "doughnut hole" -- prescription-drug coverage expenses that kick in once Medicare coverage runs out.
The Department of Health and Human Services (HHS) plans to announce those savings today. "The health care law is saving money for people with Medicare," HHS Secretary Kathleen Sebelius said.
In 2012, Medicare coverage ends when total prescription costs top $2,930. Drugmakers participating in Medicare agreed to give the government a 50% discount on premium drugs and 14% on generic drugs as part of the health care law, and to extend those discounts to seniors who have exhausted their coverage and are paying for the drugs themselves.
Because of these discounts, in the first 10 months of 2012, Medicare beneficiaries saved $1.86 billion on prescription drugs, compared with $1.51 billion in the first 10 months of 2011, according to HHS. The last months of the year tend to have higher savings as people run out of coverage and enter the doughnut hole.
The Congressional Budget Office (CBO) announced an added benefit Thursday: Cheaper drugs means more people taking their medication, reducing long-term medical costs. For example, when Medicare patients take an antibiotic to prevent further infection, they save the government money by stabilizing their illnesses and avoiding emergency hospitalizations. "Using the revised methodology, CBO estimates that the net cost of implementing the provisions closing the coverage gap will be $51 billion, rather than the $86 billion estimated prior to the revision," the CBO reported.
Michael Cannon, director of health policy studies for the Cato Institute, a libertarian think tank that has opposed the Affordable Care Act, said that as "politicians and lobbyists" expand drug benefits, more people who don't need them use them, and "health care spending rises."
"It's an attractive story: New government subsidies lead more people to take their medicine, leading to lower health care spending," he said. "Problem is, it's almost never true."
Cato has also argued that lowering the prices of name-brand medications will steer seniors away from generic drugs and drive up costs.
That may not be the case. Before the doughnut-hole discounts started, customers would learn their benefits had run out and stop taking their more expensive medications, said Steve Simenson, president of Goodrich Pharmacy and past president of the American Pharmacists Association. Now, however, more customers are taking advantage of generic medication -- even on the government's dime -- so their coverage lasts longer, Simenson said.
"They're asking for them," he said.
Ultimately, they see a difference, even if they don't know where the benefit comes from, he said: "Better adherence leads to better outcomes."
Previous CBO reports did not list the financial benefits of patients taking cheaper medications because there was insufficient evidence of an "offsetting" effect. On Thursday, the office said every 1% increase in prescriptions filled by Medicare patients would cause the program's spending to drop by one-fifth of 1 percent.
The change in policy came after dozens of studies and research showed a link between changes in prescription use and in spending for medical services, the CBO reported.
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