Medicare Part D Generates Billions in Taxpayer Savings

Medicare's prescription drug benefit saves taxpayers billions of dollars by dramatically reducing hospital admissions, a new study shows.

Researchers at the Johns Hopkins Bloomberg School of Public Health and the University of Illinois at Chicago estimated the total savings at $1.5 billion a year - about 2.2 percent of the total $67.7 billion cost of Medicare Part D in 2011.

"Medicare Part D requires a substantial investment from the federal government, and the million-dollar question has been, 'Does this investment help to pay for itself by improving the health of seniors who have gained coverage?'" says Dr. G. Caleb Alexander, the co-director of the Johns Hopkins Center for Drug Safety and Effectiveness. "Our study provides some of the most rigorous evidence to date regarding the degree to which increased prescription coverage is associated with decreases in downstream health care use and cost."


The study found that Medicare's prescription drug benefit reduced hospitalizations by 8 percent - and charges associated with those hospitalizations by 12 percent - during the first four years of the program, which went into effect in 2006.

Some 52 million Medicare beneficiaries have access to the drug benefit through private plans approved by the federal government, according to the Kaiser Family Foundation, and the Affordable Care Act is expanding the reach of the program by closing the gap in coverage known as "the doughnut hole."

The study found that Medicare's prescription drug benefit was associated with significant decreases in admissions for chronic obstructive pulmonary disease (32 percent), dehydration (20 percent), congestive heart failure (18 percent) and coronary atherosclerosis and other coronary artery diseases (13 percent).