This is the February 11, 2008, issue of Elder Law FAX, a free newsletter published by the Elder Law Practice of Timothy L. Takacs.   Medicare Part D Reduces Out-of-Pocket Drug Costs Average out-of-pocket spending has fallen and average prescription drug use has risen modestly, according to an early analysis of the effect of the Medicare Part D drug program on the prescription drug market.   In 2006, Medicare inaugurated a voluntary prescription drug benefit for older adults. Usually referred to as "Medicare Part D," the intent of the law was to help seniors reduce out-of-pocket prescription drug costs.   The analysis of the effect of the Part D drug program on the market was published in the February 5 issue of the Annals of Internal Medicine, a widely read medical journal. Why was this study done?   A 2004 projection suggested that the Medicare drug benefit would reduce average out-of-pocket expenditures among elderly persons by about 14% and would increase drug utilization by about 6%. This prediction was mainly driven by the fact that almost three fourths of elderly persons in the United States already had some kind of drug coverage and that Medicare Part D would have a small effect on their expenditures or utilization. Little work has been done to empirically estimate the effect of the Part D benefit on prescription drug utilization and expenditures.   The authors of the study sought to address these limitations by analyzing pharmacy claims from a national pharmacy chain (Walgreen's) accounting for approximately one eighth of the market share of prescription medicines in the United States.   The analyses compare the effect of Part D on prescription drug utilization and expenditures among persons eligible for the benefit who enrolled in a Part D plan, persons eligible for the benefit who did not enroll, and noneligible persons. Study results showed that Medicare beneficiaries ages 66 to 79 experienced a 13.1% decrease in costs and a 5.9% increase in prescription drug use.   The authors noted that their study did not evaluate the effect of the "doughnut hole," or the effect of changes on clinical outcomes.   The authors also noted that the generosity of Part D plans may have led to lower expenditures for drugs and thus allowed for greater use of prescription drugs, with the result that Part D enrollees' lower out-of-pocket drug costs would have decreased less than would have otherwise been expected. That is, the Part D program has caused moral hazard in drug consumption: increases in drug consumption due to greater prescription coverage rather than to seniors' unmet health care needs.   The study was a joint effort between researchers at Harvard University, the University of Chicago and Virginia Commonwealth University, and sampled information collected from Walgreen's pharmacies between 2005 and 2006.   More on the results is available in the February 5, 2008, issue of the Annals of Internal Medicine at http://www.annals.org/cgi/content/full/0000605-200802050-00200v1.