Prescription Drug Access: Not Just a Medicare Problem

Issue Brief No. 51, April 2002 — By Peter J. Cunningham

All state Medicaid programs provided outpatient prescription drug coverage, yet slightly more than one in four Medicaid patients between the ages of 18 and 64 reported being unable to fill at least one prescription in the prior year due to cost, according to a study by the Center for Studying Health System Change (HSC). Uninsured adults experienced similar difficulty affording their medications. With prescription drug expenditures rising rapidly, many states had responded by imposing copayments, capping the number of prescriptions covered, and deploying other cost-control measures. The HSC study found that these cost-containment strategies were contributing to Medicaid beneficiaries' access problems. State and federal policy makers were urged to consider that the impact of these controls would likely fall harder on Medicaid beneficiaries than on the privately insured, given their greater medical needs and lower incomes.

Nonelderly Adults Have Problems Affording Drugs

While much of the federal and state policy debate at the time focused on prescription drug needs of seniors enrolled in Medicare, many nonelderly adults also struggled to afford their medications. Data from HSC's 2000-01 Community Tracking Study Household Survey showed that nonelderly adults on Medicaid and those without any insurance faced the greatest difficulty. More than one out of four individuals in both groups had gone without at least one prescribed medication in the past year because they could not pay for it. This stood in sharp contrast to the experience of Medicare beneficiaries and people with employer-sponsored private insurance.

That adults with Medicaid coverage experienced such widespread problems affording prescription drugs was surprising. Medicaid was designed to guarantee access to affordable medical care for the nation's poorest and sickest residents, and every state Medicaid program covered prescription drugs for most beneficiaries. The gulf in prescription drug access between nonelderly Medicaid enrollees and those with employer-sponsored coverage stood out because, in most other dimensions of care, the two groups were fairly comparable. People on Medicaid were roughly similar to those with employer coverage in terms of unmet medical needs, having a regular source of care, and having seen a physician within the past year.

Low Income and Poor Health Compound the Problem

Despite the assistance Medicaid provided, beneficiaries' low incomes put them at significantly higher risk of being unable to afford prescription medications. Half of nonelderly adult Medicaid beneficiaries had incomes below the federal poverty level, which stood at $8,590 for a single person in 2001. Three-quarters had incomes below 200 percent of poverty. By comparison, only 3 percent of people with employer-sponsored health coverage fell below the poverty line, and just 14 percent were under 200 percent of poverty.

Medicaid beneficiaries also tended to be in worse health. More than half of nonelderly adults on Medicaid were living with at least one chronic condition — diabetes, heart disease, depression, or another ongoing illness — and more than one in four had two or more such conditions. Among people with employer-sponsored coverage, fewer than a third had a chronic condition, and only 10 percent had two or more.

Cost barriers were higher for people with chronic conditions regardless of insurance type. Particularly striking was the high proportion of Medicaid beneficiaries and uninsured people with chronic health problems who reported being unable to afford their drugs. Among the most troubling findings, more than 40 percent of Medicaid patients with two or more chronic conditions said they had not obtained prescribed medications because of cost. Among uninsured adults with two or more chronic conditions, that figure reached 61 percent.

Low incomes and high rates of health problems combined to put adult Medicaid beneficiaries at considerable risk for prescription drug access problems. The study showed that these characteristics largely explained the wide gap between Medicaid and privately insured individuals when it came to affording medications. But if Medicaid was supposed to narrow that gap, why had it fallen short in this particular area of care?

Cost Containment Linked to Access Gaps

State efforts to rein in Medicaid prescription drug spending appeared to be part of the answer. In the years preceding the study, many states had adopted a range of methods to control the rapid growth in Medicaid drug expenditures. These approaches aimed to influence both physicians' prescribing patterns and patients' drug use.

While specific methods differed from state to state, the most common included imposing nominal copayments, setting dispensing limits that restricted the number of prescriptions a beneficiary could fill, requiring substitution of generic drugs for brand-name alternatives, mandating prior authorization for certain medications, and establishing step-therapy protocols that required physicians to prescribe lower-cost drugs before moving to more expensive options.

Taken individually, these cost controls did not appear to significantly affect beneficiaries' ability to obtain their medications. Most states, however, had put more than one cost-control measure in place. The study found that when multiple measures were implemented simultaneously, the impact on beneficiary access was substantially greater — even after controlling for beneficiary characteristics and other community, state, and regional factors.

Beneficiaries in states that had implemented four or five cost-control measures were roughly twice as likely to report cost barriers as those living in states with one or no such policies. States pursuing multiple cost-containment strategies may have been more aggressive overall in trying to control Medicaid drug spending. In those states, the cumulative effect of layering multiple restrictions would curtail access to a greater degree than any single method, and the individual methods themselves may have been applied more stringently — with higher copayments or tighter dispensing limits. While these approaches may have yielded greater Medicaid savings, an unintended consequence of aggressive cost-control policies appeared to be reduced beneficiary access to needed medications.

Policy Implications

Although the policy debate at the time centered on expanding prescription drug coverage for Medicare beneficiaries, the HSC study underscored that policy makers should not overlook the difficulties faced by nonelderly patients, particularly those who were uninsured or enrolled in Medicaid.

The role of prescription drugs in medical care was expanding. Both the number of Americans using prescription medications and the number of prescriptions per user were climbing. Expenditures for prescription drugs accounted for about 11 percent of personal health care spending, up from roughly 6 percent in 1988. The significance and cost of prescription drugs were expected to continue growing as new pharmaceutical products — including those from the still-emerging biotechnology industry — came to market. As drug therapies became both more important and more expensive, policy makers would face the challenge of ensuring medications remained affordable and accessible for all Americans.

Many states were already experiencing Medicaid budget shortfalls, and state officials frequently pointed to rising Medicaid prescription drug spending as a primary driver. If these fiscal pressures continued or intensified, states might become even more aggressive in curtailing drug expenditures, further restricting beneficiary access. While some might view these cost-control methods as comparable to those used by private insurers, public officials needed to keep in mind that the impact on Medicaid beneficiaries was likely to be more severe given their greater health needs and lower incomes.

Data Source

This Issue Brief presented findings from the 2000-01 Community Tracking Study Household Survey, a nationally representative telephone survey of the civilian, noninstitutionalized population supplemented by in-person interviews of households without telephones to ensure proper representation. The survey covered approximately 60,000 individuals in total. The analysis sample consisted of about 39,000 adults ages 18-64, including roughly 1,800 enrolled in Medicaid or state coverage programs. The survey's response rate was approximately 60 percent.

Sources and Further Reading

Cunningham, Peter J., "Affording Prescription Drugs — Not Just a Problem for the Elderly," HSC Research Report No. 5.
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).
Bruen, Brian K., "States Strive to Limit Medicaid Expenditures for Prescribed Drugs," Kaiser Commission on Medicaid and the Uninsured (February 2002).
Merlis, Mark, "Explaining the Growth in Prescription Drug Spending: A Review of Recent Studies," report prepared for the U.S. Department of Health and Human Services (August 2000).
Levit, Katherine, et al., "Inflation Spurs Health Spending in 2000," Health Affairs, Vol. 21, No. 1 (January/February 2002).