OCTOBER 2009 HEALTH HOT TOPICS

Medicare's Drug Benefit Program: A Success Story, So Far

When the Medicare Part D drug benefit was adopted in 2006, the program faced many questions. For example, would it attract enough beneficiaries to be economically viable? Would drugs be affordable for low-income participants? Enough data have now accumulated to allow a preliminary assessment of the program's performance. RAND researchers used administrative records to examine seniors' participation in the Medicare Part D program, including how the program has affected access to medications, use of prescription drugs, and out-of-pocket costs. They also compared the 10 largest Part D plans in 2006 to seven non-Medicare drug plans often cited as examples of low-cost or generous pharmacy benefits.

Results showed that the program has performed well during its first two years, extending pharmacy coverage to most seniors while reducing overall spending on drugs. The researchers estimated that during its first year, Medicare Part D resulted in a 16-percent drop in out-of-pocket spending among seniors for prescription drugs and a 7-percent increase in the number of prescriptions filled. Savings were concentrated among the poor and disabled. After the program's first two years, about 90 percent of seniors had drug coverage at least as generous as the standard Part D benefit. Moreover, coverage under Part D was comparable to that under non-Part D plans with respect to key features that are likely to matter most to Medicare beneficiaries—access to medications and out-of-pocket costs.

Although the program has exceeded initial expectations, concerns remain over drug pricing and gaps in coverage. The researchers recommend that the government continue to monitor the competitiveness of the Part D market to ensure that it meets the diverse needs of Medicare beneficiaries.

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Do Patients Avoid Rural Hospitals?

Rural hospitals play a vital role in providing health care to rural Americans—20 percent of the population—who typically have less access to health care than their urban and suburban counterparts. Yet, rural hospitals continue to struggle to survive in the modern health care market. One challenge for rural hospitals is that many rural residents bypass them in favor of hospitals in urban areas.

To obtain a clearer understanding of the situation, a RAND team led by health economist José Escarce focused on rural hospital use in California, which has a large rural population (2.6 million) and more than 60 hospitals located in rural areas or very small towns. As in other states, California's rural hospitals face financial challenges: Several have filed for bankruptcy in recent years, and nearly three-fourths are losing money. The analysis examined factors that influence the use of rural hospitals and the characteristics of people who are most likely to use them and would be thus be harmed most by closures. The researchers used California hospital discharge data and data from the American Hospital Association's Annual Survey of Hospitals.

Results showed that substantial numbers of rural residents seek care in urban facilities even when they live closer to a rural facility. Further, patients' decisions to bypass rural hospitals are not based primarily on the services they offer; simulations showed that patients' propensity to choose rural hospitals would increase only slightly even if these hospitals offered many more services. Other factors play a greater role in hospital choice for rural residents. For example, they may worry that quality of care in rural hospitals is inferior or lack accurate information about whether the closest rural hospital offers needed services.

The researchers also found that the patients who are most likely to use rural hospitals are those without private insurance, older patients, and patients with urgent cases. These groups are more likely to lack transportation to reach alternative hospitals and are thus most likely to suffer from reduced access to care when rural hospitals close.

The findings have implications for rural hospitals in California and nationwide. To attract more patients, rural hospitals may need to provide local communities with better information about quality of care, capabilities, and outcomes. In addition, they may benefit from updating and improving their capabilities, as many facilities have done over the past decade. Many rural hospitals have adopted innovative management techniques, systems of coordination and networking, and enhanced information technology. These strategies are likely to continue to be important for their survival.

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Lowering Sodium Intake May Have Major Health and Economic Benefits

Reducing sodium consumption to recommended levels may reduce rates of hypertension, save $18 billion annually in medical costs, and improve the quality of life for millions of Americans. This conclusion emerged from a recent RAND study conducted by Kartika Palar, a fellow at the Pardee RAND Graduate School, and health economist Roland Sturm. The researchers used a simulation model to understand current levels of sodium intake among adult Americans and predict the effects of reducing sodium intake. The analysis showed that the average American adult consumes 3,400 milligrams of sodium per day. Reducing average consumption to meet recommended national sodium guidelines of 2,300 milligrams per day could reduce hypertension rates by an estimated 11 million cases per year. Doing so may translate into approximately $18 billion per year in direct health care cost savings. In addition, reducing hypertension rates could enhance the health-related quality of life for millions of Americans, an improvement that, if calculated in dollar terms, could be worth approximately $32 billion each year.

The researchers note that strategies for reducing sodium intake still need to be developed. Proposed strategies currently under consideration by policymakers include redesigning food labels to highlight sodium amounts, having manufacturers voluntarily lower sodium levels, and adopting regulations that would require food processors to lower sodium.

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