The 130th Annual Meeting of APHA

Abstract #46170

M. Paige Powell, MHA and Dennis G Shea, PhD. Department of Health Policy and Administration, Penn State Univeristy, 116 Henderson Building, University Park, PA 16801, 814-863-8130, mpp4@psu.edu

The purpose of this study is to examine the degree to which substitution of prescription drugs differs between rural and urban populations and to inform policymakers of the effect of a Medicare prescription drug benefit on the cost of the existing Medicare program. Data from the Medicare Current Beneficiary Survey (MCBS) years 1997-1998 and the 2000 Area Resource File (ARF) will be used to determine cross-price effects for 1998. Because endogeneity exists between insurance status, health status, and use, a two-stage instrumental variables analysis will be used to model cross-price effects. In the first stage, ordinary least squares regression will be used to regress the quantity of prescription drugs on the market price for physician services and the market price for prescription drugs. The model will control for predisposing, enabling and need characteristics and provider availability. In the second stage, the regression equation will be repeated including an instrumental variable of health status at t-1 (1997), to try to control for endogeneity and provide an accurate measure of the cross-price effects. The rural and urban populations will be separated using the ARF rural/urban continuum code. These models will be run for each classification to determine differences in the rural/urban population. Descriptive findings show that the mean out-of-pocket expenditure for physician care was 15.1% of mean total physician expenditures and the mean out-of-pocket expenditure for prescription drugs was 41.2% of mean total prescription expenditures. The mean out-of-pocket payment for prescription drugs was significantly higher than the mean out-of-pocket payment for physician care. Preliminary findings indicate that significant cross-price effects may exist between these services. Further multivariate analysis will estimate the direction and magnitude of these effects, controlling for multiple factors, as well as the rural/urban differentials. Most studies of a Medicare prescription drug benefit to date have focused on the direct costs of the benefit, ignoring possible substitution and complement effects that could decrease or increase total Medicare costs. Some prior studies in Medicare and non-Medicare populations indicate these relationships could be important. The direction and magnitude of cost-price effects between prescription drugs and other services will allow policymakers to make inferences about the impact of a Medicare prescription drug benefit on the total cost of Medicare. This study will also illustrate differences in the way that rural and urban beneficiaries use these services together, allowing policymakers to develop a benefit plan that considers the special needs of the rural population.

Learning Objectives:

• After completion of this session, the participant will be able to understand the link between Medicare beneficiaries' use of prescription drugs and the cost of physician services and how this effect differs between rural and urban residing Medicare beneficiaries.

Keywords: Medicare, Prescription Drug Use Patterns

Presenting author's disclosure statement:
I do not have any significant financial interest/arrangement or affiliation with any organization/institution whose products or services are being discussed in this session.