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8-14-2011 4:31:55 PM

The federal government’s prescription drug plan for the elderly, known as Medicare Part D, has been heralded as a success when it comes to reducing out-of-pocket expenses for many patients and encouraging them to use and continue taking essential medicines.

But since its implementation in January 2006, it has also been criticized as too costly. President Obama even singled out the plan as contributing to the nation’s debt crisis in his speech to the nation Monday night, calling it an “expensive prescription drug program” that was “simply added to our nation’s credit card.”

Now, a new study is arguing that Medicare Part D’s cost has been at least partly offset by reduced spending in areas like hospitalizations and short-term stays in nursing homes, because patients who benefited from the plan were less likely to need more costly inpatient care.

“That has a direct budgetary implication,” said Dr. J. Michael McWilliams, an assistant professor of health care policy and medicine at the Harvard Medical School and the lead author of the study, which will appear in Wednesday’s issue of The Journal of the American Medical Association. “Medicare Part D probably did not cost us as much as was originally thought.”

The study compared two groups of elderly patients — those who described their prescription plans as generous before 2006, and those who said they had limited coverage — and tracked their Medicare claims from 2004 through 2007 to gauge how their health care spending changed after the plan was carried out. The nearly 3,500 patients with limited coverage spent about 10 percent less, or about $1,200 each, than expected on annual non-drug related medical care after 2006.

The decrease was explained mostly by reductions in spending on inpatient and nursing-home care, the study found, suggesting that patients were able to manage serious health conditions through medication and prevent complications that could send them to the hospital. In addition, because of the expanded drug coverage, doctors may have been able to treat patients on an outpatient basis for conditions that previously required an inpatient stay in order to be covered by Medicare.

The 2,500 patients who previously had generous drug plans also saw a decrease in non-drug medical spending after Part D was carried out, but the difference was not significant, Dr. McWilliams said. Similar decreases were not observed in a control group of patients whose spending patterns between 2002 and 2005 were analyzed. The study was supported by grants from the Doris Duke Charitable Foundation, the William F. Milton Fund, and the Robert Wood Johnson Foundation.

Dr. McWilliams said the findings could mean that additional savings will come as the Medicare Part D program gradually closes the so-called “doughnut hole” in coverage over the next decade, as mandated by the federal health care law. Many beneficiaries find themselves paying hefty out-of-pocket expenses for drugs after they hit a spending limit, but before they are covered again under their catastrophic coverage.

Savings could also increase with the rise of accountable care organizations, groups of doctors and hospitals that work together in an effort to improve care and reduce costs, he added. Under the health care law, accountable care organizations that work with Medicare get to keep a portion of the money they save, so “they will have an incentive to work with the drug plans to make sure their patients have coverage,” Dr. McWilliams said.

Because researchers did not have access to drug claims before and after Part D was put in place, the study could not analyze precisely how much was spent on drug costs for the patients in the study. But Dr. McWilliams said the reduction in spending in other medical areas shows that “clearly these plans are doing something right.”