State Prescription Drug Policies, Cost Barriers, and the Use of Acute Care Services by Medicaid Beneficiaries

This paper examines the relationship between Medicaid pharmacy benefit restrictions and reports of prescription cost barriers by beneficiaries, and the relationship between prescription cost barriers and hospitalizations. The analysis uses data for adult Medicaid beneficiaries from the 2000-2001 and 2003 Community Tracking Survey household surveys, combined with data on states' Medicaid pharmacy benefit restrictions and characteristics of local health-care markets. Estimation results show that state Medicaid restrictions are associated with a higher incidence of reported drug cost barriers and that Medicaid recipients who report prescription cost barriers experience a greater number of hospitalizations. ********** Over 52 million low-income individuals receive Medicaid coverage. State and federal spending on the program amount to over $250 billion per year, making it the largest single health insurance program in the U.S. (Kaiser Commission on Medicaid and the Uninsured 2005). Offering Medicaid prescription drug coverage is optional for states, but all states currently provide this benefit to most Medicaid beneficiaries. Medicaid provides over $30 billion per year in prescription benefits, with over 500 million prescriptions covered (Holahan and Cohen 2006). Research has shown that Medicaid provides similar access and use of services at levels comparable to private coverage (Dubay and Kenney 2001; Long, Coughlin, and King 2005). However, the same may not be true regarding access to prescription drugs. After controlling for health status and other characteristics, several studies have found that Medicaid beneficiaries are significantly more likely than the privately insured to report not being able to afford needed prescriptions (Berk and Schur 1998; Coughlin et al. 2005; Cunningham 2005). This paper examines the consequences of states' Medicaid pharmacy benefit restrictions for beneficiary access to prescription drugs in recent years. Analysis of state policy trends over time shows that states have substantially increased access restrictions in their Medicaid programs during the past 15 years, and especially since 2000 (Crowley et al. 2005; Simon, Tennyson and Hudman 2009; Tennyson and Hudman 2007). We examine the extent to which this changing structure of Medicaid pharmacy benefits may contribute to drug cost barriers for Medicaid recipients. Understanding whether and to what extent current state policies contribute to cost barriers among Medicaid recipients is particularly important given the pharmacy benefit program changes resulting from the passage of both Medicare Part D and the Deficit Reduction Act of 2005. Medicare Part D shifted the drug coverage of nearly six million poor elderly from Medicaid to the new Medicare plans. While these beneficiaries are exempt from the premium and deductible features of Medicare Part D, most will be subject to tiered co-payments and other access restrictions adopted by some state Medicaid plans in recent years. The Deficit Reduction Act grants states new flexibility to increase cost sharing for prescription drugs for many Medicaid beneficiaries, including children and pregnant women who are now currently exempt from cost sharing. The Deficit Reduction Act also allows states broader flexibility to deny care, including prescription drugs, to a person who is unable to meet a cost-sharing requirement. As a result of the Deficit Reduction Act, the level and scope of prescription cost-sharing requirements under states' Medicaid programs is likely to increase in the coming years. We also examine the relationship between prescription drug access problems and hospitalizations among Medicaid beneficiaries. Prescription drugs can be viewed as an alternative to other forms of care, and drug access problems may have important negative implications for health and health-care usage. Existing research shows that failure to fill needed prescriptions may lead to greater use of other health services (Lichtenberg 1996; Piecoro et al. …