Medicaid expansion and prescription drug use

How did Medicaid expansion affect prescription drug use? At first glance, one would think that prescriptions increased; more insurance lowers patient out-of-pocket cost so we would expect more prescriptions. Medicaid insurance may crowd out other forms of insurance; if those other forms of insurance covered more drugs, then perhaps utilization would go down.

A study by Ghosh, Simon, and Summers (2019) aims to answer this question.

Using the Affordable Care Act’s Medicaid expansions as a source of variation and a national, all-payer pharmacy transactions database, we find that within the first 15 months of new health insurance availability, aggregate Medicaid-paid prescriptions increased 19 percent, amounting to nearly 9 new prescriptions a year, per new enrollee. We find no evidence of reductions in uninsured or privately-insured prescriptions, suggesting that new coverage did not simply substitute for other payment sources.

Ok, so the simple answer was right. A more interesting question was where the prescriptions were coming from. Bascially, what drugs weren’t people taking before (but were supposed to), but now they are taking given that they have insurance.

The largest increases occurred for medications treating conditions such as diabetes and heart disease, suggesting greater price elasticity for chronic medications. Generics increased more than brand-name drugs; and utilization increased less in expansion states with higher Medicaid drug copayments. Overall, these findings suggest that prescription drug demand among low income populations exhibits substantial price sensitivity, and insurance expansion can increase medication treatment for chronic conditions.

This finding, while interesting in and of itself, also may be instructive for the use of high-deductible health plans. Increase use of HDHP may reduce cost, but if people reduce pharmaceutical utilization, they may be cutting back on drugs they need to use over the long-term that would decrease the long-term impact of their chronic conditions.

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