Seniors Save as Much on Drugs as Insurers
November 19, 2003
A key argument for adding a prescription drug benefit to Medicare is that insurers obtain significant price discounts not available to individual consumers who pay out-of-pocket. But a new study from the National Center for Policy Analysis finds that seniors on their own already pay prices as low and often lower than the prices private insurers pay.
If an insurance company is paying the bill, seniors do not have much incentive to shop around, says NCPA Senior Fellow Andrew Rettenmaier, who also is executive associate director of the Private Enterprise Research Center (PERC) at Texas A&M University. But when they pay with their own money, they have an incentive to shop aggressively.
The NCPA study examined prices of more than 36,000 prescriptions for the 39 drugs most commonly prescribed for Medicare patients:
- There is no significant difference between prices paid by seniors with insurance coverage and those paid by seniors spending their own money for 60 percent of the prescriptions.
- Where price differences are significant, seniors are twice as likely to pay less than private insurers.
- For close to three-quarters of the prescriptions, third-party insurers did not pay significantly lower prices.
- Where prices differences were significant, individuals again paid lower prices twice as often.
When seniors spend their own money, they have an incentive to search for lower prices," Rettenmaier added. As a result, they often pay prices as low or lower than insurance companies.
Source: Andrew Rettenmaier, "Who Pays Higher Prices for Prescription Drugs?" National Center for Policy Analysis, November 19, 2003.
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