Taking Your Medicine Pays Off


If preventive and regular health care is available, people will stay healthier and require less expensive crisis care. That's a major premise of government health care programs.

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The belief is prevalent, especially among supporters of programs like Medicare, Medicaid and the Affordable Care Act. But there hasn't been much solid research proving this notion to be true.

A new study released this week by Johns Hopkins Bloomberg School of Public Health and the University of Illinois at Chicago offers evidence that this theory is accurate.

Researchers found that providing older people with prescription drug insurance -- Medicare Part D -- has over the past four years reduced hospitalizations by 8 percent and decreased annual Medicare spending on hospitalization by 7 percent. It also has reduced hospital charges by 12 percent during the program's first four years.

The study, published by the National Bureau of Economic Research and paid for by the National Council of Aging and the National Institutes of Health, calculated that reducing spending on hospitals saved $1.5 billion per year, or approximately 2.2 percent of the $67.7 billion cost of Medicare Part D in 2011.

The study's principal author, Robert Kaestner, professor of economics at the University of Illinois, says, "Medicare Part D helps insure that people get the correct types and quantities of drugs that help keep them out of the hospital. This improves outcomes and keeps the cost of the program -- Parts A and D -- down, providing savings that aren't trivial."

What does that mean for people who are living in retirement and dependent on Medicare? And down the road, what will be the impact on those committed to secure retirement planning?

Kaestner says his study makes it harder to argue against closing the Part D doughnut hole, an annual coverage gap that leaves many Medicare participants without help paying for drugs. "Closing the doughnut hole will cost $51 billion, but putting these people in the hospital would cost much more," he says. "Keeping people out of the hospital is a big savings."

And a huge personal economic and lifestyle improvement, we might add.

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