New study calls for public universal drug plan and warns of income related plans for seniors

Are Income-Based Public Drug Benefit Programs Fit for an Aging Population?

Steven G. Morgan, Jamie R. Daw and Michael R. Law

December 3, 2014

Medications prescribed outside a hospital setting are not covered by Canada’s medicare system. They are financed through a patchwork of private and public drug insurance plans that only provide coverage for select populations, leaving many Canadians with little or no coverage.

Up until the late 1990s, people 65 and older received universal, almost first-dollar public drug coverage in most provinces. But with population aging, the public liability associated with age entitlements has become a major concern for governments. Four provinces have discontinued their age-based programs, which covered most of the cost of medications for seniors, and -replaced them with income-based programs, which protect all residents against catastrophic drug costs. Other provinces have started to move or are considering moving in this direction.

Is this sound policy? Steven Morgan, Jamie Daw and Michael Law assess the performance of -income-based public drug plans against three key policy objectives: access, equity and efficiency. They review the theory and the evidence by comparing Ontario’s age-based and British Columbia’s income-based systems. They find that income-based plans perform poorly with respect to all of these objectives.

First, replacing age-based public plans with income-based drug benefit plans reduces seniors’ access to necessary medicines. The deductibles are a financial disincentive for patients to fill -needed prescriptions and they therefore reduce their adherence to the prescribed therapy. Second, it raises important equity issues. Deductibles under income-based plans impose considerable direct costs, especially on seniors, who are more likely to be high-needs users of prescription drugs. Third, income-based programs undermine cost efficiency because a large share of the residual costs falls to employers, unions and patients. Having multiple payers increases administrative costs and fails to leverage the purchasing power of government as the single payer in the pharmaceutical market place.

Policy-makers have portrayed the adoption of income-based plans as an expansion of previous programs because income-based plans cover patients of all ages, not just seniors. The authors of this study argue that what this really represents is a retrenchment of public drug benefits in Canada.

The authors recommend moving to public plans that offer full and universal coverage of prescription drug costs, financed through personal income taxes. Such plans would ensure better access, equity and efficiency than do those built around income-based deductibles. In particular, they would provide more equitable coverage for high-needs prescription-drug users. This approach would also enable government to achieve greater cost efficiencies and improve health outcomes. As the single payer, government would be better able to lower the price of brand-name and generic drugs, promote the use of generic drugs, help improve prescribing patterns, and take advantage of administrative and other cost efficiencies.

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