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Executive Summary

MEDICARE BENEFICIARY DRUG EXPENDITURE STUDY -- one of the major opening events in the start-up of the outpatient drug benefit program -- is underway and HHS staffers are hopeful of meeting the April 1 deadline for submission to Congress. The study is being done by the National Center for Health Statistics Research Office of Intramural Research and is based on data collected as part of the National Medical Expenditure Survey (NMES), a comprehensive measure of the nation's expenditures for health care goods and services for calendar year 1987. The NCHSR report is designed to provide Congress with background information on current drug utilization and spending patterns among the over-65 Medicare beneficiaries. NCHSR staff began the study in November with raw survey data compiled by its prime contractor Westat (Rockville, Md.). Since then, NCHSR has been editing the data and compiling analytical files. NCHSR is now ready to perform its final analysis and drafting of the report for Congress. The report is one of the most important early benchmarks in the implementation schedule of the Medicare outpatient drug program because it is expected to provide Congress, for the first time, with accurate information on which to base estimates of the total cost of the outpatient drug program. If HHS falls behind on initial data collection tasks such as the NMES study, then it will not bode well for the startup of the full Rx drug benefit by 1991. The NCHSR report will be retrospective. The Congressional Budget Office and the Health Care Financing Administration will use the raw data, however, to make prospective cost projections. The law requires CBO to give Congress its updated estimate of total program outlays within 60 days of receiving the NMES data. Last year, as the law was being developed, CBO estimated that program outlays would be about $ 2.5 bil. in 1993. However, the Health Care Financing Administration estimated that as early as 1992 the outpatient drug program will cost about $ 5.1 bil. More recently, HCFA said that the outlays in 1991 could reach over $ 3 bil. in 1991, creating a deficit in the program of $ 650 mil. in only its second year of operation ("The Pink Sheet" Nov. 28, 1988, T&G-1). Another report-to-Congress deadline is also approaching. The law requires HCFA to submit a report by May 1 on manufacturers' prices and pharmacists' charges for covered outpatient drugs and on use of covered outpatient drugs by Medicare beneficiaries. That report is the first of two to be submitted in 1989, with the second submission due Nov. 1. HCFA is reportedly on schedule for submission of the first pricing report, which is to go to both the House Ways and Means Committee and the Senate Finance Committee. That report may not go much beyond an analysis of published drug prices.

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