A single number doesn’t always tell the full story, and that’s the case when it comes to a recent report from AHIP asking how our health care premium dollars are being spent. “Where Does Your Health Care Dollar Go? AHIP Has the Answer,” suggests from 2014-2016, 23.2% of health care premium dollars went toward prescription medicines.
In addition to AHIP’s estimate, there are a variety of prescription medicine and health care spending statistics being used by different organizations or being reported in the news. Regardless of the statistic cited, it’s important that health care stakeholders and policymakers have the proper context to ensure those statistics aren’t misinterpreted or used inappropriately. Doing so requires digging deeper into the data that’s behind those numbers. In particular, the population being studied, the spending that is included or excluded, and the methodologic choices that are made all impact the numerical estimate. Put another way, understanding how medicine costs are measured (the numerator) and how total costs are measured (the denominator) puts the estimate in proper context.
More specifically, looking at the AHIP analysis, which uses 2014-2016 data, it:
- Only accounts for premiums—a set monthly amount paid by consumers and employers for insurance. This does not include out-of-pocket costs, deductibles or other copayments. Patient out-of-pocket spending should be an essential methodological input when having a public policy debate on overall prescription drug spending in the US.
- Does not adjust for rebates, which skews their estimates. In particular, not including rebates increases the drug cost portion of the estimate (the “numerator”), skewing the overall calculation of drug costs/health care costs upward. Accounting for rebates provides a more accurate assessment of spending on prescription medicines.
- Is specific to the privately insured population, which tends to be healthier than the Medicare or Medicaid populations. Health care costs, such as hospital stays and doctor visits, are relatively lower for the privately insured. Therefore, because overall health care costs (the “denominator”) for the privately insured population are generally lower, the prescription medicine cost portion (the “numerator”) is generally higher, leading to a higher percentage of spending attributed to medicines.
Regardless of the source, context matters when it comes to understanding health care statistics. That’s important to keep in mind as stakeholders use statistics to inform policy discussions and decisions.