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The impact of outpatient drug benefits on the use and costs of health care services for the elderly.

In light of the current debate surrounding the extension of Medicare benefits to cover outpatient drugs, it is important to increase our understanding of the impact of drug payment programs on overall health care outcomes and expenditures. In this retrospective study of health care use among Medicare beneficiaries in New Jersey and eastern Pennsylvania, we studied the impact of New Jersey's Pharmaceutical Assistance for the Aged (PAA) program on health care costs. Using multiple regression analysis, we found that New Jersey Medicare recipients used, on average, $238.50 less in inpatient hospital care under the PAA program than did their counterparts in eastern Pennsylvania, which did not have a drug payment assistance program in place. Although administrative costs may have reduced overall savings, it seems reasonable to conclude that the PAA program resulted in no overall health care cost increases.