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PAD-80-42 1 (1980-01-21)

handle is hein.gao/gaobabbbk0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 JAN 21 1k50 PROGRAM ANALYSIS DIVISION (j~4i 41 IN REPLY REFER TO 'I ~ B-197492 I 3I3II I 7II1111111111 113387 The Honorable Mickey Leland U.S. House of Representatives Dear Congressman Leland: On December 11, 1979, the U.S. General Accounting Office testified before the House Interstate and Foreign Commerce Subcommittee on Health and the Environment as part of the hearing on Community-based care of the Elderly. After we presented testimony on our report--Entering a Nursing Home-- CostlyImplications for Medicaid and the Elderly--you referred _.~tn a study on the effects of a restrictive drug formulary and asked for our comments. Dr. Dennis L. Hefner, the author of Cost Effectiveness of a Restrictive Drug Formulary: The Louisiana Experience, has sent us the latest draft of his work. In addition, we received a copy of the final report from Ms. Janis Kelly of Pracon, Incorporated. Dr. Hefner's study recognized one seri- ous problem with the present structure of Medicaid which we discussed in our report: that the high cost of the Medicaid program has forced many States to contain costs via restric- tions on optional services such as prescribed drugs. In examining the restrictive drug formulary implemented in the Louisiana Medicaid program in August 1976, Dr. Hefner con- cluded that the $4.1 million savings accrued from outpatients' and long-term care patients' drug purchases which formerly would have been reimbursed through Medicaid, was more than offset by the $15.1 million increase in the demand for non- prescription services. While Dr. Hefner's findings tend to support previous studies conducted primarily on restrictive hospital formu- laries, several cautionary observations should be made. A primary problem, which Dr. Hefner has recognized, is that no causal relationship between the decrease in drug prescription costs and the increase in non-prescription services was demon- strated. While Dr. Hefner has succeeded in creating a fairly controlled environment for his research, intervening variables may have contributed to the outcome. /0 PAD-80-42 990512 I

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