The Effect of a Medicaid Drug Copayment Program on the Utilization and Cost of Prescription Services

The effect of a copayment for pharmaceutical services in a Medicaid program is presented. Data were collected from Medicaid claim files in South Carolina (experimental program) and Tennessee (control program) for a 4-year period, 1976-1979. Utilization rates and expenditures for 1 year prior to copayment and 3 years after copayment were computed from a stratified sample of 18 counties. Both the level of prescriptions per eligible recipient and the slope of the utilization function after copayment were found to have declined with the implementation of copayment in South Carolina. The level of the expenditure series after copayment also declined, but the series retained a positive trend. Subsequent analysis of prescription quantity concluded that the increasing expenditure function was attributed to the inflation in cost of ingredients rather than an increase in average prescription size. The study concluded that a small (50) copayment for prescription service is a successful mechanism to control the cost and assist in financing a Medicaid prescription drug program.