Medicare Part D

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Optimal Choices of Medicare Part D Plans

November 1, 2011 in Medicare, Medicare Part D | 4 comments

Are elderly Medicare beneficiaries able to choose Part D health plans optimally?  Many researchers may believe the answer is no.  Certain elderly individuals  (e.g., those with Alzheimer’s) may be cognitively impaired.  Inertia is also a problem; switching plans is mentally taxing and involves a spending a significant amount of time researching plan alternatives.

Nevertheless, a paper by Ketcham et al. finds that Medicare beneficiaries do learn from their mistakes and can decrease over spending over time.  The Medicare Part D program began in 2006.  The authors estimate that in that year, individual overspending was $547 (overspending is the difference in beneficiary out-of-pocket payments and premiums between their current plan and the lowest cost plan).  By 2007, overspending dropped by about $298 to $248.6.  Further, whereas 9.8% of the sample had overspending levels of more than $1,000 in 2006, only 1.7% of the cohort reached these high levels in 2007.

A portion of this decrease was due to certain high-cost plans changing their benefit structure, but much of the change was due to beneficiaries switching plans.  Specifically, individuals with overspending levels of more than $1,000 were not only more likely to switch plans, but also more likely reduce the levels of overspending by more than individuals with lower levels of overspending.  This may be a regression to the mean phenomenon, or it could be the case that it takes a high level of overspending for individuals to spend the time researching plans to switch their PDP.

How did this reduction in overspending occur?  CMS’s planfinder website may have improved the information available to beneficiaries.  The site itself may have improved or more beneficiaries may have been made aware of it.  Also, the children of Medicare beneficiaries may have been more active in choosing plans for their parents.  For instance, individuals newly diagnosed with Alzheimer’s saw a decrease in overspending; this result is likely due to children helping their parents choose better PDP.

Additionally, high spending rates may provide the impetus to change plan.  Consider a model where individuals do not change plans unless their premium + OOP spending exceeds a certain threshold.  Once this threshold is met (which could differ by individual), they search for lower cost plans.  If the threshold were not met, individuals would decide that searching for a new plan is not worth the smaller savings.  In this model of behavior, one question is whether switchers (who generally have higher initial levels of overspending) tend to choose average plans (which would reduce overspending) or one of the best plans (which would decrease overspending even more).  The quantitative results of the paper seem to indicate the latter.

The conclusion of this paper: markets may not work perfectly—especially at first—but over time learning occurs and individual self-interest can more markets towards a more efficient equilibrium.

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The President’s Proposal to “Live Within Our Means”

September 29, 2011 in CHIP, Home Health, Medicaid, Medicaid/Medicare, Medicare, Medicare Part D, Part B, Physician Compensation, Public Policy | 3 comments

President Obama released a proposal last week to jump start the economy and reduce the deficit.  The proposal includes many cuts to Medicare and increased cost sharing.  Senators Coburn and Lieberman are supporting these cuts.

Increased cost sharing is a common theme in Medicare, Medicaid, but also for other programs as well.  For instance, the proposal includes increases to TRICARE pharmacy benefit co-payments to be fall more in line with the most popular Federal employee health plan

The proposal, however, also has some interesting provisions.  For instance, it would require providers to secure prior authorization to perform advanced imaging.  This is one of the first moves away from the fee-for-service free-for-all towards managed care (read: rationing).

A pro-competition rule would prohibit ‘pay-for-delay’ where brand drug companies pay off other drug makers to delay their introduction of a generic into the market.  The FTC is charged with enforcing this requirement. The proposal also would reduce the exclusive period of generic biologics.  Weakening patent protection, for this authors perspective, is likely a good idea.

Specific changes under consideration which are related to medicare are highlighted below (with potential savings per year in parentheses):

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Does Prescription Drug Coverage Save Money?

August 30, 2011 in Medicare Part D, Pharmaceuticals | 5 comments

Many experts have claimed that increasing Medicare beneficiary’s access to prescription drugs through Medicare Part D is cost saving.  Even if it does increase cost, by increasing patient adherence to various prescription drugs, Medicare could prevent certain expensive hospitalizations and emergency room visits.

The only problem is that it doesn’t.

According to Liu et al. (2011) :

“After adjustment, Part D was associated with a U.S.$179.86 (p=.034) reduction in out-of-pocket costs and an increase of 2.05 prescriptions (p=.081) per patient year. The associations between Part D and emergency department use, hospitalizations, and preference-based health utility did not suggest cost offsets and were not statistically significant.”

In fact, increased drug coverage could increase the number of prescriptions the elderly take and lead to a higher number of harmful drug interactions, leading to increased hospitalizations.

Another paper, however, disagrees.  Afendilus et al. (2011) use HCUP data and and find that for selected ambulatory care sensitive conditions:

“…our point estimates suggest that Part D reduced the overall rate of hospitalization by 20.5 per 10,000 (4.1 percent), representing approximately 42,000 admissions, about half of the reduction in admissions over our study period…The increase in drug coverage associated with Medicare Part D had positive effects on the health of elderly Americans, which reduced use of nondrug health care resources.”

The debate rages on.

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Trends in Medicare Part D

April 25, 2011 in Medicare, Medicare Part D, Pharmaceuticals | 1 comment

Recent research from Avalere Health, LLC using Medicare Part D reveals some interesting trends.  Overall, premiums for fee-for-service prescription drug plans (PDPs) increased by 3%.  For beneficiaries who enrolled in a Top 10 plan, however, premiums actually decreased by 6%.  This result was driven by a 12% decrease in premiums for the largest PDP, AARP MedicareRxPreferred and the recent arrival of the low cost Humana-Walmart-Preferred Rx Plan.

Although the total number of Special Needs Plans (SNP) has held fairly steady over time, the number of enrollees in a dual-eligible SNP has risen by 11% between 2010 and 2011.  Additional information on SNPs is below.

Within the Medicare Advantage program, enrollment in HMO and PPO plans continues to grow as PFFS enrollment declines.

Additional Part D trends are highlighted below.  This spreadsheet provides even more detail.

Plan Consolidation in 2011

  • The top 3 PDP plans made up 45.4% of all PDP enrollees.  The top 10 plans made up 73.2% of all PDP enrollees.
  • CIGNA Medicare Rx Plan One joined the top 10 PDPs as did the Humana Walmart-Preferred Rx Plan.
  • UnitedHealth, Humana, and Kaiser provide MA benefits to 44% of all MA enrollees

Part D Sponsor Acquisition and Plan Consolidation

  • CVS Caremark will acquire Universal American’s PDP plans and members after Q1 of 2011
  • AARP MedicareRxSaver consolidated into AARP MedicareRxPreferred
  • PrescriberRxBronze consolidated into Community CCRxBasic

Prices

  • Overall, PDP premiums increased by 3%.  For beneficiaries who enrolled in a Top 10 plan, however, premiums actually decreased by 6%.  This result was driven by a 12% decrease in premiums for the largest PDP, AARP MedicareRxPreferred and the advent of the low cost Humana-Walmart-Preferred Rx Plan.

Special Needs Plans

According to the CMS website, Special Needs Plans (SNPs) were created by Congress in the Medicare Modernization Act (MMA) of 2003 as a new type of Medicare managed care plan focused on certain vulnerable groups of Medicare beneficiaries: the institutionalized, dual-eligibles and beneficiaries with severe or disabling chronic conditions. These beneficiaries are typically older, with multiple comorbid conditions, and thus are more challenging and costly to treat.  Dual-eligible SNPs also offer the opportunity of enhanced benefits by combining those available through Medicare and Medicaid…Specific legislative and regulatory provisions allow SNPs to focus on specific subsets of the Medicare population with the intent to improve care and control costs for these beneficiaries. Consistent, comparable measures that reflect the service delivery and outcomes important to these populations and that promote quality improvement and maturation of SNP products are necessary.

The fifteen SNP-specific chronic conditions approved for 2010 are: 1) Chronic alcohol and other drug dependence; 2) certain auto-immune disorders; 3) cancer (excluding pre-cancer conditions; 4) certain cardiovascular disorders; 5) chronic heart failure; 6) dementia; 7) diabetes mellitus; 8 ) end-stage liver disease; 9) end-stage renal disease requiring dialysis; 10) certain hematologic disorders; 11) HIV/AIDS; 12) certain chronic lung disorders; 13) certain mental health disorders; 14) certain neurologic disorders; and 15) stroke.

 

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Estimating the Effects of Consolidating Drugs under Part D or Part B

February 15, 2011 in Medicare Part D, Part B | No comments

Currently, most Medicare beneficiaries are able to receive coverage for prescription drugs under Medicare Part D. Some drugs, however, are still covered by Medicare Part B, which covers physician services. These drugs are generally those furnished incident to a physician’s service and are administered using durable medical equipment.

To simplify coverage policy, Medicare is considering consolidating certain drugs exclusively under either Medicare Part B or Part D. A paper from Acumen, LLC (disclaimer: my current employer) has conducted a study to simulate the financial impacts of consolidating certain drugs under either the Part B or Part D program. Their key conclusions include the following:

  • Part B and Part D per unit prices vary, affecting the financial impact of consolidation (Part D per unit drug prices are roughly 52% higher than Part B prices).
  • On average, beneficiaries lose with B to D consolidations and gain with D to B consolidations.
  • Beneficiaries in the catastrophic phase experience the opposite effect.
  • Consolidation would have a small affect on Part D plan premiums.
  • Beneficiaries currently do not react to financial incentives by substituting drugs (e.g., substituting metered dose inhalants for nebulizer inhalants, substituting pumped for injectable insulin)
  • Consolidation does not substantially increase incentives to switch Part D plans.
  • Overall, Medicare gains with B to D consolidation and loses with D to B consolidation.

Further information on the drug coverage in Medicare Parts B and D is described below.

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CMS 2010 Requirements for Medicare Part D Plan MTM Programs

September 2, 2010 in Medicare Part D, Pharmaceuticals | 1 comment

In an effort to standardize the provision of medication therapy management (MTM) within Medicare Part D, CMS has outlined specific requirements for Part D Plan MTM programs in 2010.  The APhA’s Medication Therapy Management Digest (March 2010) reviews these requirements.

MTM programs must:

  • Enroll targeted beneficiaries using an opt-out method only (i.e., beneficiaries are automatically enrolled unless they choose not to be)
  • Target beneficiaries for enrollment at least quarterly.
  • Include the following enrollment criteria for targeted beneficiaries:
    • Does not require more than three chronic disease states.
    • Does not require more than eight medications.
    • In defining multiple chronic diseases, sponsors must target at least four of seven core chronic disease states.
    • Likely to incur annual costs of $3,000 for covered Part D drugs (a reduction from the previous requirement of $4,000).

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