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SEPTEMBER 2007 HOT TOPICSA preview of Part D: How limits on drug benefits affect retiree prescription use
In 2003, Congress passed the Medicare Modernization Act (MMA). One of the main provisions of MMA created Medicare Part D, a prescription drug benefit for beneficiaries. Since the legislation was signed into law and the program subsequently began in 2006, policymakers have been interested in assessing the progress and outcomes of Medicare Part D. One of the issues surrounding Medicare Part D is a coverage gap—referred to by some as the “doughnut hole.” In 2007, Part D coverage ends after $2,400 in pharmaceutical spending and resumes at $5,451. Between 24 and 38 percent of Medicare enrollees are expected to reach the doughnut hole in 2007. As a result, many seniors with high drug expenses will face higher out-of-pocket costs. It is still too early to assess the effects of Part D. However, it is possible to glimpse the likely outcomes by examining the effect on retirees who have private insurance plans with a similar benefit cap. A team of RAND researchers led by Geoffrey Joyce used data from a private employer to examine the effect of benefit caps on prescription drug use by retirees. The employer offered multiple prescription plans to retirees. One had a $2,500 annual cap, similar to Part D. The employer also offered an uncapped plan. The analysis compared prescription use under the two plans, focusing on enrollees with the highest drug costs. The researchers measured changes in drug use across seven drug classes, including antihypertensives, cardiac drugs, antidiabetic drugs, antidepressants, cholesterol-lowering drugs, anti-inflammatories, and antiulcerants. The findings showed that high-cost enrollees in the capped plan stopped taking medication at higher rates than did patients in the uncapped plan across all the classes of drugs. The drug classes with the greatest differences in discontinuation rates were antihypertensives (22 percent, compared with 14 percent under the uncapped plan) and cardiac drugs (28 percent, compared with 19 percent under the uncapped plan). Enrollees in the capped plan also resumed drug use at higher rates when benefits began again the next year, suggesting that the benefit limit influenced decisions to discontinue. The results suggest that prescription benefit limits can disrupt drug therapy for high-cost prescription users, including the chronically ill. This result is consistent with a growing body of evidence about the mixed effects of drug benefit designs that increase cost sharing for patients. In some cases, cost sharing can steer patients to more cost-effective treatments without harming health. However, it can also lower rates of drug treatment, reduce adherence to prescriptions among existing users, and lead to more frequent discontinuation of therapy. For drugs that are known to be cost-effective in preventing expensive medical care, greater cost sharing may be cost-ineffective in the long run. Of course, Medicare’s drug benefit differs from the capped plan in this study in that its benefits resume after spending reaches $5,451 within a calendar year. The effects of this additional benefit—which might affect 10 to 15 percent of the relevant population—are yet to be determined.
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IN THE NEWSPatients with Depression Seeing Primary Care Physicians Frequently Do Not Receive High Quality Care |
RESEARCHER PROFILEGeoffrey Joyce
Geoffrey Joyce, Ph.D., M.P.P., is a senior economist at RAND and director of the UCLA-RAND Health Services Research Training Program. Previous work of Dr. Joyce includes examining the impact of alternative benefit designs on prescription drug spending among private employers, as well as simulating the costs of a Medicare prescription drug benefit. Currently he is the principal investigator of two studies examining how drug benefits affect medication compliance in private health plans and the impact of high deductible health plans on use of preventive services and pharmaceuticals. |
RAND CONGRESSIONAL RESOURCES STAFFLindsey Kozberg Shirley Ruhe Kristy Anderson RAND Office of Congressional Relations |
RELATED LINKSMore Congressional Resources on HealthHealth Research AreaRAND HealthRAND Congressional Web SiteRAND Web Site
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