Dollars to Doughnuts: Predicting Prescription Drug Costs of Beneficiaries and the Medicare Program under Part D M. Christo...
Research Objectives <ul><li>To examine drug utilization and out-of-pocket costs of Medicare beneficiaries using a Medicare...
Medicare Drug Discount Card <ul><li>Created via the  Medicare Modernization Act. </li></ul><ul><li>A temporary program (en...
Data <ul><li>Eligibility and prescription claims data for enrollees with one of 34 separate Medicare drug discount cards m...
Sample Characteristics Note: All differences in means across TAP and Non-TAP groups are statistically significant (p<0.01)...
Annualized Utilization and Costs under Medicare Drug Discount Card Program Note: All differences in means across TAP and N...
Standard Medicare Part D Benefit Enrollee Out-of-Pocket Cost Share $250 $2250 $5100 100% coinsurance $0 25% coinsurance $2...
Standard Part D Benefit Simulation <ul><li>Standard Part D benefit cost-share structure was applied to annualized total dr...
Beneficiaries’ Mean Out-of-Pocket Costs
Percent of Beneficiaries in the Doughnut Hole
Multivariate Analyses  <ul><li>Estimated generalized linear models (GLM; gamma/log link) for: </li></ul><ul><ul><li>Simula...
Multivariate Results <ul><li>TAP (low income) status is associated with: </li></ul><ul><ul><li>$186 lower beneficiary cost...
Conclusions / Policy Implications <ul><li>In choosing whether or not to enroll in Medicare Part D, beneficiaries will comp...
Strengths and Limitations <ul><li>Strengths: </li></ul><ul><ul><li>Actual claims experience, not self-reported use. </li><...
<ul><li>THANK YOU! </li></ul>
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Dollars to Doughnuts: Predicting Prescription Drug Costs of Beneficiaries and the Medicare Program Under Part D

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ABSTRACT

Title
Dollars to Doughnuts: Predicting Prescription Drug Costs of Beneficiaries and the Medicare Program Under Part D

Authors
M. Christopher Roebuck, MBA1
Dominick Esposito, PhD2
Meredith Lewis, BS1

1 Caremark, Hunt Valley, MD
2 Mathematica Policy Research, Princeton, NJ

Research Objective
To examine drug utilization and out-of-pocket costs of Medicare beneficiaries using a Medicare prescription drug discount card, including beneficiaries who qualified for the Transitional Assistance Program (TAP).

Study Design
Data included eligibility and prescription claims for enrollees in 34 separate Medicare drug discount card programs managed by Caremark. We used claims data to calculate annualized utilization and costs for beneficiaries and, in turn, simulated Medicare beneficiaries’ out-of-pocket costs (excluding premiums) and costs to Medicare under the Part D benefit. We estimated a generalized linear model (GLM; gamma distribution with log link function) for both beneficiary costs and Medicare payments under Part D to identify factors associated with drug expenditures. A probit model for the likelihood of falling into the doughnut hole was also specified. Explanatory variables in the models included demographic characteristics (age, gender, region, and TAP status), the generic dispensing rate, and 62 disease indicators derived using a pharmacy-based classification system.

Population Studied
Beneficiaries enrolled for a minimum of six months with at least one claim between June 2004 and November 2005 (n=37,425). Participants were largely female (67%), between the ages of 65 and 80 (70%), and had an average of 2.2 medical conditions, with hypertension (52%), hypercholesterolemia (27%), and diabetes (16%) being among the most prevalent.

Principal Findings
On average, beneficiaries in the sample filled 19 prescriptions at an annual cost of $538. Under the standard Part D benefit, mean total drug expenditures for these seniors would be $849 annually with $412 paid by the beneficiary and $437 paid by Medicare. About 6% of these beneficiaries have annual spending greater than $2,250 (the benefit’s “doughnut hole”). TAP beneficiaries (46%) would have higher out-of-pocket costs under Part D than the drug discount card ($429 versus $256; p<0><0><0><0.001).

Conclusions
TAP beneficiaries who do not qualify for subsidized coverage under Part D will face higher out-of-pocket costs than under the discount drug card program, assuming fixed drug utilization. Increased use of generic drugs in proportion to brand name drugs would benefit the Medicare program more than beneficiaries, on average, due to the standard benefit’s structure.

Implications for Policy, Delivery, and Practice
In choosing whether or not to enroll in Medicare Part D, seniors will compare their annual premium with the expected payout of the Medicare program. These results suggest the average, risk-neutral beneficiary would only enroll at monthly premiums below $36 ($437 divided by 12). If faced with higher out-of-pocket costs, low-income beneficiaries who do not qualify for subsidies may reduce their prescription drug utilization potentially resulting in adverse health effects. Finally, to reduce costs to both beneficiaries and taxpayers, Medicare should promote the substitution of generic medications whenever possible. Assuming 29 million Medicare Part D enrollees, the Medicare program could save more than $1.2 billion annually by increasing the generic dispensing rate 10%.

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  • At the average premium of $24 per month (CMS), 58% to 61% of our sample would have enrolled (assuming risk-neutrality). Seniors, however, are more likely to be risk-averse, suggestions higher enrollment numbers. According to CMS, as of June 14 th , 33 million seniors had enrolled in some form of Medicare prescription drug coverage (another 5 million had other sources of credible drug coverage).
  • NCHS estimates 5 out of 6 seniors use at least one prescription drug. We also looked at seniors using non-Medicare drug discount cards and the average number of annualized fills were substantially lower (10 versus 19) suggesting that the Medicare cards were used more regularly. Indeed, CMS reports that as of June 14 th , 87% of enrollees have selected non-standard plans.
  • Dollars to Doughnuts: Predicting Prescription Drug Costs of Beneficiaries and the Medicare Program Under Part D

    1. 1. Dollars to Doughnuts: Predicting Prescription Drug Costs of Beneficiaries and the Medicare Program under Part D M. Christopher Roebuck 1 Dominick Esposito 2 Meredith Lewis 1 Jan Berger 1 1 Caremark Rx, Inc. 2 Mathematica Policy Research, Inc. Academy Health Annual Research Meeting Seattle, WA June 26, 2006 Received “Best Abstract Award”
    2. 2. Research Objectives <ul><li>To examine drug utilization and out-of-pocket costs of Medicare beneficiaries using a Medicare prescription drug discount card, including beneficiaries who qualified for the Transitional Assistance Program (TAP) </li></ul><ul><li>To simulate Medicare beneficiaries’ out-of-pocket costs (excluding premiums) and costs to Medicare under the standard Part D benefit. </li></ul><ul><li>To understand the factors associated with these simulated costs and the probability of being in the doughnut hole. </li></ul>
    3. 3. Medicare Drug Discount Card <ul><li>Created via the Medicare Modernization Act. </li></ul><ul><li>A temporary program (enrollment period: June 2004 - December 2005) for non-dual eligible beneficiaries. </li></ul><ul><li>TAP provided a $600 annual subsidy to seniors with income below 135% of the federal poverty level. </li></ul><ul><li>Cardholders may have been charged an enrollment fee of up to $30 per calendar year. </li></ul>
    4. 4. Data <ul><li>Eligibility and prescription claims data for enrollees with one of 34 separate Medicare drug discount cards managed by Caremark. </li></ul><ul><li>Sample consists of beneficiaries enrolled for 6+ months with 1+ claims between June 2004 and November 2005 (n=37,425). </li></ul><ul><li>Pharmacy Health Dimensions (PHD), a pharmacy-based risk index that categorizes prescription data into 62 disease indicators, were generated. 1 </li></ul><ul><li>1 Powers, C.M., Meyer, C.M., Roebuck, M.C. and B. Vaziri. 2005. “Predictive Modeling of Total Healthcare Costs Using Pharmacy Claims Data: A Comparison of Alternative Econometric Cost Modeling Techniques.” Medical Care 43(11): 1065-1072. </li></ul>
    5. 5. Sample Characteristics Note: All differences in means across TAP and Non-TAP groups are statistically significant (p<0.01) using Kruskal-Wallis equality of populations test, except High Cholesterol. 11% 10% 13% Depression 12% 10% 14% Allergies 15% 12% 18% Osteoarthritis 15% 13% 17% Hypothyroidism 16% 14% 19% Diabetes 27% 27% 27% High Cholesterol 52% 45% 60% Hypertension 2.2 2.0 2.5 Number of Conditions 76 75 76 Mean Age 33% 38% 26% Male Total (n=37,425) Non-TAP (n=20,108) TAP (n=17,317)
    6. 6. Annualized Utilization and Costs under Medicare Drug Discount Card Program Note: All differences in means across TAP and Non-TAP groups are statistically significant (p<0.01) using Kruskal-Wallis equality of populations test. $849 $781 $928 Total $311 $0 $672 Medicare (TAP Subsidy) $538 $781 $256 Enrollee (Out-of-Pocket) Annual Drug Costs 19 15 23 Total 10 7 12 Generic 9 8 11 Brand Annual Number of Rxs Total (n=37,425) Non-TAP (n=20,108) TAP (n=17,317)
    7. 7. Standard Medicare Part D Benefit Enrollee Out-of-Pocket Cost Share $250 $2250 $5100 100% coinsurance $0 25% coinsurance $2/$5 copay or 5% coinsurance Doughnut Hole
    8. 8. Standard Part D Benefit Simulation <ul><li>Standard Part D benefit cost-share structure was applied to annualized total drug costs (plus a 3.5% price inflation adjustment from 2005 to 2006). </li></ul><ul><li>Utilization increases are expected under insurance. </li></ul><ul><li>Applied variable “induction factors” of between 0.70 a and 1.25 b for prescription drugs. </li></ul><ul><ul><li>Each $1.00 decrease in out-of-pocket costs are estimated to induce between $0.70 and $1.25 of increased drug spending. </li></ul></ul><ul><li>a Mays, J., Brenner, M., Neuman, T., Cubanski, J., and G. Claxton. November, 2004. “Estimates of Medicare Beneficiaries’ Out-of-Pocket Drug Spending in 2006: Modeling the Impact of the MMA.” Henry J. Kaiser Family Foundation. Menlo Park, CA. </li></ul><ul><li>b American Academy of Actuaries. May 1995. “Medical Savings Accounts: Cost Implications and Design Issues.” Washington, DC. </li></ul>
    9. 9. Beneficiaries’ Mean Out-of-Pocket Costs
    10. 10. Percent of Beneficiaries in the Doughnut Hole
    11. 11. Multivariate Analyses <ul><li>Estimated generalized linear models (GLM; gamma/log link) for: </li></ul><ul><ul><li>Simulated out-of-pocket costs under Part D. </li></ul></ul><ul><ul><li>Simulated Medicare payments under Part D. </li></ul></ul><ul><li>Estimated a probit model for the likelihood of being in the doughnut hole. </li></ul><ul><li>Explanatory variables included: </li></ul><ul><ul><ul><li>Age, gender, geographic region </li></ul></ul></ul><ul><ul><ul><li>TAP status </li></ul></ul></ul><ul><ul><ul><li>Generic dispensing rate </li></ul></ul></ul><ul><ul><ul><li>62 PHD disease indicators </li></ul></ul></ul>
    12. 12. Multivariate Results <ul><li>TAP (low income) status is associated with: </li></ul><ul><ul><li>$186 lower beneficiary costs </li></ul></ul><ul><ul><li>$175 lower Medicare payments </li></ul></ul><ul><ul><li>8 percentage point reduction in the probability of being in the doughnut hole </li></ul></ul><ul><li>A 10-percentage point increase in the generic dispensing rate is associated with a: </li></ul><ul><ul><li>$35 decrease in beneficiary costs </li></ul></ul><ul><ul><li>$49 decrease in Medicare payments </li></ul></ul><ul><ul><li>1 percentage point reduction in the probability of being in the doughnut hole </li></ul></ul>
    13. 13. Conclusions / Policy Implications <ul><li>In choosing whether or not to enroll in Medicare Part D, beneficiaries will compare annual premiums with the expected payout of the Medicare program. </li></ul><ul><ul><li>Risk-neutral beneficiaries will enroll at monthly premiums below the $40-45 range. </li></ul></ul><ul><li>Faced with higher out-of-pocket costs, low-income beneficiaries without low-income subsidies may reduce their drug utilization, potentially resulting in adverse health effects (e.g., those not passing the asset test). </li></ul><ul><li>To reduce costs, Medicare should actively promote generic substitution. </li></ul><ul><ul><li>With 33 million enrollees, the Medicare program could save more than $1.6 billion annually by increasing the generic dispensing rate by 10%. </li></ul></ul>
    14. 14. Strengths and Limitations <ul><li>Strengths: </li></ul><ul><ul><li>Actual claims experience, not self-reported use. </li></ul></ul><ul><ul><li>Actual out-of-pocket amounts. </li></ul></ul><ul><ul><li>Data on a low-income population (TAP). </li></ul></ul><ul><li>Limitations: </li></ul><ul><ul><li>Enrollees with zero claims excluded from the analysis. </li></ul></ul><ul><ul><li>Discount card may not always have been used. </li></ul></ul><ul><ul><li>Simulating the standard Part D benefit, although most have selected non-standard plans. </li></ul></ul>
    15. 15. <ul><li>THANK YOU! </li></ul>
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