TAYLOR MELANSON Providing Prescription Drug Coverage to the Elderly: America’s Experiment with Medicare Part D By Mark Duggan, Patrick Healy, and Fiona.

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Presentation transcript:

TAYLOR MELANSON Providing Prescription Drug Coverage to the Elderly: America’s Experiment with Medicare Part D By Mark Duggan, Patrick Healy, and Fiona Scott Morton

History of Medicare Part D Medicare did not cover drugs ( ) % of healthcare costs accounted for by drugs  4.5% – 1982  5.6% – 1994  10.1 – 2005 Prior to Part D, 30% of 44 million beneficiaries lacked coverage for drugs (Neuman et al., 2007) Medicare Prescription Drug, Improvement, and Modernization Act of 2003  Took effect in > Established Part D  2007 – covered 24 million people, cost $39 billion

Why Study Part D? Impact on health and economic well-being Increase in government spending “Attempt to use market mechanisms in the delivery of a large-scale entitlement program” (70)  Competition  Price negotiation  Preference matching

Coverage Plans Stand-alone plans Basic plans  Government defined standard  “actuarially equivalent” Many options  4% of plans cover more than half of enrollees

Standard Cost Sharing Scheme Monthly premium Deductible = $275 Low cost coverage Donut hole Catastrophic coverage Only 17% of plans

Coverage of Medications Basic Plan coverage - $ catastrophic coverage Formularies  Tier system  Prior authorization  Step therapy  Off formulary drugs

Choice of Plan Out-of-pocket cost Formulary status of current drugs  Maintenance vs acute need drugs Reputation Incentive to enroll early  Incentivizes alternative plans % of eligible people did not enroll

Influence on Drug Prices Formulary placement Incentives for patients and pharmacies Average price of drugs declined Treatments without substitutes  CMS required coverage Protected Classes

Incentives for Sponsors Firms make bid to CMS Base beneficiary premium  Incentives to make bid accurate Risk factor adjustment  Offsets approximately ¼ of variance in drug spending  Plans have better data than government Catastrophic coverage Risk absorption

Issues Enrollees without financial incentives Catastrophic coverage Formulary manipulation Inefficient treatment patterns Impact on budget

Conclusions Successes  Drug prices  Drug utilization  Costs Failures  Suboptimal choices  Treatments without substitutes  Administrative costs  Unsuccessful incentives

Citations Images  0log%20blue.jpg 0log%20blue.jpg  content/uploads/2012/04/doughnut_ x286.jpg content/uploads/2012/04/doughnut_ x286.jpg 