1. Cost-Sharing & Diabetes: Strategies for States
Presentation title
Cost-Sharing & Diabetes: Strategies for States
June 15, 2007
Michael Mawby
Chief Government Affairs Officer

2. Americans need more help
managing diabetes
Reuters Health
Copyright 2006 Reuters.

3. Private Sector Solutions Point to Promising Practices for Medicaid
Some Employers Are Offering Free Drugs The New York Times February 20, 2007
For years, employers have been pushing their workers to pay more for health care, raising premiums and out-of-pocket medical expenses in an effort to save money for the company and force workers to seek only the most necessary care.
Now some employers are reversing course, convinced that their pennywise approach does not always reduce long-term costs. In the most radical of various moves, a number of employers are now giving away drugs to help workers manage chronic conditions like diabetes, high blood pressure, asthma and depression.

4. Cost Sharing Places a Disproportionate Burden on Medicaid Beneficiaries
A privately insured adult with income greater than 200% FPL spends a total of 0.7% of family income on out-of-pocket medical costs (in 2002)1
In contrast, a Medicaid beneficiary with lower income and who is chronically ill will spend a much greater share of income on drug copays alone (1-18%)
Thus, elimination of copays may be an even stronger incentive among these individuals to adhere to medication regimens that prevent costly complications
Source: 1Flowers L, Cool R, and Melvin M. State Profiles: Reforming the Health Care System. AARP: Public Policy Institute, 2003.

5. Findings from the Literature on Cost Sharing
Presentation title
Findings from the Literature on Cost Sharing

6. Overview of Cost Sharing Literature
Copayments are designed to encourage consumer engagement in health care decision making by giving individuals financial interest in their choices…
…however, copays can make it difficult for low-income individuals to access health care services and obtain prescription drugs
Individuals may use fewer of non-essential drugs and services when faced with copayments…
…but, they will also use fewer essential drugs and services, leading to increased hospitalizations and emergency room visits
Copayments are particularly burdensome to chronically ill Medicaid beneficiaries who use more services and prescription drugs and thus face greater overall amounts of cost sharing
Findings from the literature suggest that an inverse relationship exists between drug use and inpatient hospital utilization; thus, if individuals adhere to preventive drug regimens they may be more likely to avoid costly complications

7. Some argue that cost sharing encourages consumer engagement…
If an individual receives drugs or health care services for free or deeply discounted (e.g., because of generous insurance), s/he will not recognize their true monetary value
Insurers use cost sharing as a way to sensitize individuals to health care costs so that they will weigh the cost against the benefit of the drug or service
But, to be effective, cost sharing depends upon a consumer’s ability to differentiate between drugs and services that are “worth the cost” and those that are not
Also, individuals must be able to meet the cost sharing requirements for those drugs and services

8. …but some data shows it adversely affects low-income individuals…
Research has shown that cost sharing requirements imposed upon low-income individuals, including Medicaid beneficiaries, does not have desired effect of making these individuals more “thoughtful” consumers
Copayments make it unaffordable and difficult for low-income individuals to access health care services and obtain prescription drugs

9. RAND Health Insurance Experiment (1971-1986), the definitive study on cost sharing in health care
Copays led to a larger reduction in use of care by low-income adults and children as compared to those with higher incomes
Low income adults and children subject to copays had worse health status at the end of the study than those who did not face copays
studied the differential impact of cost sharing on low and higher income individuals
Sources: Keeler EB. (1992). “Effects of Cost Sharing on Use of Medical Services and Health.” Medical Practice Management Summer: Ku L and Wachino V. The Effect of Increased Cost Sharing in Medicaid: A Summary of Research Findings. Center on Budget and Policy Priorities. July 7, 2005.

10. Cost sharing may be unaffordable for low-income individuals…
Cost sharing was an important contributor to Medicaid beneficiaries disenrollment from Oregon’s Medicaid program, Oregon Health Plan (OHP), following introduction of premiums and copays for “expanded eligibility” beneficiaries
Cost sharing disproportionately affected the poorest members
Source: Wright BJ, et al. (2005). “The Impact of Increased Cost Sharing on Medicaid Enrollees.” Health Affairs 24(4):

11. …leading to reduced drug and service utilization…
Several studies have shown that copays reduce drug use and drug regimen compliance
32% of surveyed Medicare beneficiaries enrolled in a Medicare+Choice plan with drug coverage in 2002 reported not filling a prescription or reducing a prescription dosage because of out-of-pocket costs1
Those with incomes less than $2000/month were more likely to have not filled a prescription or reduced a dosage because of costs
Following introduction of copays for SC Medicaid beneficiaries in 1976, drug use declined significantly except for analgesics and sedatives/hypnotics2
RAND study found large, inverse relationship between copays and compliance with cholesterol lowering therapy3
COPAYS
COMPLIANCE
Sources: 1Rector TS and Venus PJ. (2004). “Do Drug Benefits Help Medicare Beneficiaries Afford Prescription Drugs?” Health Affairs 23(4): Hoadley J. Cost Containment Strategies for Prescription Drugs: Assessing the Evidence in the Literature. Kaiser Family Foundation, March Goldman DP, et al. (2006). “Varying Pharmacy Benefits with Clinical Status: The Case of Cholesterol-lowering Therapy.” The American Journal of Managed Care 12:

12. …and increasing the likelihood for costly complications.
88% Increase
78% Increase
Following introduction of copays for low-income elderly and adult welfare recipients in Quebec, drug use declined by 9% among elderly and 14% among welfare recipients, leading to increases in adverse events and emergency dept. visits1
In another study of older adults with chronic conditions, individuals who cut back on prescription drugs because of cost were:2
76% more likely to suffer significant decline in overall health
50% more likely to have nonfatal heart attack, stroke or chest pain
Findings from these studies suggest an inverse relationship between drug use and inpatient hospital utilization
* Serious adverse events include death, hospitalization, and nursing home admission. Similar, though smaller, results were observed for the elderly.
Sources: 1Tamblyn R., et al. (2001). “Adverse Events Associated with Prescription Drug Cost Sharing Among Poor and Elderly Persons.” JAMA 285: Gardner A. “Cost Cutting on Drugs Has Health Cost.” HealthDay June 25, 2004.

13. Support for Eliminating Medicaid Co-pays for Diabetes Drugs
Approximately half of the lifetime health costs for patients with diabetes are related to potentially preventable complications1
Several highly effective treatment strategies to prevent or delay the onset of complications of diabetes have emerged within the past decade2
However, access to these drugs and therapies is impeded by cost sharing requirements, especially for low-income individuals
Non-compliance with drug regimens proven to prevent or delay the complications of diabetes can result in costly emergency room and inpatient hospital visits
Savings realized from decreased utilization or cost sharing in the short term may be offset by later costs for preventable illness
Sources: 1Avalere Health. The Impact of the Medicare Prescription Drug Benefit on Beneficiaries with Diabetes. October Yale University Schools of Public Health and Medicine and the Institute for Alternative Futures. Barriers to Chronic Disease Care in the United States of America: The Case of Diabetes and its Consequences. November 2005.

14. The Private Sector Steps Up
A number of employers – both large and small – have developed innovative cost sharing models that give preferential formulary placement to drugs that have proven benefit or effectiveness in treating and preventing chronic illness, including diabetes
Companies now recognize that “if you get people’s obesity down, cholesterol down, asthma down, you save a lot of money,” said Uwe E. Reinhardt, a health economist at Princeton University.
Employers realize that by encouraging employees to adhere to drug regimens –by removing financial barriers to compliance (e.g., copays) – they can keep employees healthy and save money in the short and long term
These successful and promising practices in the private sector can serve as models for Medicaid programs

15. Pitney Bowes
Premise: Company’s future health care claims could be reduced by keeping employees with chronic diseases on their medications
Action: Place targeted chronic disease medications on most affordable tier to increase compliance
Rx Access Benefit design includes all brand name drugs for diabetes, asthma, and hypertension, along with generics, on “Tier 1”
Cost sharing for 1st tier is 10%, while 3rd tier cost sharing can be as high as 50%
Preliminary Findings:
Percentage of members with suboptimal insulin adherence decreased by 2/3
ER visits decreased by 26% for employees with diabetes
Average annual pharmacy costs for employees with diabetes decreased by 7%, likely due to decrease in use of drugs to treat complications
Average annual cost of care decreased for diabetes (6%) and asthma (15%)

16. City of Asheville, NC
City pays 100% of pharmacy costs for medications and supplies for enrollees who participate in DM programs for diabetes, asthma, and high blood pressure and cholesterol
Results from diabetes program in late-1990s found:
Members’ HbA1c and cholesterol levels declined
Absolute treatment costs (IP & OP) related and non-related to diabetes fell by more than $2,000 per member

17. Marriott
Custom formulary targets five therapeutic drug classes commonly used for chronic conditions (statins, ACE inhibitors, diabetes drugs, beta blockers, & inhaled steroids for asthma)
Eliminated copays for generic drugs and reduced copays by 50% for brand name drugs
Outcomes will be compared to those for the year before program was implemented and to those of another company (also a client of Marriott’s DM provider) that offers similar benefits but no copay customization
2005 data not yet complete; preliminary data show shift in amount of copays paid

18. University of Michigan
Announced in April 2006 that it will give free or discounted drugs to employees and family members with diabetes during a 2-year pilot program called “MHealthy: Focus on Diabetes”
Beginning July 1, 2006, university employees and dependents will pay nothing for generic drugs and 25-50% less for brand name drugs that treat diabetes and its complications (e.g., high blood pressure, heart disease)
University researchers will measure the medical and financial outcomes of the program, which has been designed specifically to evaluate the impact of targeted copay reductions for preventive medications
More than 2,000 of the university’s 69,700 employees and dependents take medications for diabetes
Estimated costs for the 2-year program are $800,000 in additional drug costs and $100,000 in administrative costs, which are expected to be offset by decreased costs for complications

19. Evidence of Cost Savings from Increased Drug Compliance
Bridges to Excellence, a consortium of large employers, provides incentives to physicians whose patients achieve key measures associated with improved care for patients with diabetes
These measures are greatly influenced by patient compliance with medication regimens and other healthy lifestyle choices
Estimates of annual savings to the employers suggest savings that may result from improved compliance with medication regimens:
As much as $279 per patient per year for HbA1c control
As much as $494 per patient per year for blood pressure control
As much as $369 per patient per year for LDL (cholesterol) control
Diabetes Physician Recognition Program (DPRP) is a voluntary program of

20. New Tack on Co-pays: Cutting Them
Employers, Insurers Bet That Covering More of the Cost of Drugs Can Save Money Over the Long Term for Chronic Conditions
May 8, 2007