Introduction
Since the inception of Medicare Part D (MPD), several plan benefit parameters
have received a great deal of public attention, despite the lack of evidence regarding their
relationship to a beneficiary's total out-of-pocket drug costs. The Cline and Gupta survey
showed that the annual deductible and monthly premium were the two most important
plan parameters to seniors discerning between various prescription drug insurance plans.
Attention to annual changes in the MPD benefit by the media and pharmacy community
has similarly focused on increasing premiums and other individual plan attributes. ' It
has been contended that this plan parameter bias may have caused some MPD
beneficiaries to enroll in a stand-alone prescription drug plan (PDP) that does not best
suit their prescription drug insurance needs.

The potential for beneficiaries to enroll in a less than ideal MPD PDP is further
complicated by the vast number of PDPs offered annually in each MPD region (e.g.,
California). As seen in Table 4.1, each year since the inception of MPD, Medicare
beneficiaries in California have had between 47 and 56 PDPs from which to choose. This
figure does not take into account the number of Medicare Advantage plans (MA-PDs)
that are available to beneficiaries, and which vary on a county by county basis.
Table 4.1 Characteristics of stand-alone prescription drug plans (PDPs) offered
in California from 2006 to 20094'5'6'7

While plans with a wide range of premiums have been offered each year in
California, the average PDP premium has shown a steady increase since 2007 (Table
4.1). Prescription drug plan enrollment decisions have been made more difficult as a
result of the number of plans waiving the deductible and/or offering gap coverage each
year. In both 2006 and 2007, at least one PDP in California offered coverage of both
brand and generic formulary medications during the gap. Conversely, PDPs offering gap
coverage in 2008 and 2009 only covered certain generic medications.
Further complicating matters is the fact that a plan sponsor may alter the monthly
premium, deductible amount, and/or gap coverage of a given PDP on an annual basis.
This may result in beneficiaries who are enrolled in a plan that lacks the incentive that
promoted enrollment in the first place. Most importantly, it is unknown if the lowest cost
plan for a beneficiary is a plan offering a lower monthly premium and/or a $0 deductible.
While it is possible for beneficiaries to determine the total out-of-pocket cost of
PDPs offered in their region, only 6% of beneficiaries surveyed in 2006 did so using the
Plan Finder Tool on the Medicare website (www.medicare.gov).8 The Plan Finder Tool
provides an objective source to calculate the estimated annual cost (EAC) of all PDPs.
Beneficiaries who fail to use the Plan Finder Tool or call Medicare (1-800-MEDICARE)
may not be enrolled in the lowest cost PDP.

Objectives
Considering the overwhelming number of PDPs offered, and the variation in their
plan parameters, this study will focus only on California, the PDP region with the most
Medicare beneficiaries. Using a randomly sampled cohort of Medicare-eligible patients,
this study will: (1) examine trends in various plan parameters of the lowest EAC PDPs in
California from 2007 to 2009; and (2) determine which plan parameters are the most
consistent indicators of a patient's total out-of-pocket prescription drug costs by
comparing the lowest, median, and highest ranked EAC PDPs in California from 2007 to
2009.

Methods
A database of approximately 18,000 Medicare-eligible patients was provided by
the data analytics company, Medlnitiativesâ„¢. This database consisted of pharmacy
claims data provided by the pharmacy benefits management company Catalyst Rx®. All
protected health information and unique patient identifiers were stripped from the
database prior to provision. A sample of 50 patients was randomly selected from the
provided database. Pharmacy claims records for each study patient were obtained from
this database during the six-month period from January 1 to June 30, 2007 in order to
determine the patient's medication profile. Prescription medications taken on a regular
basis, defined as having at least an 84-day supply filled during the six month interval,
were included in the patient's medication profile. Patients without any medications
meeting this criterion over the six month time frame of interest were excluded from
further analyses and replaced by a new randomly selected patient.
A patient medication profile (e.g., medication name, strength, dosage form,
frequency of use) was created and saved on the Medicare website for each of the 50
sample patients. The Medicare Plan Finder Tool was used to determine the lowest,
median, and highest cost plans each patient in California in 2007, 2008 and 2009. For
each plan, the following parameters were obtained: EAC, total monthly drug cost,
monthly premium, and annual deductible. The EAC includes all anticipated costs that
would be paid by the beneficiary during the year including monthly premiums, co-pays in
each coverage level, and co-pays for Medicare-excluded or non-formulary medications.
Total monthly drug costs and monthly premiums were multiplied by 12 to obtain annual
drug costs and annual premium amounts, respectively. Plans were grouped into either
having a deductible (full or partial deductible) or a $0 deductible.
Cost parameters (EAC, total monthly drug cost, and monthly premium) from
2007 and 2008 were adjusted using the medical care commodities Consumer Price Index
(CPI) to account for the average change in prescription drug prices prior to comparison
with 2009 values. Consumer Price Index was calculated at the regional level (e.g., West)
from December 2006 to November 2008 in order to reflect drug price changes occurring
between the 2007 and 2009 open enrollment periods.9
In order to determine the percent out-of-pocket savings afforded by enrolling into
a specific PDP, the percent of annual drug costs paid by the patient (Pt%) was calculated
as follows: Pt% = EAC / annual drug cost (4.1)

Essentially, a Pt% equal to 100% would indicate that PDP costs would be
equivalent to not having prescription drug insurance and paying cash prices for
prescription medications. A value under 100% would indicate that the beneficiary would
be paying less than cash prices for their PDP, while a value over 100% indicates that the
PDP EAC exceeds the cash prices of the beneficiary's prescription medications. This
situation may occur if a beneficiary with inexpensive medications enrolls in a PDP with a
large monthly premium and/or co-pays relative to the actual price of the medications.
Within each year, the CPI-adjusted EAC, annual premium, and Pt% for the
lowest, median, highest EAC plans were compared to one another for all 50 sample
patients via the repeat measure analysis of variance (ANOVA) test. A significant finding
was followed up by the Tukey post-hoc test. The CPI-adjusted EAC, annual premium,
and Pt% of the lowest EAC PDP between years (2007-2009) were likewise compared to
one another. The number of plans not charging a deductible was compared both within
each year between the lowest, median, and highest EAC plans and for the lowest cost
PDPs between years using the Cochran's Q test for all 50 sample patients. Significant
findings were further analyzed using the post-hoc Critical Difference test.
All statistics were performed in Microsoft® Excel 2007 and verified using STATA™ SE
v. 10. Alpha was set a priori at 0.05 for all performed statistical analyses.

Results
Comparisons between the lowest, median, and highest cost plans within each year
for the sample cohort are shown in Table 4.2. A significant difference in EAC between
each of the three plans was observed for each year examined. Annual premiums were
significantly different from each other for all three PDPs in 2008 and 2009, with only the
highest EAC PDP premium differing significantly from the lowest and median EAC
PDPs in 2007. In all three years, Pt% showed a significant difference between the lowest
and highest EAC PDPs, with the Pt% of the highest EAC PDP averaging over 100% each
year. The number of PDPs at each rank with a $0 deductible varied considerably
Table 4.2 Comparisons of lowest, median, and highest estimated annual cost
(EAC) stand-alone prescription drug plans (PDPs) from 2007 to 2009 (CPI-
adjusted values) for the sample cohort between years with no significant difference seen in 2007. The lowest ranked PDPs had
significantly fewer PDPs with $0 deductibles than the median and highest PDPs in 2008,
and the lowest ranked PDPs had significantly fewer PDPs with $0 deductibles than the
highest ranked PDPs in 2009.

Between-year comparisons of the lowest EAC PDPs showed that the 2007 EAC
was significantly less than the EAC of 2008 or 2009. Overall, the annual premium of the
lowest EAC PDPs significantly decreased in 2009 compared to 2007. The annual
premium of the lowest EAC PDP significantly decreased by approximately $200 between
2007 and 2008, and significantly increased by almost $100 between 2008 and 2009.
There was a statistically significant increase in Pt% between 2007 and 2009. Also, a
significantly greater proportion of the lowest EAC PDPs in 2007 offered a $0 deductible
compared to 2008 and 2009.

Discussion
Contrary to reports indicating increases in MPD costs, this study indicates that
beneficiaries enrolled in the lowest cost PDP in California may not be paying
significantly more each year for MPD prescription drug insurance. As seen in Table 4.2,
and assuming beneficiaries are annually re-evaluating the PDP offerings, it is possible
that MPD PDP costs for the lowest EAC PDPs plateaued between 2008 and 2009 in
California. The smaller percent of PDPs with the lowest EAC having a $0 deductible (as
compared to median and highest) in both 2008 and 2009 or the lack of variation between
differentially ranked PDPs in offering a $0 deductible (as in 2007) show plan deductible
to be a poor plan parameter to use in identifying the lowest cost PDP. Additionally, the
variability in annual premium of the lowest EAC PDP between 2007 and 2009 show that
premium is also a poor surrogate for EAC. As such, reliance on either of these plan
parameters may lead to sub-optimal plan selection and increase out-of-pocket costs.
Based on the comparisons between the lowest, median, and highest EAC PDPs
between 2007 and 2009, it is evident that EAC remains the most consistent indicator of
out-of-pocket beneficiary costs. In the three years examined (Table 4.2), EAC was the
only plan parameter that consistently showed significant differences between the lowest,
median, and highest EAC PDPs. Data presented in Table 4.2 also show evidence
contrary to the notion that PDPs without a deductible would be less expensive as the
highest EAC PDP was more likely to offer a $0 deductible as compared to the lowest
EAC PDP in 2008 and 2009.

The calculated plan parameter Pt% also depicts interesting changes between the
lowest EAC PDPs of each year and between differentially ranked PDPs in each year. As
seen in Table 4.2, Pt% indicate that beneficiaries may be paying a higher percentage of
total drug costs between 2007 and 2009, even if enrolled in the lowest cost PDP in each
year. While not surprising, this trend does beg the question as to whether or not the PDPs
offered through MPD are maintaining the same cost-sharing benefit structure year to
year.

The discrepancy in cost-sharing is further emphasized when considering the
significant increase in Pt% between the lowest and highest ranked PDPs in each year.
Clearly, beneficiaries choosing PDPs that are not the lowest EAC PDP will pay a larger
percent of their drug costs. Surprisingly, beneficiaries may pay one and one-half to two
times as much for the highest EAC PDP as they would if they paid cash prices for their
medications without prescription drug insurance. For instance, a beneficiary enrolled in
the highest EAC PDP in 2009 would pay 118% more on average for this PDP than they
would by foregoing a PDP and paying cash prices for their prescription medications. As
also seen in 2009, beneficiaries enrolled in the median EAC PDP would pay just as much
for their PDP as they would if paying cash prices for their prescription medications. This
gradual increase in Pt% may indicate that enrolling in the lowest EAC PDP may become
even more important in subsequent years to reduce beneficiary out-of-pocket drug costs.
With this trend in mind, the necessity for annual re-evaluation of PDP offerings is
essential for beneficiaries to minimize their out-of-pocket prescription drug costs. These
findings also warrant additional studies examining the observed increase in the cost-
sharing structure of the MPD benefit. Including additional PDP parameters such as
formulary coverage and PDP-sponsor market share may further explain the trends
observed herein.

Such findings reveal that beneficiaries desiring to minimize out-of-pocket
prescription drug costs must base PDP enrollment decisions on EAC over other plan
parameters. However, beneficiaries may be basing plan enrollment decisions on other
non-cost related PDP parameters, such as customer service ratings, plan loyalty, or plan
reputation. Considering that it has been shown that fewer than 10% of MPD
beneficiaries were enrolled in the lowest EAC PDP in the first year of the MPD benefit10,
these non-cost parameters may be a more common basis upon which enrollment
decisions are made. Beneficiaries having difficulty affording their prescription drug
costs, or those simply desiring lower out-of-pocket drug costs, must evaluate PDP
offerings based on EAC on an annual basis.

In light of the fact that pharmacists are the most accessible healthcare provider
and have likely had the most experience in dealing with the MPD benefit, it is vital for
pharmacists to encourage beneficiaries to annually re-evaluate PDP offerings. If
provided by pharmacists, Medicare Part D plan assistance may result in significant
reductions in beneficiary out-of-pocket spending, and thusly open future discussions
pertaining to reimbursement for such cognitive services.

References
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2006. Publication 7426. Washington, DC: Kaiser Family Foundation; 2005.
5. Kaiser Family Foundation. Medicare Part D plan characteristics, 2007. Publication
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cost plans? Washington, DC: Kaiser Family Foundation; 2009.