The studies presented herein are the first reported estimates of the annual
variation in total out-of-pocket costs paid by Medicare beneficiaries under the Medicare
Part D (MPD) prescription drug benefit. These studies maintained a patient-perspective
approach by using the Medicare Plan Finder Tool to obtain estimated annual costs (EAC)
of all stand-alone prescription drug plans (PDP) in each PDP region for all patients in a
sample cohort.
Since the inception of MPD, practitioners, researchers, and the media have
focused on various aspects of the MPD benefit. While the first year of the benefit
appeared to be beneficial for beneficiaries, many cited the annual changes in various PDP
parameters, such as monthly premiums and gap coverage, as evidence that beneficiaries
may be paying more for the MPD benefit. However, prior to completion of the current
studies, no research examining the total out-of-pocket costs of MPD beneficiaries has
been published. While many have cited the need for changes in the MPD benefit, little
empirical evidence was offered to support these claims.
The first goal of the present research was to determine the annual trends in MPD
costs in each of the MPD regions. The results indicated that beneficiaries in 13 of the 34
MPD regions may not have paid significantly more for their MPD benefit between 2007
and 2008. However, this was only apparent for beneficiaries who would have been
enrolled in the lowest cost PDP in both years. This finding indicates that beneficiaries
who did not re-evaluate PDP offerings between 2007 and 2008 may have paid
significantly more for their MPD benefit.
The potential avoidable cost increase was examined in a second study which
sought to determine the opportunity cost involved in failing to annually re-evaluate PDP
offerings in each MPD region. The results of this study further support the need for
annual re-evaluation of PDP offerings by beneficiaries as this will likely help to minimize
their out-of-pocket costs. Avoidable beneficiary out-of-pocket costs may lead to cost-
related non-adherence and/or changes in the utilization of medications for chronic disease
states resulting in: 1) physician office visits, 2) emergency room visits, and 3) hospital
admissions.
The collective findings of the present research highlight the importance of
pharmacists and other healthcare providers to encourage and assist MPD beneficiaries
with PDP selection and enrollment each year. While pharmacists are not allowed to
direct beneficiaries to a specific PDP due to potential conflicts of interest, they can and
should inform MPD beneficiaries about the implications of failing to re-evaluate PDP
offerings. Additionally, pharmacists should offer assistance to MPD beneficiaries who
have questions regarding their MPD benefit. Because the Plan Finder Tool on the official
Medicare website is the only available method for objectively comparing all available
PDP offerings, advocates should be proficient in its use in order to best serve
beneficiaries.
While many beneficiaries may rely on individual plan parameters to make
enrollment decisions, it is vital to compare the costs of PDP offerings based on EAC.
The conducted research indicated that using certain plan parameters (e.g., deductible or
monthly premium) as a surrogate for EAC may result in increased avoidable out-of-
pocket MPD costs. The EAC generated by the Medicare Plan Finder Tool was shown to
be the most consistent indicator capable of distinguishing lowest, median, and highest
cost PDP. The observed changes to the PDP cost-sharing structure in California between
2007 and 2009 indicate the necessity to expand this analysis to each of the other 33 MPD
regions.
By using these findings as a starting point, a myriad of follow-up investigations
are both possible and warranted. In addition to continued observations of annual
variation in PDP costs, it would be ideal to retrospectively collect such information since
the inception of MPD. As compared to the database of Medicare-eligible patients
sampled for these studies, the use of Medicare claims data or beneficiary claims data
provided by a PDP sponsor would externally validate the findings herein.
Currently, many researchers are focusing on the implications of the coverage gap
on cost-related non-adherence and/or coping strategies adopted by MPD beneficiaries.
Similar behavioral trends may be occurring in January of each year when beneficiaries
who do not re-evaluate PDP offerings during the open enrollment period incur
unnecessary out-of-pocket prescription drug costs. Beneficiaries who remain enrolled in
a PDP that undergoes large formulary or plan parameter alterations may resort to
adopting cost-saving measures including: switching to generic alternatives, using low-
cost pharmacies offering discounts on their medications, or forgoing their prescription
medications altogether. Considering that PDP sponsors are primarily concerned with
containing prescription drug costs, adoption of such behaviors by beneficiaries may result
in increased Medicare Part A expenditures (e.g., emergency room visits and hospital
admissions) and/or Part B expenditures (e.g., physician office visits and laboratory tests).
In order to maintain the long-term viability of the Medicare benefit, these inter-
benefit interactions must be examined. Clearly, if the annual variation in MPD PDP
offerings not only increases beneficiary out-of-pocket spending, but also increases
Medicare expenditures for Parts A and B, the structure of MPD may need to be changed
to control the total cost of the Medicare health benefit. In order to undertake such a
study, changes in prescription utilization and MPD costs need to be correlated with Part
A and B costs.
Based on the supposition that MPD costs may be increasing costs of Medicare
Parts A and B, the comparison of PDP costs to the costs of Medicare Advantage
Prescription Drug Plans (MA-PDs) is warranted. Because MA-PDs are responsible for
all aspects of a beneficiary's healthcare, these plans may have a benefit design with
minimal annual alteration, and whose primary interest is in managing a beneficiary's total
healthcare costs and not just their prescription drug spending.
Lastly, considering that the effect of increased MPD costs is related to resources
at the disposal of MPD beneficiaries, those beneficiaries with limited incomes may be
most impacted by relatively small increases in out-of-pocket costs. Recognizing this,
MPD beneficiaries with limited income and assets are subsidized by either the Social
Security Administration through the Low Income Subsidy (LIS) or by Medicaid (Dual-
eligible). While dual-eligibles and LIS beneficiaries have lower co-pay amounts, reduced
or no monthly premiums, and no coverage gap, the effect of annual variability in PDP
offerings on these beneficiaries has not been examined.
Dual-eligibles face a unique risk of increased out-of-pocket expenditures and
resultant cost-related non-adherence based on their random assignment and enrollment
into PDPs without regards to their prescription medications. Those enrolled in a PDP
that no longer meets the benchmark requirements for dual-eligibles may be re-assigned to
a different PDP with a similar disregard for prescription drug coverage needs. As such,
this cohort of Medicare beneficiaries may be a source of increased Medicaid expenditures
that could be mitigated by the increased involvement of pharmacists in the pharmaco-
therapeutic management of dual-eligibles and LIS beneficiaries.
It is evident that increased costs due to the variability of the MPD benefit can be
moderated through the intervention of healthcare providers properly trained to assess the
needs of MPD beneficiaries and the MPD plans available to meet these needs. Although,
pharmacists are poised to be the key practitioner involved in these interventions, two
main barriers exists which must be overcome if this ability is to be realized. First and
foremost, Medicare must recognize pharmacists as a provider of services for Medicare
beneficiaries. Second, pharmacists must be adequately reimbursed for these services.
Rather than charging beneficiaries, reimbursement should be provided by Medicare,
Medicaid (in the case of dual-eligibles), and/or MPD plan sponsors. Ultimately future
research would lead to this policy shift, benefiting the profession of pharmacy, as well
providing better care to Medicare beneficiaries at a lower cost.
