Fixing flaws in medicare drug coverage that prompt insurers to avoid low-income patients

Health Affairs

Volumn 29, Issue 12, 2010, Pages 2335-2343

  Hsu, John ^a   Fung, Vicki ^b   Huang, Jie ^b   Price, Mary ^b   Brand, Richard ^c   Hui, Rita ^d   Fireman, Bruce ^b   Dow, William H ^e   Bertko, John ^f   Newhouse, Joseph P ^g  

^a MASSACHUSETTS GENERAL HOSPITAL   (United States)

^b DIVISION OF RESEARCH   (United States)

^c UNIVERSITY OF CALIFORNIA   (United States)

^d KAISER PERMANENTE   (United States)

^e UNIVERSITY OF CALIFORNIA   (United States)

^f LMI   (United States)

^g HARVARD UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

AGED; ARTICLE; FACTUAL DATABASE; FEMALE; FINANCIAL MANAGEMENT; HEALTH CARE COST; HUMAN; INSURANCE; MALE; MEDICARE; ORGANIZATION AND MANAGEMENT; POVERTY; RISK ASSESSMENT; UNITED STATES;

AGED; AGED, 80 AND OVER; DATABASES, FACTUAL; FEMALE; FINANCING, PERSONAL; HEALTH EXPENDITURES; HUMANS; INSURANCE SELECTION BIAS; MALE; MEDICARE PART D; POVERTY; RISK ADJUSTMENT; UNITED STATES;

EID: 79953798208     PISSN: 02782715     EISSN: 15445208     Source Type: Journal    
DOI: 10.1377/hlthaff.2009.0323     Document Type: Article

References (32)

1. Hoadley J, Cubanski J, Hargrave E, Summer L, Neuman T. Medicare Part D spotlight: Part D plan availability in 2010 and key changes since 2006 [Internet]. Menlo Park (CA): Kaiser Family Foundation; 2009 Nov 6 [cited 2010 Oct 18]. Available from: http://kff.org/medicare/upload/7986.pdf
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9. Medicare Payment Advisory Commission. Report to the Congress: Medicare payment policy [Internet]. Washington (DC): MedPAC; 2008 Mar [cited 2010 Oct 18]. Available from: http://www.medpac.gov/documents/Mar08_EntireReport.pdf
10. Summer L, Hoadley J, Hargrave E, Cubanski J, Neuman T. Medicare Part D 2009 data spotlight: lowincome subsidy plan availability [Internet]. Menlo Park (CA): Kaiser Family Foundation; 2008 Nov [cited 2010 Oct 18]. Available from: http://kff.org/medicare/upload/7836.pdf
11. Changes by the Centers for Medicare and Medicaid Services (CMS) in the method used to calculate the benchmark have also contributed to these trends. Between 2007 and 2008 CMS changed from unweighted to enrollment-weighted benchmarks. In an effort to minimize disruptions in plan enrollment for low-income subsidy beneficiaries, CMS also established a rule that allowed enrollees to stay in their current plans if costs increased only minimally. In 2009 CMS altered its methodology to use subsidy enrollment versus all enrollment for weighting. In 2010 the benchmarks were calculated using Medicare Advantage prescription drug plan premiums before Part A or Part B rebates were applied.
12. CMS's current policy is to reassign only beneficiaries that it had originally assigned, and not to reassign subsidy beneficiaries who had chosen their own Part D plan. Despite this limited focus, CMS has reassigned millions of subsidy beneficiaries since the inception of the Part D program. Furthermore, subsidy beneficiaries who chose their plan must pay an additional premium to remain in it.
13. Kaiser Family Foundation. Medicare Part D spotlight: Part D plan availability in 2011 and key changes since 2006 [Internet]. Washington (DC): KFF; 2010 Oct [cited 2010 Oct 18]. Available from: http://www.kff.org/medicare/8107.cfm
14. Hsu J, Huang J, Fung V, Price M, Brand R, Hui R, et al. Distributing $800 billion: an early assessment of Medicare Part D risk adjustment. Health Aff (Millwood). 2009;28(1): 215-25.
15. To access the Technical Appendix, click on the Technical Appendix link in the box to the right of the article online.
16. Supplemental Security Income recipients and people enrolled in Medicare savings programs are also eligible for the full subsidy.
17. If a prescription drug plan moves from being below to being above the benchmark, CMS reassigns its enrollees to another below-benchmark plan via auto-or facilitated enrollment. People who chose to enroll in their original plan are notified that they can change plans to avoid paying a premium.
18. Since the introduction of Part D in 2006, CMS has increased the riskadjusted prospective payment by a single multiplier per beneficiary: 1.08 for a person receiving the full subsidy, 1.05 for partial subsidy, 1.21 for the disabled who are institutionalized, and 1.08 for other institutionalized beneficiaries. If a beneficiary is both institutionalized and eligible for the low-income subsidy, only the institutionalized multiplier applies to that beneficiary.
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21. If a beneficiary had fewer than twelve months of enrollment in 2006, we annualized 2006 costs by multiplying actual costs by twelve and dividing by the months enrolled (results using alternative definitions for prior-year costs were similar).
22. Huskamp HA, Stevenson DG, Keating NL, Newhouse JP. Rejections of drug claims for nursing home residents under Medicare Part D. Health Aff (Millwood). 2008; 27(2):560-7.
23. However, rebates apply post hoc and in aggregate. Thus, they are unlikely to affect our conclusions that subsidy beneficiaries are less profitable than nonsubsidy beneficiaries, and that including in the formula cost or information on prior drug use would improve the formula's accuracy.
24. Neuman P, Strollo MK, Guterman S, Rogers WH, Li A, Rodday AMC, et al. Medicare prescription drug benefit progress report: findings from a 2006 national survey of seniors. Health Aff (Millwood). 2007;26(5): w630-43.
25. McClellan MB. Medicare prescription drug benefit: statement to House Committee on Ways and Means [Internet]. Washington (DC): Department of Health and Human Services; 2006 Jun 14 [cited 2010 Oct 18]. Available from: http://www.hhs.gov/asl/testify/t060614b.html
26. In contrast, there have been a number of changes in premiums and plan offerings by the private Part D plan sponsors. The 2011 Combined Call Letter from CMS outlines a number of changes, including replacement of the low-income and long-term institutionalized status multipliers with five new categories, each with its own set of coefficients: long-term institutionalized, low-income elderly, non-low-income elderly, lowincome disabled, and non-lowincome disabled. This approach of using separate models is analogous to use of a separate risk-adjustment model for beneficiaries with endstage renal disease. Alone, this approach does not affect plans' incentives for avoiding the lowincome-subsidy market, but it could improve the accuracy of payments within each of the five new categories. Centers for Medicare and Medicaid Services. Note to: Medicare Advantage organizations, prescription drug plan sponsors, and other interested parties [Internet]. Baltimore (MD): CMS; 2010 Feb 19 [cited 2010 Oct 18]. Available from: http:// www.cms.gov/PrescriptionDrug CovContra/Downloads/2011 CombinedCallLetter.pdf
27. NORC at the University of Chicago. Continuation of drug risk adjustment: final report [Internet]. Bethesda (MD): NORC; 2006 Dec [cited 2010 Oct 18]. Available from: http://aspe.hhs.gov/health/reports/06/drugcontinuation/report.pdf
28. Hsu J, Price M, Huang J, Brand R, Fung V, Hui R, et al. Unintended consequences of caps on Medicare drug benefits. N Engl J Med. 2006;354(22):2349-59.
29. Zhang Y, Donohue JM, Lave JR, O'Donnell G, Newhouse JP. The effect of Medicare Part D on drug and medical spending. N Engl J Med. 2009;361(1):52-61.
30. Other features of the Part D program may have exacerbated the churning of subsidy beneficiaries, including changes in the calculation of benchmarks and the widening of the risk corridors. These changes-and other program features such as reinsurance calculations, reassignment protocols, risk corridors, and formulary regulations-also affect the stability of the subsidy market.
31. Psaty BM, Burke SP. Protecting the health of the public-Institute of Medicine recommendations on drug safety. N Engl J Med. 2006;355(17): 1753-55.
32. Okie S. Safety in numbers-monitoring risk in approved drugs. N Engl J Med. 2005;352(12):1173-6.