Currently Viewing:
The American Journal of Managed Care August 2009
Outcomes of Patients Discharged From Pharmacy-Managed Cardiovascular Disease Management
Kari L. Olson, PharmD; Thomas Delate, PhD; Jon Rasmussen, PharmD; Tammy L. Humphries, PharmD; and John A. Merenich, MD; for the Clinical Pharmacy Cardiac Risk Service Study Group
Burden of Alzheimer's Disease and Association With Negative Health Outcomes
Daniel C. Malone, RPh, PhD; Trent P. McLaughlin, PhD; Peter M. Wahl, BA; Christopher Leibman, PharmD; H. Michael Arrighi, PhD; Mark J. Cziraky, PharmD; and Lisa M. Mucha, PhD
Distal Upper and Lower Limb Fractures Associated With Thiazolidinedione Use
Stephen G. Jones, MS; Soyal R. Momin, MS, MBA; Matthew W. Good, MD; Terence K. Shea, PharmD; and Kenneth Patric, MD
Cost Comparison of Peritoneal Dialysis Versus Hemodialysis in End-Stage Renal Disease
Ariel Berger, MPH; John Edelsberg, MD, MPH; Gary W. Inglese, RN, MBA; Samir K. Bhattacharyya, PhD; and Gerry Oster, PhD
Cost Evaluation of a Coordinated Care Management Intervention for Dementia
O. Kenrik Duru, MD, MSHS; Susan L. Ettner, PhD; Stefanie D. Vassar, MS; Joshua Chodosh, MD, MSPH; and Barbara G. Vickrey, MD, MPH
Can a Nationwide Media Campaign Affect Antibiotic Use?
Beatriz Hemo, MA; Naamah H. Shamir-Shtein, MA; Barbara G. Silverman, MD, MPH; Judith Tsamir, MA; Anthony D. Heymann, MB; Sharon Tsehori, MD, MHA; and Nurit L. Friedman, PhD
Cost Minimization of Medicare Part D Prescription Drug Plan Expenditures
Rajul A. Patel, PharmD, PhD; Helene Levens Lipton, PhD; Timothy W. Cutler, PharmD; Amanda R. Smith, MPH; Shirley M. Tsunoda, PharmD; and Marilyn R. Stebbins, PharmD
Currently Reading
Medicare Part D After 2 Years
Geoffrey F. Joyce, PhD; Dana P. Goldman, PhD; William B. Vogt, PhD; Eric Sun, PhD; and Anupam B. Jena, PhD
A Telephone-Based Intervention for Increasing the Use of Osteoporosis Medication: A Randomized Controlled Trial
Jill Waalen, MD, MPH; Amalia L. Bruning, PA; Mark Jason Peters, MD; and Eric M. Blau, MD

Medicare Part D After 2 Years

Geoffrey F. Joyce, PhD; Dana P. Goldman, PhD; William B. Vogt, PhD; Eric Sun, PhD; and Anupam B. Jena, PhD

Coverage under Part D is comparable to that under non–Part D plans with respect to key features likely to be important to Medicare beneficiaries.

Objective: To assess the broad impacts of Medicare Part D and the extent to which prior concerns have been realized.

Methods: We used administrative data to summarize beneficiary enrollment and plan participation in Part D, and compared pharmaceutical use and out-of-pocket spending before and after the introduction of Part D. We characterized the benefit designs of the 10 largest Part D plans in 2006 and compared them with the benefit designs of 7 non–Part D plans often cited as examples of low-cost or comprehensive drug benefits.

Results: By 2008, nearly 90% of seniors had drug coverage at least as generous as the standard Part D benefit. Excluding premiums, annual out-ofpocket spending in the 10 largest Part D plans was comparable to that of other private and public drug benefits, with the most prominent differences attributable to out-of-pocket spending on drugs
not covered in the plan. Poorer beneficiaries have gained the most from Part D in terms of increased access to medications and reduced out-of-pocket spending.

Conclusions: Coverage under Part D is comparable to that under non–Part D plans with respect to key features that are likely to be important to Medicare beneficiaries—access to medications and out-of-pocket costs. Nonetheless, concerns remain over drug pricing and gaps in coverage. The government should continue to monitor
the competitiveness of the Part D market to ensure it meets the diverse needs of Medicare beneficiaries.

(Am J Manag Care. 2009;15(8):536-544)

After more than 2 years of experience, data are starting to accumulate on the performance of Medicare Part D.

  • Nearly 90% of Medicare beneficiaries have prescription drug coverage as generous as the standard Part D benefit.
  • Part D was associated with a 16% annual decrease in out-of-pocket spending and a 7% increase in the number of prescriptions.
  • Coverage under Part D is comparable to that of other private and public drug benefits with respect to access to medications and out-of-pocket costs.
  • Poorer beneficiaries have gained the most from Part D.
Prior to the introduction of Medicare Part D in 2006, there were concerns that the program would not appeal to all types of beneficiaries, nor entice a sufficient number of health plans to offer a benefit. Failing to attract a broad cross-section of beneficiaries could jeopardize the long-term viability of the program if, for example, only the sickest patients enrolled. Similarly, failing to attract a sufficient number of plan sponsors would diminish competition, which was widely viewed as the cornerstone of a well-functioning program. Other concerns focused on low-income beneficiaries, many of whom were previously covered by Medicaid’s prescription drug benefit. Would they be negatively affected by potentially more expensive private plans with more restrictive formularies? Would seniors be able to navigate the myriad of plan choices and benefit options, including the gap in coverage (“doughnut hole”) in Part D? Finally, many analysts feared that the cost of the program would exceed original Congressional Budget Office estimates if private plans could not obtain sufficient price discounts or constrain growth in per capita utilization.

Nearly 3 years into the Medicare Part D program, enough data have accumulated on the program’s performance for a preliminary picture to emerge. We examined beneficiary and plan participation in the program, and how Part D has affected beneficiaries’ access to medications, utilization, and financial risk. We compared the 10 largest Part D plans in 2006 with 7 non–Part D plans often cited as examples of low-cost or generous pharmacy benefits. We found that although Part D has exceeded expectations in many ways, several questions remain that warrant careful monitoring in the future.


Beneficiary Enrollment and Plan Participation

We used data from the Centers for Medicare & Medicaid Services to characterize beneficiaries’ drug coverage and plan participation in Medicare Part D. Estimates of Medicare beneficiaries with prescription drug coverage were from enrollment files. Data on plan participation were derived from the Prescription Drug Plan Landscape File.

Benefit Design and Formulary Coverage

To characterize the Part D program, we examined the 10 largest prescription drug plans (PDPs) based on 2006 enrollment. These 10 plans accounted for 46% of total Part D enrollment in 2006. We compared these 10 plans with 7 public and private plans often cited as examples of low-cost or comprehensive drug benefits with respect to formulary coverage, cost-sharing features, and out-of-pocket costs. The 7 non–Part D plans included the Federal Employees Health Benefits Program (FEP Basic), the California Public Employees’ Retirement System (CALPERS Choice/CALPERS Care), the California State Medicaid program (Medi-Cal), the Veterans Affairs plan (VA National Formulary), the Department of Defense plan (TRICARE), Anthem Blue Cross, and Kaiser Permanente.

We used data from the Fingertip Formulary and Internet sources to characterize the benefit designs and cost-sharing arrangements of each of these 17 plans. The Fingertip Formulary is an online database of formulary designs for nearly all commercial, Medicare, Medicaid, and public insurance plans ( The data in our analysis contain formulary designs as of July 16, 2007. In cases where there were discrepancies between sources, we contacted the plans directly to resolve any ambiguities.

We compared coverage in each plan for the 300 drugs most widely prescribed to seniors between January and October 2006. The list of medications was based on Verispan’s Vector One data, a national-level prescription and patient tracking service that collects nearly half of the retail prescriptions dispensed each month in the United States. The list of 300 drugs was reduced to 252 in some analyses because of 33 generic/brand duplicates and 15 drugs not covered under Part D. We also examined how broadly plans cover medications for chronic diseases of the elderly to assess the potential clinical consequences of formulary exclusions.

Public programs with statutory or regulatory limits on cost-sharing often use formulary restrictions or other types of administrative requirements to limit access to specific medications. For example, plans may require prior authorization (requiring permission before certain drugs can be dispensed), step therapy (requiring use of lower-cost medications before providing coverage for more expensive alternatives), or quantity limits (which restrict the number of pills or prescriptions dispensed per month or per patient) to control utilization and improve patient safety. We examined the extent of these restrictions in each of the 17 plans.

Relative Plan Generosity

It often is difficult to translate the stated pharmacy benefit into actual prices that consumers face. Multitier formularies are the standard for most private plans, and they also have gaps in coverage, out-of-pocket limits, and discounts for purchases through mail-order or in-network pharmacies. These added complexities mean that the price a consumer will pay for a given drug depends in which tier it is placed, where it is dispensed, and at what time of year. To address this issue, we estimated average beneficiary out-of-pocket costs in each plan for a standardized set of pharmacy claims. The set of drug claims was generated by drawing a random sample of seniors from 14 large employers providing retiree drug coverage in 2004 (non–Part D plans, national in scope). The sample included beneficiaries age 65 years and older who were continuously enrolled in a plan for the entire year and who had at least 1 pharmacy claim for the 300 most common drugs. We randomly selected 10% of enrollees from each plan, up to a maximum of 500 per plan. We then created a “market basket” of drug claims used by this random sample of retirees, restricted to the 300 most common drugs. This fixed set of pharmacy claims then was processed through the benefit designs of each plan to calculate the average out-of-pocket costs in each of the 17 plans. This approach incorporates the plan’s cost-sharing arrangements and other factors such as where the drug was dispensed (eg, network or mail-order pharmacy) and cumulative spending to date.

For drugs that were not covered by the plan—either because they were excluded from the formulary or because the beneficiary’s cumulative spending was below the deductible or in the doughnut hole—we assigned an out-of-pocket payment equal to the full price of the drug (excluding rebates). We used the full price of the drug for each Part D plan as reported on the Medicare Web site in July 2007. Some Part D plans did not report prices for all of the drugs. In those cases, we imputed the average price of a drug across all other Part D plans with pricing data. Similarly, because we did not have price data for the employer plans, we assigned the average price of each drug in the Part D plans.

Our approach to estimating out-of-pocket costs for a fixed basket of pharmacy claims had 2 principal limitations. Most importantly, it assumed no demand response (ie, that patients’ drug use or “bundle of claims” was fixed across plans and thus invariant to the benefit design). In reality, patients will alter their choice of drugs in response to changes in cost-sharing.1 Second, the price we used for uncovered drugs was measured with some error, given the limitations on quantity and dosage and our use of average prices in the 10 largest Part D plans. Given these limitations, our out-of-pocket estimates provide a useful measure of relative plan generosity, but should not be viewed as an accurate measure of the actual cost burden to beneficiaries.

Changes in Utilization

We estimated the effects of Part D on pharmacy utilization and spending using a “before and after” design. For the baseline period, we analyzed data from the 2004 Medicare Current Beneficiary Survey (MCBS). For the follow-up period, we analyzed 2006 enrollment and claims data from a large Part D plan. These datasets are not perfectly comparable. First, the MCBS relies on self-reports and has been shown to undercount drug spending.2 Second, the MCBS is a stratified national sample of Medicare enrollees, whereas the Part D data are a convenience sample, albeit a large one.

To address the first problem, MCBS spending was adjusted upward from 2004 to 2006 using the consumer price index prescription drug series, and both spending and number of fills were adjusted upward by 15% to account for the undercount. To address the second problem, we constructed demographic weights based on age, sex, and state of residence so the Part D enrollees were demographically representative of the Medicare population. We re-weighted the Part D data to match the MCBS for each age-sex-state-subsidy cell and used these weights in all reported analyses.

We also approximated low-income subsidy (LIS) eligibility in the MCBS prior to Part D introduction based on a reported household income less than 150% of the federal poverty line. No asset information is available in the MCBS. Prior work suggests that nearly 14 million Medicare beneficiaries would qualify for the LIS based on this income test alone, of which 2.4 million (17%) would be ineligible based on assets.3

For each of the 3 eligibility groups (dual-eligible, LIS, general), we examined the distribution of prescriptions and out-of-pocket spending before and after the introduction of Part D. In particular, we compared the means, variances, and various quartiles of the distributions of these variables.



Table 1 shows the breakdown of prescription drug coverage among Medicare beneficiaries as of January 2008. Nearly 90% of seniors had drug coverage at least as generous as the standard Part D benefit. More than 57% were enrolled in a Part D plan (15% dual-eligibles), with the remainder covered by employer plans (15%) or some other creditable plan (17%).

Plan Participation

Widespread enrollment in Part D is partly attributable to robust plan participation across states. In January 2006 alone, there were on average 43 PDPs in each state, with states at the 25th percentile having 41 plans. In 2007 and 2008, this number rose to 54 plans, with states at the 25th percentile having 53 plans on average. Despite the large number of plan offerings, beneficiaries enrolled in Part D were highly concentrated in a few plan sponsors. Nearly 44% of enrollees in 2007 were in plans offered by UnitedHealth and Humana, while almost a quarter were covered by Universal American Financial, WellPoint, WellCare, Kaiser Permanente, and Coventry. A similar degree of concentration occurred in the Medicare Advantage market prior to Part D.4

Formulary Design and Coverage

Copyright AJMC 2006-2020 Clinical Care Targeted Communications Group, LLC. All Rights Reserved.
Welcome the the new and improved, the premier managed market network. Tell us about yourself so that we can serve you better.
Sign Up