taylor melanson
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Providing Prescription Drug Coverage to the Elderly: America’s Experiment with Medicare Part D By Mark Duggan, Patrick Healy, and Fiona Scott Morton. Taylor Melanson. History of Medicare Part D. Medicare did not cover drugs (1966-2006) % of healthcare costs accounted for by drugs - PowerPoint PPT PresentationTRANSCRIPT
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TAYLOR MELANSON
Providing Prescription Drug Coverage to the Elderly: America’s Experiment with Medicare Part D
By Mark Duggan, Patrick Healy, and Fiona Scott Morton
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History of Medicare Part D
Medicare did not cover drugs (1966-2006)% of healthcare costs accounted for by drugs
4.5% – 1982 5.6% – 1994 10.1 – 2005
Prior to Part D, 30% of 44 million beneficiaries lacked coverage for drugs (Neuman et al., 2007)
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 Took effect in 2006 -> Established Part D 2007 – covered 24 million people, cost $39 billion
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Why Study Part D?
Impact on health and economic well-beingIncrease in government spending“Attempt to use market mechanisms in the
delivery of a large-scale entitlement program” (70) Competition Price negotiation Preference matching
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Coverage Plans
Stand-alone plansBasic plans
Government defined standard “actuarially equivalent”
Many options 4% of plans cover more than half of enrollees
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Standard Cost Sharing Scheme
Monthly premiumDeductible = $275Low cost coverageDonut holeCatastrophic coverageOnly 17% of plans
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Coverage of Medications
Basic Plan coverage - $1676 + catastrophic coverage
Formularies Tier system Prior authorization Step therapy Off formulary drugs
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Choice of Plan
Out-of-pocket costFormulary status of current drugs
Maintenance vs acute need drugsReputationIncentive to enroll early
Incentivizes alternative plans2008 - 10% of eligible people did not enroll
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Influence on Drug Prices
Formulary placementIncentives for patients and pharmaciesAverage price of drugs declinedTreatments without substitutes
CMS required coverageProtected Classes
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Incentives for Sponsors
Firms make bid to CMSBase beneficiary premium
Incentives to make bid accurateRisk factor adjustment
Offsets approximately ¼ of variance in drug spending Plans have better data than government
Catastrophic coverageRisk absorption
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Issues
Enrollees without financial incentivesCatastrophic coverageFormulary manipulationInefficient treatment patternsImpact on budget
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Conclusions
Successes Drug prices Drug utilization Costs
Failures Suboptimal choices Treatments without substitutes Administrative costs Unsuccessful incentives
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Citations
Images http://www.epsilonregistration.com/ERImages/378/CM
S%20log%20blue.jpg http://www.alan.com/wp-content/uploads/2012/04/dou
ghnut_21023028-300x286.jpg
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