Data-Driven Drug Coverage

Harnessing Information for a Better Medicare Prescription Drug Program

Report from Jack Hoadley outlines how to harness information for a better Medicare prescription drug program.

Volunteer Jane Mitchel helps Frank Johnson select a Medicare prescription drug enrollment plan at Trenholm State Technical College in Montgomery, Alabama. (AP/Rob Carr)
Volunteer Jane Mitchel helps Frank Johnson select a Medicare prescription drug enrollment plan at Trenholm State Technical College in Montgomery, Alabama. (AP/Rob Carr)

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The Centers for Medicare and Medicaid Services, the agency that administers Medicare, is a significant source of hospital and physician data on a variety of important health policy and health care matters. CMS collects and disseminates data that allow researchers both in and out of government to study such questions as the effectiveness of different treatments, the impact of different payment incentives on the behavior of health care providers, and the morbidity and health status of an aging population.

Under the new Medicare Part D prescription drug program, however, such data are not always available. About 57 percent of all Medicare beneficiaries—roughly 25 million seniors—now are enrolled in either stand-alone privately operated drug plans, paid for through Part D, or private Medicare Advantage plans, under which beneficiaries receive all their health services, including drugs. The exclusive use of private plans to deliver the benefit represents a departure from the traditional government-operated Medicare program. As such, these plans are not required to produce the same level of data on quality and effectiveness of care available when Medicare pays directly for services.

Broadly speaking, we know that the creation of Part D has dramatically increased the number of seniors with prescription drug coverage. According to a recent survey, only 8 percent of seniors lacked drug coverage in 2006, compared with about one-third before the program began. But many basic questions about the effectiveness of Part D, which carries a $50 billion annual price tag, cannot be answered.

Seniors are expected to voluntarily enroll in one of more than 1,800 stand-alone plans or more than 2,000 Medicare Advantage plans that make up the Part D program. This system is premised on market competition and the ability of beneficiaries to choose smartly one of these plans and, if necessary, switch to a different plan that better serves their needs. To what extent are beneficiaries switching from one plan to another? And which plans are proving most effective? There currently are no data to assess plan switching, and only limited data to judge plan performance—which, if collected and disseminated, could inform plan choices. The benefits of market competition are constrained by the absence of such information.

About half of all beneficiaries qualify for Part D’s Low-Income Subsidy program and face virtually no out-of-pocket costs. These LIS beneficiaries, however, may encounter coverage instability when plans make changes in premiums and become ineligible to be assigned low-income beneficiaries; this happened to about 2 million beneficiaries in 2007. There also is concern whether plans available to low-income beneficiaries are inferior to other plans, both in coverage and performance. What should be done to mitigate the impact of coverage instability? And are LIS beneficiaries receiving sub-par care? The ability to answer these questions is limited because CMS does not disseminate data on plan-level LIS enrollment or plan-reported performance measures.

Beneficiaries who do not qualify for the low-income subsidy pay more of the cost of their drugs out of pocket than do beneficiaries under the typical employer-sponsored drug benefit or the Department of Veterans Affairs. Part D plans also more frequently exclude drugs from their formularies. To what extent do higher drug costs cause seniors to skip prescribed drugs? There already is evidence this is happening. And are beneficiaries able to find alternatives or receive exceptions for excluded drugs? It is not known how many beneficiaries face significant cost-sharing burdens or whether drugs are systematically more expensive under specific plans—information necessary to determine cost sharing but which plans consider proprietary. Nor are there data available on how often prescriptions are delayed at the point of sale because of a drug’s off-formulary status, or other restrictions, and how often exceptions are granted in these cases.

On top of regular cost sharing, beneficiaries may face a coverage gap—the so-called “doughnut hole”—where they must pay the full cost of their drugs after an initial coverage period. In 2007, nearly 30 percent of stand-alone drug plans offered enhanced coverage in this doughnut hole, but fewer than 10 percent of beneficiaries enrolled in these plans. It is assumed that seniors sometimes go without drugs when they hit the coverage gap, but how widespread is this problem? Claims data that could help answer this question have not yet been made available to researchers, and information on plan parameters that indicate when beneficiaries can expect to face out-of-pocket expenses is presented in a way that makes research extremely difficult.

The ultimate goal of Part D, of course, is to improve the health of seniors. Greater access to drugs should reduce morbidity, extend life expectancy, and improve quality of life. But to what extent is this actually happening? Are prescribed drugs producing desired results?

Steps have been taken only recently to make available a database that draws together the experiences of the program’s millions of beneficiaries. This new opportunity should provide a powerful tool to learn more about the effective use of drugs. Not only can we better assess the effectiveness of particular drugs and their comparative effectiveness against similar drugs, but we can more precisely track adverse side effects, monitor the effects of using multiple drugs simultaneously, identify overuse of medications, and assess outcomes for subpopulations, including seniors as a whole, that are not normally tested in drug trials. Decisions about which drugs to monitor would no longer be the chief domain of the manufacturers.

By giving seniors access to effective drugs, it was further anticipated that there would be fewer emergency room and physician visits, producing cost savings for the Medicare program. It stands to reason, for example, that seniors with diabetes or hypertension will suffer fewer complications if effectively medicated. Yet are these expected cost savings actually being realized? When drug claims data are made available to researchers, it is essential that they be merged with claims data for other Medicare services, such as hospital care, so that researchers can explore cause-and-effect relationships associated with expanded access to drugs. At the same time, inappropriate drug use can be harmful. Are plans monitoring the safety of the drugs as well as the cost?

The Part D benefit is unique in its total reliance on competing private plans, the onus it places on seniors to voluntarily enroll and make smart choices about plans, its extensive low-income subsidy, and its incorporation of a substantial gap in coverage. These program innovations must be closely scrutinized—especially as Congress considers reforms to Part D—and seniors must have adequate information to choose plans that best suit their needs.

At the same time, significant controversies have arisen recently over the safety and efficacy of various new drugs. Federal authorities have struggled to make informed decisions on whether certain drugs should be removed from the market or whether strong warnings should be added to drug labels. Patients and physicians have been under pressure to decide whether the benefit offered by these drugs is outweighed by their risks. Observation of drugs prescribed under the Part D program could bring greater clarity to such treatment decisions.

Unfortunately, the data now collected and disseminated under Part D are inadequate to assess competently both program and plan performance or to evaluate the effectiveness of drugs prescribed. Given the stakes involved—the health of millions of seniors and tens of billions of dollars in annual expenditures—closing these data gaps should be a top priority.

This report describes data now collected and used under the Medicare Part D program, dissemination of this information to the public or for research purposes, and data gaps that should be addressed. The primary types of data discussed are:

  • Enrollment data maintained by the Centers for Medicare and Medicaid Services
  • Data describing the private drug plans that participate in Part D, including benefit designs, formularies, and other plan features
  • Data on plan performance submitted quarterly to the Center for Medicare and Medicaid Services
  • Claims data representing transactions between beneficiaries and drug plans

Expanding collection and dissemination of data in these areas, as recommended in this report, would help ensure seniors are receiving quality care at an affordable price. Policymakers could better evaluate the effects of market competition and beneficiary cost sharing with complete data on plan-level enrollment and plan parameters. Seniors could make smarter choices about which plans to enroll in with greater access to information on plan performance. And doctors could more effectively treat patients if claims data were used to evaluate the effectiveness of drugs prescribed under Medicare Part D.

This information can be made available largely, if not completely, through administrative action, with no legislation necessary. Thus, the new Obama administration has an opportunity to achieve a quick and significant health-care victory. This opportunity should not be passed up.

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