1. The Impact of Drug Benefit Caps Geoffrey Joyce, PhD

2. A6794c-2 6/06Acknowledgements Collaborators: Collaborators: Dana Goldman Dana Goldman Pinar Karaca-Mandic Pinar Karaca-Mandic This research was funded by: This research was funded by: National Institute on Aging National Institute on Aging

3. A6794c-3 6/06 Benefit Cap Annual limit on the plans contribution Annual limit on the plans contribution In this case, $2,500 benefit cap In this case, $2,500 benefit cap Common in Medicare M+C plans Common in Medicare M+C plans Impact of caps on retirees < age 65 and 65+ in 2003-2004Impact of caps on retirees < age 65 and 65+ in 2003-2004

4. A6794c-4 6/06 Imposing a Spending Cap Creates a Fundamental Trade-off Imposing a spending cap decreases the cost to provide the prescription benefit Makes coverage available to more beneficiaries Makes coverage available to more beneficiaries A spending cap creates a coverage gap (or donut hole) for beneficiaries Increases the risk that patients will reduce or cease drug therapy Increases the risk that patients will reduce or cease drug therapy

5. A6794c-5 6/06 As Set Up, Medicare Part D Raises Some Issues 50% of Costs Paid by Insurer ($2,113) 25% Copay ($500) Beneficiary Pays Next $2,850 in Rx Spending Catastrophic Coverage Insurer Pays 90% of Costs Stop-Loss $5,100 ($3,600 in out-of-pocket) Initial Coverage Limit $2,250 5% Cost-Sharing Above Stop-Loss 75% Paid by Plan ($1,500) Catastrophic Coverage Insurer Pays 95% of Costs 2006 Insurer Paid Beneficiary Paid $250 Deductible

6. A6794c-6 6/06 Tseng et al (2004): Surveyed Beneficiaries to Assess the Effects of Spending Caps 1,300 Medicare+Choice enrollees in one state in 2001: Group who exceeded their annual prescription benefit cap of $750 or $1,200 Group who exceeded their annual prescription benefit cap of $750 or $1,200 Matched controls who did not exceed their annual cap of $2,000 Matched controls who did not exceed their annual cap of $2,000 Those exceeding the cap had resulting coverage gaps of 75–180 days

7. A6794c-7 6/06 Beneficiaries Reported Using Several Strategies When They Exceeded Caps 010203040 Switched Drugs Percent of Beneficiaries Using Strategy Used Drugs Less Often Used Free Samples 15 (9) 18 (10) 34 (27)

8. A6794c-8 6/06 Hsu et al (2006): Impact of $1,000 Cap on Utilization, Costs, & Clinical Measures Compared clinical and economic outcomes in 2003 among Kaiser M+C members in capped vs. non- capped plans in 2002-2003 (age 65+) Compared clinical and economic outcomes in 2003 among Kaiser M+C members in capped vs. non- capped plans in 2002-2003 (age 65+) Employer-supplemental insurance – No cap Employer-supplemental insurance – No cap Individual-purchased - $1,000 benefit cap Individual-purchased - $1,000 benefit cap About 13% reached the cap in 2003 About 13% reached the cap in 2003 Those in capped plan: Those in capped plan: 31% lower Rx costs 31% lower Rx costs No difference in total medical costs No difference in total medical costs

9. A6794c-9 6/06 Hsu et al (2006) But had higher rates of But had higher rates of ED visits (RR=1.09) ED visits (RR=1.09) Nonelective hospitalizations (RR=1.13) Nonelective hospitalizations (RR=1.13) Mortality rate (1.22) Mortality rate (1.22) Non-adherence (1.2-1.3) Non-adherence (1.2-1.3) Capped members had higher odds (1.2 – 1.3) Capped members had higher odds (1.2 – 1.3) Elevated LDL Elevated LDL Systolic blood pressure Systolic blood pressure HbA1c HbA1c

10. A6794c-10 6/06 Aims of This Study Examine Rx utilization and costs in more detail Examine Rx utilization and costs in more detail Behavior pre- and post-cap Behavior pre- and post-cap Timing of cap Timing of cap Stopping, switching, mail-order use, by class Stopping, switching, mail-order use, by class Do those who stop resume drug therapy in subsequent year Do those who stop resume drug therapy in subsequent year Impact on hospitalizations and ED visits Impact on hospitalizations and ED visits

11. A6794c-11 6/06 Data & Methods We linked health care claims to health plan benefits of 30 large employers (1997-2004) We linked health care claims to health plan benefits of 30 large employers (1997-2004) Over 50 health plans Over 50 health plans Nearly 8 million person-years Nearly 8 million person-years Analyze 7 plans in 2003-2004 from large employer Analyze 7 plans in 2003-2004 from large employer 2 plans had an annual Rx benefit cap of $2,500 2 plans had an annual Rx benefit cap of $2,500 Compare Rx and medical use Compare Rx and medical use Among groups within the same (capped) plan Among groups within the same (capped) plan Among persons in capped vs. uncapped plans Among persons in capped vs. uncapped plans

12. A6794c-12 6/06 Distribution of Health Plan Spending in Capped Plans (PPPY)

13. A6794c-13 6/06 Classify Members Into 3 Groups Group 0: Rx spending by the health plan <= $2,400 Group 0: Rx spending by the health plan <= $2,400 Group 1: Rx spending by the health plan > $2,400 Group 1: Rx spending by the health plan > $2,400 But no subsequent Rx claims But no subsequent Rx claims Group 2: Rx spending by the health plan > $2,400 Group 2: Rx spending by the health plan > $2,400 With subsequent Rx claims With subsequent Rx claims

14. A6794c-14 6/06 When Do Members Reach the Cap?

15. A6794c-15 6/06 Monthly Rx Spending in Capped vs. Non-capped Plans (>$2,400)

16. A6794c-16 6/06 Monthly Rx Use in Capped vs. Non-capped Plans (>$2,400)

17. A6794c-17 6/06 Percent Switching Medications Post-Cap (Among Those Reaching the Cap Before November)

18. A6794c-18 6/06 Percent Stopping Medications Post-Cap (Among Those Reaching the Cap Before November)

19. A6794c-19 6/06 Resumption of Medication Use Among those who stopped taking a class of medications in capped plans Among those who stopped taking a class of medications in capped plans Modest take-up in Q1 of 2004 Modest take-up in Q1 of 2004 May be related to data problem in 2003 May be related to data problem in 2003

20. A6794c-20 6/06 Preliminary Conclusions Imposing a spending cap: Imposing a spending cap: Reduces Rx use overall Reduces Rx use overall 50% - 66% reductions in Nov-December 50% - 66% reductions in Nov-December Effects vary modestly by therapeutic class Effects vary modestly by therapeutic class Increases the risk of adverse health outcomes Increases the risk of adverse health outcomes Inconsistent evidence on medical use Inconsistent evidence on medical use