The Impact of Drug Benefit CapsThe Impact of Drug Benefit Caps

Geoffrey Joyce, PhDGeoffrey Joyce, PhD

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AcknowledgementsAcknowledgements

Collaborators:Collaborators:

Dana GoldmanDana Goldman

Pinar Karaca-MandicPinar Karaca-Mandic

This research was funded by:This research was funded by:

National Institute on AgingNational Institute on Aging

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Benefit CapBenefit Cap

• Annual limit on the plan’s contributionAnnual limit on the plan’s contribution

• In this case, $2,500 benefit capIn this case, $2,500 benefit cap

• Common in Medicare M+C plansCommon in Medicare M+C plans

• Impact of caps on retirees < age 65 and 65+ in Impact of caps on retirees < age 65 and 65+ in 2003-20042003-2004

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Imposing a Spending Cap Creates aImposing a Spending Cap Creates aFundamental Trade-offFundamental Trade-off

Imposing a spending cap decreases the cost to provide Imposing a spending cap decreases the cost to provide the prescription benefitthe prescription benefit

Makes coverage available to more beneficiariesMakes coverage available to more beneficiaries

A spending cap creates a coverage gap (or “donut A spending cap creates a coverage gap (or “donut hole”) for beneficiarieshole”) for beneficiaries

Increases the risk that patients will reduce or cease Increases the risk that patients will reduce or cease drug therapydrug therapy

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As Set Up, Medicare Part D Raises Some As Set Up, Medicare Part D Raises Some IssuesIssues

50% of Costs Paid

by Insurer ($2,113)

25% Copay ($500)

Beneficiary Pays Next

$2,850 in Rx Spending

Catastrophic CoverageInsurer Pays 90% of CostsStop-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

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Tseng et al (2004): Surveyed Beneficiaries to Tseng et al (2004): Surveyed Beneficiaries to Assess the Effects of Spending CapsAssess the Effects of Spending Caps

1,300 Medicare+Choice enrollees in one state in 1,300 Medicare+Choice enrollees in one state in 2001:2001:

Group who exceeded their annual prescription Group who exceeded their annual prescription benefit cap of $750 or $1,200benefit cap of $750 or $1,200

Matched controls who did not exceed their Matched controls who did not exceed their annual cap of $2,000 annual cap of $2,000

Those exceeding the cap had resulting coverage Those exceeding the cap had resulting coverage gaps of 75–180 daysgaps of 75–180 days

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Beneficiaries Reported Using Several Beneficiaries Reported Using Several Strategies When They Exceeded CapsStrategies When They Exceeded Caps

0 10 20 30 40

Switched Drugs

Percent of Beneficiaries Using Strategy

Used Drugs Less Often

Used Free Samples

15 (9)

18 (10)

34 (27)

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Hsu et al (2006): Impact of $1,000 Cap on Hsu et al (2006): Impact of $1,000 Cap on Utilization, Costs, & Clinical MeasuresUtilization, Costs, & Clinical Measures

Compared clinical and economic outcomes in 2003 Compared clinical and economic outcomes in 2003 among Kaiser M+C members in capped vs. non-among Kaiser M+C members in capped vs. non-capped plans in 2002-2003 (age 65+)capped plans in 2002-2003 (age 65+)

Employer-supplemental insurance – No capEmployer-supplemental insurance – No cap

Individual-purchased - $1,000 benefit capIndividual-purchased - $1,000 benefit cap

About 13% reached the cap in 2003About 13% reached the cap in 2003

Those in capped plan:Those in capped plan:

31% lower Rx costs31% lower Rx costs

No difference in total medical costsNo difference in total medical costs

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Hsu et al (2006)Hsu et al (2006)

But had higher rates ofBut 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 LDLElevated LDL

Systolic blood pressureSystolic blood pressure

HbA1cHbA1c

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Aims of This StudyAims of This Study

Examine Rx utilization and costs in more detailExamine Rx utilization and costs in more detail

Behavior pre- and post-capBehavior pre- and post-cap

Timing of capTiming of cap

Stopping, switching, mail-order use, by classStopping, switching, mail-order use, by class

Do those who stop resume drug therapy in Do those who stop resume drug therapy in subsequent yearsubsequent year

Impact on hospitalizations and ED visitsImpact on hospitalizations and ED visits

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Data & MethodsData & Methods

We linked health care claims to health plan benefits We linked health care claims to health plan benefits of 30 large employers (1997-2004)of 30 large employers (1997-2004)

Over 50 health plansOver 50 health plans

Nearly 8 million person-yearsNearly 8 million person-years

Analyze 7 plans in 2003-2004 from large employerAnalyze 7 plans in 2003-2004 from large employer

2 plans had an annual Rx benefit cap of $2,5002 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) planAmong groups within the same (capped) plan

Among persons in capped vs. uncapped plansAmong persons in capped vs. uncapped plans

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Distribution of Health Plan Spending Distribution of Health Plan Spending in Capped Plans (PPPY) in Capped Plans (PPPY)

PPPY Spending by Health Plan

< $2,400

$2,401- $2,499

>= $2,500

Plan 1 N 6,843 192 239 % 94.1 2.6 3.3

Plan 2 N 25,972 1,359 1,981 % 88.6 4.6 6.8

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Classify Members Into 3 GroupsClassify Members Into 3 Groups

Group 0: Rx spending by the health plan <= $2,400Group 0: Rx spending by the health plan <= $2,400

Group 1: Rx spending by the health plan > $2,400Group 1: Rx spending by the health plan > $2,400

But no subsequent Rx claimsBut no subsequent Rx claims

Group 2: Rx spending by the health plan > $2,400Group 2: Rx spending by the health plan > $2,400

With subsequent Rx claimsWith subsequent Rx claims

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When Do Members Reach the Cap?When Do Members Reach the Cap?

Percentile of Those Reaching the Cap

5th 10th 25th 50th 75th 90th

Feb April June Sept Nov Dec

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Monthly Rx Spending in Capped vs. Monthly Rx Spending in Capped vs. Non-capped Plans (>$2,400)Non-capped Plans (>$2,400)

0

100

200

300

400

500

600

700

1 2 3 4 5 6 7 8 9 10 11 12

Month in 2004

PM

PM

Rx

Sp

en

din

g

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Monthly Rx Use in Capped vs. Non-capped Monthly Rx Use in Capped vs. Non-capped Plans (>$2,400)Plans (>$2,400)

0

2

4

6

8

10

12

1 2 3 4 5 6 7 8 9 10 11 12

Month in 2004

PM

PM

N3

0D

E S

cri

pts

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Percent Switching Medications Post-CapPercent Switching Medications Post-Cap (Among Those Reaching the Cap Before November)(Among Those Reaching the Cap Before November)

Percent Switching Post-Cap Cap No Cap Diabetes

3.3 5.8

Cardiac

9.6 8.1

Hypertension

7.2 6.3

Depression

4.2 6.1

Cholesterol 2.1 2.4

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Percent Stopping Medications Post-CapPercent Stopping Medications Post-Cap(Among Those Reaching the Cap Before November)(Among Those Reaching the Cap Before November)

Percent Stopping Post-Cap Cap No Cap Diabetes

4.9 3.3

Cardiac

5.2 5.4

Hypertension

7.0 6.6

Depression

16.4 8.7

Cholesterol 13.0 4.8

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Resumption of Medication UseResumption of Medication Use

• Among those who stopped taking a class of Among those who stopped taking a class of medications in capped plansmedications in capped plans

Modest take-up in Q1 of 2004Modest take-up in Q1 of 2004

May be related to data problem in 2003May be related to data problem in 2003

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Preliminary ConclusionsPreliminary Conclusions

Imposing a spending cap:Imposing a spending cap:

Reduces Rx use overall Reduces Rx use overall

50% - 66% reductions in Nov-December50% - 66% reductions in Nov-December

Effects vary modestly by therapeutic classEffects vary modestly by therapeutic class

Increases the risk of adverse health outcomesIncreases the risk of adverse health outcomes

Inconsistent evidence on medical useInconsistent evidence on medical use