Impact of Medicare Part D on Medicare–Medicaid Dual‐Eligible Beneficiaries' Prescription Utilization and Expenditures

The Part D drug benefit represents the single largest change to Medicare in its 40-year history. Because of the size of the program—the program enrolls over 25 million seniors and is expected to cost over U.S.$700 billion in its first 10 years of implementation—considerable attention has been paid to studying the effect of the Part D benefit on aggregate drug utilization among seniors, seniors' out-of-pocket expenditures, total federal expenditures, and revenues of drug manufacturers (Bach and McClellan 2006; Lichtenberg and Sun 2007; Frank and Newhouse 2008; Yin et al. 2008;), although this research has been hindered due to the sequestering of Medicare Part D claims data by the Center for Medicare and Medicaid Services (Stuart 2008). There are, however, important reasons to examine the effect of the Part D drug benefit on specific subpopulations, especially the more than 6 million beneficiaries who were dually eligible for Medicare and Medicaid (dual eligibles). With Part D implementation, dual-eligible beneficiaries faced new rules governing their access to pharmaceuticals and were no longer subject to the same protections found under Medicaid law (Crowley, Ashner, and Elam 2005).1 Further, while dual eligibles pay no premium and face no deductible under Part D, they may face slightly higher copayments for covered drugs, or full out-of-pocket cost of drugs not included in their Part D plan formulary, although many states provide wrap-around coverage to these drugs statutorily excluded from Part D such as the benzodiazepines, but not all drugs. Potential adverse effects of instances of higher cost sharing are compounded by the relatively low income and asset levels among dual beneficiaries, and by random auto-enrollment of the vast majority of duals beneficiaries into Part D plans whose formularies may not include drugs demanded by specific individuals (Levinson 2006). In addition, dual-eligible beneficiaries have a higher incidence of disabling and chronic illness and lower incomes and education than the average Medicare population (Moon and Shin 2006), making these beneficiaries more vulnerable to coverage lapses due to the administrative complexity associated with transitioning from Medicaid to Part D. Early data on dual eligibles' access to prescription drugs provided cause for concern. For example, in a telephone survey of employed dual eligibles in Kansas conducted in early 2006, 20 percent of participants reported difficulties obtaining medications, 13 percent were required to switch medications, and 8 percent stopped taking at least one medication (Hall, Kurth, and Moore 2007). In another study of a nationally random sample survey of psychiatrists, more than one-half (53 percent) of psychiatrists interviewed about the experiences of a randomly selected dual-eligible patient reported that the patient had experienced medication access problem. More than one-fifth (23 percent) of these psychiatrists reported having discontinued or temporarily stopped a patients' medication because of prescription drug coverage or management issues (West, Wilk, and Muszynski 2007). Neuman et al. (2007) conducted a national survey in 2006 and found that dual-eligible seniors had the highest rates of changing Part D plans (11 percent) across all Part D enrollees. Some of these problems may have been due to system-level difficulties (such as identifying the low-income status of patients) in transition where the dual eligibles were incorrectly charged, improperly asked to pay deductibles, or not listed in plans they thought they were enrolled in. These new rules and other challenges to implementing Part D were widely anticipated and there was considerable apprehension regarding the potential for disrupted access to prescription drugs for the dual eligibles (GAO 2005). In response, varying state contingency plans were developed to help transition dual eligibles into Part D plans. For example, during early 2006, 37 states implemented temporary coverage programs to provide low-income Medicare beneficiaries access to drugs through Medicaid (West, Wilk, and Muszynski 2007). Additionally, the Centers for Medicare and Medicaid Services required all Part D plans to have “transition plans,” for example, to offer a one-time supply of drugs not included in the formulary but which were previously consumed by new enrollees (Smith et al. 2006). These programs may have played an important role in mitigating any short-run difficulties faced by dual eligibles during their transition between Medicaid and Part D coverage. For example, in a recent study (Madden et al. 2008), researchers have found evidence for a small but significant overall decrease in cost-related medication nonadherance following Part D implementation, but no such decrease among the sickest beneficiaries. Only very recently, some analyses on the effect of Part D on the burden faced by dual eligibles are beginning to emerge. Shrank et al. (2008) have looked at the impact of Part D on dual eligibles' utilizations of five specific drugs and found no effect in any of them. To date, no empirical analyses have been performed to look at the effect of Part D on the overall burden faced by dual eligibles in terms of drug usage, out-of-pocket costs, and total drug expenditures. We attempt to fill this gap by using pharmacy claims from a national pharmacy chain accounting for approximately 15 percent of the outpatient prescription drug market in the United States. Therefore, based on a broad national sample of Medicare beneficiaries, we study how Part D impacted the drug utilizations and expenditures of this vulnerable population compared with their potential utilizations and expenditures had they continued under contemporaneous state Medicaid policies.