The Impact of Medicare Part D on Beneficiaries with Type 2 Diabetes: Drug Utilization and Out-of-Pocket Expenses

Abstract

We study the impact of Medicare Part D on beneficiaries' drug utilization and out-of-pocket costs for drug therapy. We examine the cost experience of beneficiaries not dually eligible for Medicare and Medicaid relative to the thresholds specified in law for the coverage gap in the standard Part D benefit and the catastrophic level for enrollees with type 2 diabetes. We find that most drugs recommended in clinical guidelines to treat type 2 diabetes and the two most common co-occurring conditions - hypertension and dyslipidemia - are covered by Part D plans with copayments between $0 and $30. In 2007, Part D plan formularies included an average of 85 to 88 percent of the drugs available to treat type 2 diabetes, hypertension, and dyslipidemia. These levels are in line with coverage levels for other drugs that treat chronic diseases including those in the protected classes. The majority of hypertension and dyslipidemia drugs were placed on tier 1, the level associated with the lowest cost sharing, with enrollee copayments between $0 and $10, while the majority of diabetes drugs were placed on tier 2 with copayments between $20 and $30. Most Part D plans have four cost-sharing tiers.Our analysis of claims data suggests that Medicare Part D has improved access to medications. Part D plan enrollees with type 2 diabetes show an increase in utilization and a decrease in per prescription out-of-pocket costs of drugs used to treat diabetes and the two related conditions. Prescription Drug Plan (PDP) and Medicare Advantage Prescription Drug (MA-PD) plan enrollees experience increases of 11.2 and 6.2 percent, respectively, in the average number of diabetes-related prescriptions per enrollee. Out-of-pocket diabetes drug costs per prescription are 35 percent lower for PDP enrollees and 25 percent lower for MA-PD plan enrollees, as compared to fellow Medicare beneficiaries who do not enroll in a Part D plan. This initial investigation of claims data indicates the majority of enrollees with type 2 diabetes who reached the coverage gap threshold in 2006 did so by August. By the end of 2006, 43 percent of non-Medicaid beneficiaries enrolled in PDPs and 33 percent of those in MA-PD plans reached the gap threshold. We did not, however, observe a drop in the number of prescriptions filled after that point. Sicker beneficiaries - those whose type 2 diabetes is accompanied by both hypertension and dyslipidemia - are more likely to reach the threshold than those whose diabetes is not accompanied by those common co-occurring conditions. Further study is needed to confirm these results and to investigate the effects of the Part D coverage gap on the medication usage behavior of this population.