Summit for State Health Policy Makers: Medicare Part D Implementation October 7, 2004

1. Cost Sharing for Low-Income Beneficiaries and Supplementing Part D Examples from Pharmacy Plus Medicaid Demonstration Programs Summit for State Health Policy Makers: Medicare Part D Implementation October 7, 2004 Cindy Parks Thomas Brandeis University Schneider Institute for Health Policy Dan Gilden, JEN Associates

2. Background • Brandeis/JEN Evaluation of the Impact of Pharmacy Plus Waivers in Illinois and Wisconsin on Medicare and Medicaid (CMS 500-00-0031/TO2) • Analysis of cost sharing and plan design strategies in two waiver states (HCFO 050507) • Comparing two states with different member cost sharing, but same enrollment criteria • Cost sharing analysis is adapted to inform Medicare Part D wrap-around options for states for this population (up to 200% FPL, not covered by Medicaid) • This analysis of beneficiary cost sharing does not reflect overall impact of Medicare Part D on states

3. Pharmacy Plus Waiver Demonstrations: State Waiver Designs and Part D (160% fpl)

4. Prescription Drug Cost Sharing Ranges by Program Design and by Income Level Note: Analysis of members enrolled full 12 months, program year 1, 2002-2003. Before rebates.

5. Cost Sharing/Wrap Around Coverage Will Affect Patterns of Rx Use for Low Income Seniors Average expenditures and use for matched sample across states* *Illinois enrollee sample and Wisconsin controls, matched for age, gender, race, income urban/rural, medical diagnoses and prior year Medicare Part A and B utilization 1mm=member month

6. Cost Sharing Example: Matched sample, Women age 70-84, urban, white, with CHF diagnosis* Annual allowed spending (2002-2003) *Illinois enrollee sample and Wisconsin controls, matched for age, gender, race, income urban/rural, medical diagnoses and prior year Medicare Part A and B utilization

7. Total Enrollee Prescription Drug Spending Distributions Can Change Considerably by 2006 Note: Hypothetical case, with 2003 analysis based on allowed charges for state program members enrolled full 12 months, program year 1 before rebates.

8. Medicare Part D: Potential Cost Sharing Faced by “Average Use” Beneficiary Age 65+ 2003 utilization and generic use rates, 10% annual growth from 2003; Excludes out of plan drugs. Assets not accounted for: a large proportion of individuals with incomes <150% FPL do not qualify for Part D subsidies

9. Summary • Cost sharing and wrap around approach will have an impact on patterns of prescription use for low income seniors • Current Rx spending distributions can change considerably by 2006 • With Part D standard benefit, beneficiaries below 150%, who qualify for subsidies will gain, all others now covered will pay more in transition to Part D • High cost to supplement Part D; most expenditures are in cost sharing and donut, not catastrophic portion or the predictable deductible • Wrap around is only partial cost. Additional costs to states: greater wrap around expenses at 200+ % FPL income levels - higher cost sharing, greater rx use, outreach; additional assistance for non-covered drugs or out of plan use