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University of Maryland Baltimore. School of Pharmacy. Do Large Gaps in Prescription Coverage Matter Beyond the Obvious Fact that they Reduce Generosity of Coverage?. Bruce Stuart,* Joseph Terza,** Lirong Zhao* AcademyHealth annual meetings, Orlando 6/4/07
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University of Maryland Baltimore School of Pharmacy Do Large Gaps in Prescription Coverage Matter Beyond the Obvious Fact that they Reduce Generosity of Coverage? Bruce Stuart,* Joseph Terza,** Lirong Zhao* AcademyHealth annual meetings, Orlando 6/4/07 *University of Maryland Baltimore, **University of Florida
Acknowledgement The Authors wish to thank the Robert Wood Johnson Foundation for research support
Background • The “doughnut hole” in the standard Medicare Part D benefit design is controversial for 3 reasons • It reduces the average value of the policy for medium-high spenders • It impacts beneficiaries differentially • The large gap may have pernicious effects in disrupting medication regimens
Background • Large literature supports assertion that less generous drug coverage reduces demand • Small literature on coverage gap effects • Studies by Stuart et al. (2005), Simoni-Wastila et al. (2007) • Studies of M+C benefit caps • No study (that we are aware of) that examines independent effect of gaps controlling for generosity
Research questions • Do Medicare beneficiaries who experience benefit gaps in prescription coverage spend less on medications than those with continuous coverage holding generosity constant? • Does the relationship vary with gap duration? • Does relationship vary at different levels of drug spending?
Research strategy • Construct a testthat captures essential elements of Medicare beneficiaries’ exposure to standard Part D design in 2006 • Restrict to community-dwelling beneficiaries with some Medicare supplementation who spent >$250 per year on drugs measured in 2006 dollars • No Medicaid recipients • No gaps longer than 5.3 months per year • Annual average generosity of benefits (% spending paid by 3rd party) >30%
Data • Medicare Current Beneficiary Surveys from 1997 – 2003 • Desirable qualities of MCBS • Can identify beneficiaries with gaps in prescription coverage and gap duration • Can also identify gaps and gap duration in Medicare supplemental insurance • Can compute average generosity of drug coverage • Less desirable qualities • No plan design information
Study samples • Base sample: N=27,802 person-years meet study inclusion/exclusion criteria • Subsamples (non-exclusive) • Employer sponsored Rx coverage (n=17,697) • Medicare HMO Rx coverage (n=6,231) • Self-purchased Rx coverage (n=5,682)
Measures • Dependent variable: annual drug spending converted to 2006 constant dollars • Independent variables • Generosity (% spending paid by 3rd party) • Rx coverage gap (0/1) • Continuity of Rx coverage (% year with coverage) • Continuity of Medicare supplement (% year with coverage) • Covariates: age, sex, race, income, education, residence, health status, health care contacts, HCC risk adjuster, death, year dummies
Statistical analysis • Regression models predicting drug spending for base sample and subsamples • All person-years • Person years with spending $250-$2,250 • Person years with spending >$2,250 • Model specification (GLM with Gamma and log link using robust command in Stata) • Models with Rx gap (0/1) variable to test disruption hypothesis • Models with continuity-of-Rx-coverage variable to test duration of gap hypothesis
Statistical issues • Ex-post measure of generosity is endogenous • Gap variables may or may not be endogenous depending on (unobserved) causal factors generating gaps • Prior research indicates that HCC risk adjuster controls for Rx plan selection in studies using MCBS data • Stuart et al., 2005, Stuart et al., 2006, Stuart et al, 2007
Marginal effects (elasticities) of generosity in models with dichotomous Rx gap variable statistical significance ***p<.01, **p<,05, *p<.10
Marginal effects for dichotomous Rx coverage gaps variable statistical significance ***p<.01, **p<,05, *p<.10
Marginal effects (elasticities) for continuity of prescription coverage variable statistical significance ***p<.01, **p<,05, *p<.10
Discussion • Study confirms previous research showing that generosity of coverage is a significant driver of drug spending • Mixed support for idea that Rx coverage gaps have independent impact on drug spending • Small gap effects found in base sample and ESI sample for those with spending between $250 and $2,250 • No evidence that Rx coverage gap reduces spending among those spending >$2,250
Study limitations • Ex-post measure of generosity is clearly endogenous but difficult to instrument (direction of potential bias also unclear) • Endogeneity in gap variables is likely to bias results to the null (assuming that beneficiaries who chose—or fail to avoid—gaps have less need for medications) • Control for gaps in underlying Medicare supplementation reduces likelihood of bias
Conclusions • Findings are suggestive but not definitive regarding impact of the Part D doughnut hole on beneficiary spending over the year • They do suggest that the debate over the doughnut hole should distinguish generosity-reducing effects from gap-specific dislocations in medication regimens