Drug-Plan Benefit Caps Harm Members' Health

Study could hold warning for Medicare's new Part D, researchers say

WEDNESDAY, May 31, 2006 (HealthDay News) -- Medicare drug plans that offer limited coverage to beneficiaries could end up harming members' health while not providing any real savings in terms of health care expenditure, a new study shows.

That's because poorer beneficiaries often choose to go without the care they need after they reach their benefits "cap," causing their condition to deteriorate and forcing them into more expensive care, the researchers speculated.

"We found very substantial, unintended consequences -- specifically, that an annual drug benefit cap of $1,000 worsened patients' health without saving [society] money," said study lead author Dr. John Hsu, a physician scientist and internist in the Division of Research at Kaiser Permanente Northern California, in Oakland.

The study, which is just one of a number of health insurance-themed articles in the June 2 issue of the New England Journal of Medicine, is based on 2003 data, collected before this year's launch of the new Medicare Part D drug benefits program.

But one expert said the findings have implications for that plan, as well.

Part D's architects "need to take heed from this article and recognize that it's not a philosophical, partisan or political matter, but rather a matter of cost-effectively taking care of people," said Judith Stein, founder and executive director of the nonprofit Center for Medicare Advocacy Inc., in Washington, D.C.

She pointed out that caps and coverage gaps do exist under Part D -- most notably caps on some expensive outpatient procedures for patients with chronic illnesses such as Parkinson's disease. There's also the much talked-about "doughnut hole," where beneficiaries must pick up the tab for annual drug expenses between $2,249 and $5,100, when Part D benefits kick in again.

"And it's not just the dollars," Stein said. "The drugs you need might also not be on your [plan] formulary, or you may not be able to afford the co-pays. So Part D isn't the program that would have solved people's problems in the way that Medicare has traditionally and cost-effectively solved the health-care needs of older or disabled people."

In the study, Hsu's team compared the health outcomes of two groups of Medicare + Choice participants. One group of more than 157,000 seniors was enrolled in a plan with a $1,000 a year drug-benefits cap, after which point they were expected to pay for their prescriptions out-of-pocket. Another group of nearly 42,000 people had no cap on their drug expenses because of supplemental employer benefits.

"We found that imposing this $1,000 drug benefit cap had a consistent, negative impact on their overall health, and it failed to save money," Hsu said. "Capped" participants had higher rates of emergency room visits, non-elective hospitalizations, and death compared to people with fully covered access to medications. They were also much less likely to stick to their prescriptions as ordered by their doctor, and tended to have higher blood pressure, blood cholesterol and other risk factors, compared to people in the non-capped plan, he said.

"The bottom line is that those who consumed the most [medications] were affected the most," Hsu added. This included many patients with chronic illnesses, as well as patients who might require new, very expensive drugs.

He said it's tough to make direct comparisons between this 2003 study and Part D, however. With Part D, "many more patients now have coverage, and that's a good thing," Hsu said. "But with Part D, benefits can still vary considerably in terms of the number and amount of cost-sharing that's involved."

Co-authoring a separate "perspective" article in the journal, Dr. Mark McClellan, the administrator of the Center for Medicare and Medicaid Services, said competition among private plans has already eased the financial burden for many Part D members.

In the standard Part D plan, members face a $250 deductible before coverage kicks in. But, "78 percent of all beneficiaries who enrolled chose plans with no [standard $250] deductible, and 18 percent elected a plan that offered some coverage in the doughnut hole," McClellan wrote.

Stein noted that those plans come with higher premiums, however. She pointed to one insurer, whose premiums ranged from $7.20 a month (for the standard Part D plan) to $60 per month, for a plan that avoids the deductible and offers some "doughnut hole" coverage.

Not everyone can afford $60 a month, however. "So, for a lot of people in the middle- or upper-income bracket, that's good," she said, but not for the poor. "That's really regrettable, because Medicare was never an income-based program, and now it is, with regard to prescription drug coverage."

McClellan also countered critics who believe Medicare should negotiate with the pharmaceutical industry to bring members' drug costs down. He pointed to two U.S. government reports that "both concluded that Medicare itself could not obtain the same level of discounts unless it imposed severe formulary restrictions that would limit therapeutic options for beneficiaries."

Stein disagreed. "Wal-Mart does not negotiate from each of its stores for its drugs -- they negotiate on behalf of the zillions of people who go to Wal-Mart nationally," she said. "It seems to me that that is the purchasing model that we should use if we really want to drive down the point price."

For his part, Hsu said the problem of getting drugs to everyone who needs them will continue to be a thorny one.

"That's the Holy Grail of health care," he said, "to find the right balance between getting people the care they need, making sure its high-quality care, and still do it in a way that we can afford, both as individuals and as a society."

More information

For more on the Medicare drug benefit, head to the Kaiser Family Foundation.

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