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Report: Medicare Could Save Billions by Scrapping Random Drug Plan Assignment

“Lower-cost” plans end up costing more

According to a report from the Kaiser Family Foundation, researchers at the University of Pittsburgh have found that Medicare is spending billions of dollars more than it needs to on prescription drugs for low-income seniors and disabled beneficiaries.

In 2013, an estimated 10 million people who participate in the Medicare prescription drug program (Part D) received government subsidies to help pay for that coverage. These subsidies account for an estimated three quarters of the program’s cost. Most of the low-income enrollees are randomly placed in a plan that costs less than the average for the region where the person lives.

But even though these are lower-cost plans, they often end up costing the government and the beneficiary more. If Medicare instead assigned those people to a drug plan based on the drugs they actually took, it could save those patients hassle and money, and potentially save the government billions of dollars, according to the new study, which was published in the June issue of Health Affairs.

Using a 5% sample of Medicare drug-claims data from 2008 and 2009, the researchers calculated that if Medicare had matched beneficiaries to drug plans using “intelligent reassignment” rather than random chance, the government would have saved $5 billion in 2009. That’s because the government is responsible for picking up the co-payments for many low-income beneficiaries.

Meanwhile, beneficiaries who are assigned to plans that don’t cover the drugs they take are on the hook for out-of pocket expenses, or they have to go back to their doctors to get authorization for specific drugs or specific quantities of medications.

Lead author Dr. Yu-ting Zhang and her colleagues created an algorithm that used patients’ previous drug claims to match them to a more appropriate plan. The algorithm resulted in not just a mean total saving of $743 per individual to the government, but also fewer prescriptions subject to utilization review (19% rather than 29%) or quantity limits (19% rather than 27%).

But sometimes even simple things aren’t so simple. The random assignment of beneficiaries to plans (if beneficiaries don’t choose a plan) was a decision made specifically at the outset of the Patient Protection and Affordable Care Act to ensure that no one plan got a disproportionate number of very sick beneficiaries, according to a study conducted at Georgetown University and the University of Chicago.

Changing the way Medicare assigns low-income beneficiaries to Part D plans would require a change in the law, according to Medicare officials. That means it would be up to Congress to make the savings happen.

Source: Kaiser Health News; June 2, 2014.

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