Title: Risk Adjustment for the Medicare Drug Benefit
1Risk Adjustment for the Medicare Drug Benefit
- Melvin Ingber (presenter)
- Jesse Levy
- John Robst
- Centers for Medicare and Medicaid Services
2The Drug Benefit Part D
- Mandated by MMA Starts in 2006 system must be
announced in early 2005 - Covers self-administered prescription drugs not
covered by Medicare Part B - Beneficiaries may enroll in any one of the
prescription drug plans (PDPs) or MAPDPs offered
in their region - Formularies and prices are not standardized
- Premiums are set by bid and formula
3The Drug Benefit Part D
- Standard benefit, initial thresholds for
beneficiary - Monthly premium
- (A) 250 deductible
- (B) 25 coins. from 250 to 2250 total spending
- (C) 100 coins. from 2250 to out-of-pkt 3600
(5100) - (D) above OOP3600 (5100), greater of (5
coins., 2 generic/preferred, 5 brand)
(Reinsurance tier) - Plan pays in (B) and (D) is paid capitated
amount by Medicare for (B) and part of (D) - Reinsurance by Medicare for people in (D) on cost
net of rebates and discounts, 80
4The Drug Benefit Part D
- True Out of Pocket TrOOP
- Paid for covered drugs by enrollee, by Part D
subsidy or state pharmacy assistance program - Some charitable payment aid would be counted
- Payments by insurers, government providers and
special funds will not count - Other payment sources may be used but will not
count toward thresholds. - Thresholds and cost sharing to be adjusted
annually
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6The Drug Benefit Part D
- Actuarially equivalent standard plans allowed
- Maintain average of standard cost sharing in
tiers - Alternative plans allowed
- Actuarially equivalent proposals entertained
that vary thresholds and cost sharing - Enhanced more generous than standard, premium
must go into bid - Other aspects low inc. subsidy, regions, access,
Medicare Advantage drug plans, LTC .
7Bid to be Risk Adjusted
- Average monthly cost incurred by plan for person
with national average risk - Plan costs above deductible and above TrOOP
threshold - Low income subsidy
- Standard benefit
- Separate bid for enhanced coverage
8Risk Adjustment Approach
- Data for predictors must be available for FFS and
MA beneficiaries demographics and diagnoses - Build on underpinnings of prospective HCC model
for Part A and B services - ICD-9 codes grouped into DxGs DxGs grouped into
HCCs - Expected spending f (age/sex, HCC1 HCCn)
- DxG groupings of ICD-9 will be aggregated into
new Drug HCCs
9Risk Adjustment Approach
- Hierarchies of severity for Part A, B costs often
do not hold for drug costs - ICD-9 codes needed go beyond the abbreviated set
initially required for MA plans - Conditions with low inpatient/ambulatory costs
may have significant drug costs hypertension,
high cholesterol - CMS had to announce new data requirements for MA
plans in May - MA drug plans have the same data requirements as
FFS PDPs - Codes required were published based on
preliminary models
10Data?
- Existing estimation data are not perfect
- Best development data yet found Federal retirees
with Medicare in Blue Cross - Blue Shield FEP - 1 million persons, 3 pairs of years
- Link to Medicare diagnosis files via SSN
- No disabled under 65
- Reasonable national representation, can be
reweighted - No cap, coinsurance for retail, copays for mail
order - Total enrollee and plan spending for each person
- Other data Medicaid, State pharmacy assistance
plans
11Estimation
- Linear additive model reasonable for drugs
- Model should have clinical credibility
- Individual DxGs may not have enough sample size
for reliable estimation, will be grouped
clinically - Hierarchies will be imposed and tested
- Preliminary models for total drug costs have R2
of about .25 - Age/sex coefficients exceed deductible even in
very comprehensive model
12Preliminary estimates - example
- DxG groups in HCC Other Endocrine and Metabolic
disorders - Clinical judgment not yet applied
13Geographic Price Adjuster
- MMA Test for geographic price variation adjust
if needed - 10 to 50 geographic regions, not yet defined MA
plans may cover only own service area - Data sources
- FEP imputed prices for therapeutic class market
baskets - Commercial pricing data
- Utilization variation to be studied later
14Application of Model
- Preferred approach by system implementers
- Capitated payment
- (plan bid adjusted for premium and actuarial
estimates of spending in various tiers and
subsidies) - Risk factor
- Geographic price index if needed