Factors Associated with Regional Variation in
Medicare Part D Prescription Drug Plan
Participation and Beneficiary
Leslie M. Greenwald, Ph.D.
Principal Scientist
RTI, International
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
2
RTI colleagues who participated in this research

Judith Shinogle

John Kautter

Elisabeth Root

Dan Crespin

Greg Pope
Purpose
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
Understand the factors that influence regional variation in
Medicare Part D prescription drug plan (PDP) participation and
beneficiary premiums.

Gain insight into regional characteristics that may be attractive to
Medicare PDPs

Identification of regional characteristics “attractive” to PDPs may
help policy makers predict long term PDP plan participation

“Region”, in this work, refers to the 34 Medicare PDP regions.
Methods

Data on PDP regional characteristics were developed from a
comprehensive database of U.S. Census, Medicare
administrative files, the Area Resource File, Interstudy, AARP,
and other sources.
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Regional characteristics included:
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Population Characteristics

Payment Rates, Cost and Disease Risk
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Insurance Market Characteristics

General Provider Supply Characteristics
The number of PDP plan options and average monthly
premiums charged were correlated (Pearsons r) with regional
characteristics available in this database.
Findings: Total PDP Plans by PDP Region
Map
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Total Number of PDP Plans by PDP Region, 2006
Findings: Average Total Monthly PDP Part D
Premium by PDP Region
Average Total Monthly PDP Part D Premium by
PDP Region, 2006
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Findings: Relationship Between Population
Characteristics and PDP Participation/Premiums
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
Both the number of defined standard benefit, and total number
of PDP plans in each PDP region, are correlated to the total
number of elderly and number of Medicare eligible beneficiaries
in each region.

Also found positive relationships between the total number of
PDP plans and the number of Medicare managed care
enrollees.

Results suggest, not surprisingly, regions with larger potential
enrollment pools attract more PDP plans.
Findings: Relationship between Population
Characteristics and PDP Participation/Premiums
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Also noted relationships between population characteristics and
PDP plan premiums at the regional level. Total (basic and total)
premiums were negatively correlated to various measures of
population size.
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Suggests, in general, that the greater the population size, the
lower the average premiums.
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Exceptions: found strongly positive relationships between the
percent of elderly living in poverty and the percent of elderly
living in rural areas and premium levels.

Findings indicate that regions with larger proportions of
traditionally higher cost populations are likely to face higher
average premiums.
Findings: Relationship between Payment Rates,
Cost, Disease Risk and PDP Participation/Premiums
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Few payment rate or cost/disease factors were related to
number of PDP plans at the regional level.
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May reflect that there is little actual relationship between historic
Medicare payment rates and payment for the new PDP plans.

Observed a positive correlation between the number of PDP
plans and higher CMS HCC risk scores. One might expect
insurers would avoid areas with higher risk scores.

Also found a positive correlation between the percent of
Medicare beneficiaries with Medicaid coverage (dual eligibles)
and higher premiums, suggesting perhaps that regions with
greater percentages of dual eligible beneficiaries may be
perceived by plans to be higher cost.
Findings: Relationship between Insurance Market
Characteristics and PDP Participation/Premiums
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Insurance market characteristics were correlated to the total
number of PDPs at the regional level.
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Percent of total and Medicare population in an HMO plan was
positively correlated with number of PDPs in a region.
Relationship may indicate that PDP organizations, many of
whom also offer HMOs and other managed care products, are
attracted to regions with existing HMO penetration.

Also found that the total number of PDPs was negatively
correlated with the percent of total population enrolled in any
PPO plans, suggesting that PPO penetration (at least by risk
bearing PPOs) is not an attractive regional characteristic to
potential PDP organizations.

Regions with higher HMO and Medicare penetration in HMOs
were associated with lower average monthly premiums.
Conversely, regions with higher PPO penetration were
associated with higher total PDP premiums.
Findings: Relationship between Insurance Market
Characteristics and PDP Participation/Premiums
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Also noted interesting relationships between the number of PDP
plans at the regional level, and both the market share and
number of private insurers operating in that region.
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Fewer PDP plans were associated with PDP regions where the
largest private insurer had greater market share.
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Similarly, noted a positive correlation between the number of
private insurers and the total number of PDP plans.
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Findings may suggest that the presence of a dominant existing
large private insurer – perhaps offering coverage to a dominant
employer or group of employers – may be a deterrent to a larger
number of PDP plans.
Discussion and Conclusions
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
Medicare Part D standalone PDPs are widely available to
Medicare beneficiaries in all regions, though the number and
cost of these plans vary and are related to key PDP regional
characteristics.
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Our findings are generally consistent with views expressed by
PDP organizations, including:
 that more sparsely populated would have fewer PDPs and
face higher premiums;
 and that the structure of health insurance markets in the PDP
regions would affect the viability of the new Part D products.
Discussion and Conclusions
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
Characteristics of the PDP regions insurance markets,
particularly penetration of HMOs versus PPOs, and market share
of existing large private insurers, also appear to be related to the
number and pricing of PDP products.

Currently options are widely available, however, attention to
these characteristics may help policy makers understand and
predict where PDPs may be successful in future years as the
market for this benefit matures.