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
University of Maryland Baltimore
School of Pharmacy
1
Acknowledgement
The Authors wish to thank the Robert Wood
Johnson Foundation for research support
2
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
3
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
4
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?
5
Research strategy

Construct a test that 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%
6
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
7
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)
8
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
9
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
10
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
11
Sample characteristics
Continuous coverage
Coverage gaps
% of
sample
Mean
generosity
% of
sample
Mean
generosity
Base
Sample
90%
73%
10%
65%
ESI
92%
76%
8%
70%
MHMO
90%
68%
10%
61%
Selfpurchased
85%
67%
15%
60%
Sample
12
Mean annual Rx spending (sd) in
2006 constant dollars
Continuous coverage
Coverage gaps
% of
sample
Mean
Rx spend
% of
sample
Mean
Rx spend
Base
Sample
90%
$2,155
( 2,309)
10%
$1,817
( 2,053)
ESI
92%
$2,332
( 2,474)
8%
$1,904
( 2,357)
MHMO
90%
$1,610
(2,051 )
10%
$1,362
( 1,359)
Selfpurchased
85%
$2,025
( 2,132)
15%
$1,765
(1,537 )
Sample
13
Marginal effects (elasticities) of generosity
in models with dichotomous Rx gap variable
Sample
Spending
$250 - $2,250
Spending
> $2,250
Base Sample
5.3***
(0.34)
30.4***
(0.56)
ESI
7.1***
(0.46)
31.7***
(0.59)
MHMO
5.2***
(0.34)
29.9***
(0.57)
Self-purchased
2.8***
(0.16)
25.3***
(0.43)
statistical significance ***p<.01, **p<,05, *p<.10
14
Marginal effects for dichotomous Rx coverage
gaps variable
Spending
$250 - $2,250
Spending
> $2,250
Base Sample
-30.6**
1.4 (ns)
ESI
-67.1***
10.0 (ns)
MHMO
12.2 (ns)
-267.3 (ns)
Self-purchased
-23.0(ns)
-156.8 (ns)
Sample
statistical significance ***p<.01, **p<,05, *p<.10
15
Marginal effects (elasticities) for continuity of
prescription coverage variable
Spending
$250 - $2,250
Spending
> $2,250
Base Sample
1.1***
(0.10)
-3.1 (ns)
ESI
1.9***
(0.16)
-4.6 (ns)
MHMO
0.4 (ns)
5.4 (ns)
Self-purchased
0.8 (ns)
1.1 (ns)
Sample
statistical significance ***p<.01, **p<,05, *p<.10
16
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
17
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
18
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 gapspecific dislocations in medication regimens
19