Medicare now finances a large share of psychotropic drug expenditures overall and for dual-eligibles in particular. While we know relatively little about the impact of Part D on health outcomes among dual-eligibles, we do know something about how PDPs have responded to the economic incentives in Part D and can point to some new directions for policymakers to consider.
Some PDPs that served dual-eligibles when the program was implemented have exited the LIS market.42
Re-assignment of dual-eligibles to other PDPs might cause medication discontinuities and possibly decrements in health. Also, if plan exit continues at current levels, plan choice (and the competitive effects that might result) will become limited in more areas.
The doubling of the PDP risk corridors (the proportion of financial gains/losses that a PDP assumes responsibility for) in 2008 exposes plans to greater risk, and may exacerbate incentives to limit coverage for medications used by high-cost beneficiaries. Increased plan risk may also result in additional benchmark plan exits if the risk adjustment system does not accurately adjust for expected costs of dual-eligibles. The risk adjustment system could be updated to take drug utilization into account. In addition, CMS could consider exposing benchmark PDPs to less financial risk for dual-eligibles than other PDPs. For vulnerable populations like dual-eligibles, Medicare may opt to face higher program costs in order to improve medication access and plan participation.
Formulary coverage of psychotropic medications has been relatively generous overall since Part D’s implementation due to the special protections for antidepressants, antipsychotics, and anticonvulsants. There are, however, gaps in coverage for certain formulations. In addition, utilization management requirements for psychotropic drugs vary across PDPs and have increased in the first three years of the program. Many state Medicaid programs use similar tools, so the switch from Medicaid to PDPs for dual-eligibles may not represent more restrictive coverage. However, the devil is in the details with respect to the impact of tools like prior authorization on access to psychotropics. For example, some PDPs may grant few approvals, while others approve most requests. CMS might consider monitoring prior authorization approval rates and possibly including them in plan performance rankings so that beneficiaries can make better plan choices.
Because of the variation across PDPs in formulary coverage and utilization management for psychotropics, duals with mental disorders may be better served by an intelligent random assignment process, although such a process may exacerbate concerns about adverse selection. However, the degree to which plans vary in the restrictions they place on psychotropics, the cognitive and other limitations preventing dual-eligibles from making fully-informed choices, and the vulnerability of this population to medication discontinuities suggest that CMS might consider experimenting with alternatives to random assignment.