We employed a simulation model to project the policy implications of a prescription drug copayment increase on various stakeholders. Because inputs into simulation models can be tailored on the basis of policy makers’ specific interests, our approach could be especially helpful when estimating the impact of a particular variable on health and economic outcomes, orwhen empirical data are not applicable to the precise situation where the policymaker’s interest lies. We conducted extensive sensitivity analyses to estimate the impact of influential model parameters, and regardless of assumptions, they were consistent with our base-case analyses. Nevertheless, because simulation models are based on assumptions and estimations from other studies, our projections should be validated by an empirical analysis.
Given the budget constraints and financial pressures facing Medicaid programs nationwide, there are sound economic reasons to institute cost-containment policies to curb unnecessary utilization by forcing consumers to internalize externalities associated with their consumption of scarce sources. Nevertheless, our analysis suggests that the current copayment policy creates distinct winners and losers that may not reflect public policy objectives being pursued. Using the example of ICS therapy for asthmatic MassHealth beneficiaries, we find that an increase in prescription drug copayment would shift the financial burden from MassHealth to other stakeholders. Asthmatic patients would shoulder a heavier burden in the form of increased out-of-pocket payment and additional acute exacerbations. This finding persists over a broad range of assumptions regarding drug nonadherence rates, drug efficacy, AWP of ICS, risk of acute event, and acute-care cost. Our analysis only takes into account direct out-of-pocket costs to the patient. Additional acute exacerbations are also likely to impact quality-of-life and incur indirect costs due to disability and lost productivity.
Our findings are consistent with previous studies [4
], which suggest that cost-sharing policies have negative effects on health outcomes among the poor and sick. It can be argued that our nonadherence estimate of 10% is less conservative, considering that the new copayment requirement was only $2.00 per prescription. Nevertheless, it represents a 300% increase from the previous copayment, 50¢. Moreover, chronic conditions, such as diabetes, metal illness, high blood pressure, and asthma require multiple prescriptions, even small copayments add up quickly for low-income patients with chronic diseases [10
]. Given the high prevalence of chronic diseases among Medicaid beneficiaries [10
], health outcomes might deteriorate even further than in our base-case analysis, if potential nonadherence to multiple medications was considered.
Although our analysis suggests that providers would receive additional payments from MassHealth, this should not be interpreted to mean that higher drug copayments represent a net financial gain for providers. MassHealth reimbursement rates to providers are reported to be lower than actual cost [36
]; hence, increased acute event caseloads in a postpolicy scenario could pose financial problems to providers. MassHealth beneficiaries may encounter higher barriers to care [21
], because financially stressed providers may refuse to participate in MassHealth programs. We assumed that pharmacies would successfully collect all copayments from patients. Nevertheless, federal laws require that pharmacies dispense prescribed medication regardless of Medicaid patients’ ability to pay the copayment [1
]. If, as has been reported, more Medicaid patients fail to make the increased copayment, pharmacies may incur even higher financial loss with the copayment increase [10
There is reason to worry that increasing copayment may not be the most effective mechanism available to the state to control health-care spending. As we have noted above, the federal government provides matching funds that covers more than half the cost of Medicaid spending in Massachusetts. With the institution of the copayment, more than half the savings that accrue to the state also pass directly to the federal government. Given the losses—both the financial costs and the adverse health effects—remain in state, there is an inevitable net loss to the people of Massachusetts, when viewed from a local societal perspective, which is built into the structure of this policy.
Nationwide, approximately 6 million beneficiaries dually eligible for Medicare and Medicaid transitions form Medicaid to Medicare Part D drug coverage in 2006 and will face higher copayments as a result. Other low-income beneficiaries will also face copayments of between $1 and $5 depending on their income levels and the drug they are taking.
This study has several limitations. First, we assumed that physicians’ prescribing behavior would not change as a result of the copayment increase. If physicians increased the average prescription size as a result of increased copayment, then Medicaid beneficiaries would make fewer copayments and their monthly financial burden per ICS payment would be smaller. Currently, Medicaid programs in Massachusetts, New York and California allow up to a maximum of 90 days’ supply of drugs to be dispensed with one copayment [6
]. Nevertheless, 40 other state Medicaid programs limit the supply of medication dispensed on one prescription to 30 to 34 days [6
], therefore physicians could not increase prescription size. Our assumption that physicians’ prescribing behavior would not change is consistent with a previous study [19
Second, Medicaid patients are a fluid group, and more than one-third of Medicaid beneficiaries lose coverage within 12 months [42
]. This lack of continuous enrollment led us to choose a 1-year time horizon. Whether there would be a long-term deterrent effect of a copayment increase on the ICS usage is not clear.
Third, drug rebates from manufacturers to the federal and the state government were not included in our analysis: the states and federal government share in the rebates in proportion to their share of the cost of the drugs [43
]. The rebate is estimated based on the Average Manufacturer Price (AMP), but AMP of ICS was not publicly available. Including the drug rebate in our analysis would reduce the size of the savings to MassHealth.
Fourth, we did not incorporate a potential increase in the utilization of short-acting beta-agonist resulting from ICS nonadherence, because of the limited number of available studies. In addition, we assumed that there would be no effect on the utilization of rescue therapies for patients experiencing acute exacerbations.
Finally, data on the impact of a copayment increase on the asthmatic Medicaid beneficiaries are limited. Many of the studies that report on price sensitivity were old. Since these studies were conducted, the volume of prescription drug use and polypharmacy for a number of conditions has increased and it is not clear what impact these trends would have on the price responsiveness among Medicaid enrollees. We conducted sensitivity analyses to explore the variations of noncompliance rates in our results, yet our findings in this regard are speculative. Furthermore, our analysis is based on adult, asthmatic Medicaid beneficiaries; the results may not be applicable to children or other patients with higher incomes and better health status.