Risk Adjustment for the Medicare Drug Benefit

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Risk Adjustment for the Medicare Drug Benefit

• Melvin Ingber (presenter)
• Jesse Levy
• John Robst
• Centers for Medicare and Medicaid Services

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The 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

3
The 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

4
The 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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The 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 .

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Bid 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

8
Risk 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

9
Risk 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

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Data?

• 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

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Estimation

• 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

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Preliminary estimates - example

• DxG groups in HCC Other Endocrine and Metabolic
  disorders
• Clinical judgment not yet applied

13
Geographic 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

14
Application 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