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Growing Reinsurance Payments Weaken Competitive Bidding in Medicare Part D
Author(s) -
Jung Jeah,
Feldman Roger
Publication year - 2018
Publication title -
health services research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.706
H-Index - 121
eISSN - 1475-6773
pISSN - 0017-9124
DOI - 10.1111/1475-6773.12866
Subject(s) - reinsurance , formulary , actuarial science , payment , medicare part d , business , risk management , prescription drug , finance , medical prescription , medicine , pharmacology
Objectives To examine variation in risk‐adjusted reinsurance payments across Part D plans, analyze its implications for the program, and explore options to reduce reinsurance payments. Data/Study Design 2007–2015 Part D Plan Payment and Premium data; 2010–2013 Part D Prescription Drug Event data; and 2013 Part D Plan Formulary Files. Principal Findings Risk‐adjusted reinsurance payments varied widely across plans at a given out‐of‐pocket (OOP) premium. The variance in risk‐adjusted reinsurance in common OOP premium ranges increased between 2010 and 2015. High risk‐adjusted reinsurance payments were negatively correlated with use of utilization management tools for high‐cost drugs. Conclusions Growing reinsurance payments shrink plans’ liability for managing drug spending for high‐cost enrollees, creating plan moral hazard, and making OOP premiums a noisy signal of plans’ total costs.