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Press Release

April 22, 2008

April 22, 2008 (Oakland, Calif.) – Medicare Beneficiaries have limited knowledge of their Medicare Part D outpatient prescription drug benefits. And those who are unaware of the coverage gap are less likely to report any cost-coping behaviors and more likely to report that the costs of drugs created a substantial financial burden, according to researchers. The study appears in the April 23/30, 2008 issue of the Journal of the American Medical Association (JAMA).

“The new Medicare Part D program provides billions of dollars in new benefits for seniors, but also imposes complex and high levels of cost-sharing. The study shows that many seniors have trouble understanding these benefits, and that this poor knowledge limits their ability to manage their medication needs and costs,” said John Hsu, MD, Director of Kaiser Permanente’s Center for Health Policy Studies and the lead investigator and author of the study. “Seniors with worse knowledge were less likely to switch to less expensive medications, and more likely to report going without basic necessities.”

The study, by investigators with Kaiser Permanente’s Center for Health Policy Studies and the Division of Research; University of California, San Francisco; and Harvard University, interviewed 1,040 Medicare Advantage Prescription Drug plan beneficiaries who had a gap in their drug coverage if they exceeded $2,250 in drug costs. In the coverage gap, also called the “doughnut hole,” these beneficiaries had to pay for the full cost of their outpatient medications.

“The Medicare drug benefit is complex, but it provides important coverage that didn't exist for many older Americans before January 2006,” said Patricia Smith, President and CEO for the Alliance of Community Health Plans. “This study tells us that more education is needed to help Medicare enrollees gain the most from the benefit, but it also tells us that Kaiser Permanente and plans like them that encourage their members to use the medications that are most effective, but least costly, are helping their patients stay healthy and at the same time find the best value in their health care coverage.”

Increased efforts are needed by Medicare and all Part D plans to offer tools to help physicians and beneficiaries choose the treatment options offering the greatest individual value, explained Hsu. “Patients need to work in partnership with their physicians to determine what works best for them -- both medically and financially.”

The study contributes several additional findings about the Medicare Part D program. Fewer than one in twelve beneficiaries in this Medicare Advantage Prescription Drug plan entered the coverage gap, which is a considerably smaller ratio than suggested by estimates performed before the Part D implementation. In addition, many patients appear to change their behavior before they reach the coverage gap starting point, perhaps in anticipation of the loss of coverage or in efforts to avoid reaching the gap, according to Hsu.

“Finding effective ways to provide and pay for health care in the United States is an ongoing challenge. Before the Medicare Part D program, many seniors did not have any prescription drug benefits. With Part D, more seniors have drug benefits, but also face a dizzying array of plan choices, and once they are in a plan, they face complicated cost-sharing and formulary structures. As a result, seniors now have a substantial financial stake in the decisions about whether to start or stop a medication and in decisions about which medications offer the greatest value,” he said.

“These findings once again reinforce the need to monitor closely how new policy changes affect patients and society in general. If we are to make informed decisions to improve the health care system, it is critical to understand whether policies work as intended and whether there are unintended consequences.”

More detailed findings from the study include:
• Over half of all Medicare beneficiaries in this plan report making less than $40,000 in total household income in 2006
• Over a third reported using more than five different prescription drugs in 2006
• Only 40% of patients with a coverage gap realized they had the gap. Not surprisingly, patients who had higher drug costs were more knowledgeable about their benefits:
• 49% of patients with $1,301-$2,250 in annual drug costs (just below the gap start) knew
• 75% of patients with $2,250-$3,500 in annual drug costs knew
• 89% of patients with over $3,500 in annual drug costs knew they had gap
• Over a third reported changing their behavior because of their drug costs
• 26% reported a cost-coping behavior such as switching to a lower cost medication
• 15% reported taking less than prescribed, without their doctor’s knowledge
• 7% reported their drug costs created substantial financial burdens such as requiring them to go without basic necessities
• Compared to beneficiaries who were unaware of the coverage gap, those who were knowledgeable were more likely to report any cost-coping behavior and less likely to report drug cost related financial burdens

The study included individual subscribers aged 65 years and older, who were continuously enrolled in Kaiser Permanente Northern California’s Medicare Advantage Prescription Drug plan throughout 2006, and who were not duel-eligible for Medicaid or did not receive a low-income cost subsidy.  A stratified random sample of was obtained from the target population of 135, 297 total eligible members, with half of whom selected to have reached the coverage gap in 2006.

Funding for the study came from the National Institute on Aging, the Agency for Healthcare Research and Quality, the Alfred P. Sloan Foundation, and the Kaiser Foundation Research Institute. The research team includes John Hsu, MD, MBA, MSCE, Vicki Fung, PhD, Mary Price, MA, Jie Huang, PhD, and Bruce Fireman, MA from the Center for Health Policy Studies and the Division of Research; Rita Hui, PharmD from the Kaiser Pharmacy Outcomes Research Group; Richard Brand, PhD from the University of California San Francisco; and Joseph P. Newhouse, PhD from the Harvard Medical School, Harvard School of Public Health, and the Kennedy School of Government.