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Fixing flaws in Medicare drug coverage that prompt insurers to avoid low-income patients

Since 2006 numerous insurers have stopped serving the low-income segment of the Medicare Part D program, forcing millions of beneficiaries to change prescription drug plans. Using data from participating plans, we found that Medicare payments do not sufficiently reimburse insurers for the relatively high medication use among this population, creating perverse incentives for plans to avoid this part of the Part D market. Plans can accomplish this by increasing their premiums for all beneficiaries to an amount above regional benchmarks. We demonstrate that improving the accuracy of Medicare’s risk and subsidy adjustments could mitigate these perverse incentives.

Authors: Hsu J; Fung V; Huang J; Price M; Brand R; Hui R; Fireman B; Dow WH; Bertko J; Newhouse JP

Health Aff (Millwood). 2010 Dec;29(12):2335-43. Epub 2010 Oct 28.

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