Utilization Management in the Medicare Part D Program and Prescription Drug Utilization
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Martin S. Andersen
Abstract
Medicare Part D has significantly enhanced access to prescription drugs among Medicare beneficiaries. However, the recent rapid rise of utilization management policies in the Medicare Part D program may have adversely affected access to prescription drugs. I study the effects of expected and observed exposure to utilization management in prescription drug utilization using Medicare Part D claims data from 2009 to 2016 and an instrumental variables strategy based on the interaction of lagged health status and the set of plans available to each beneficiary. I find that the expected share of spending subject to utilization management increases the observed share, with the smallest effect for prior authorization. Increases in the expected share of drug spending subject to prior authorization increases Part D spending by $122.27 per percentage point, with almost three-quarters of this increase being paid by the Medicare program, rather than beneficiaries or plans. Comparable increases in step therapy and quantity limit exposure increase spending by $46 and decrease spending by $31, respectively. Interestingly, increased exposure to prior authorization and quantity limits increases the average price per 30-day prescription.
Appendix
Simulator correlations.
| Year | Raw correlation | Adjusted correlation | ||||
|---|---|---|---|---|---|---|
| (1) | (2) | (3) | (4) | (5) | (6) | |
| Spending | Out-of-pocket | TrOOP | Spending | Out-of-pocket | TrOOP | |
| 2010 | 0.716 | 0.930 | 0.931 | 0.985 | 0.940 | 0.940 |
| 2011 | 0.687 | 0.949 | 0.967 | 0.974 | 0.974 | 0.980 |
| 2012 | 0.519 | 0.905 | 0.94 | 0.952 | 0.967 | 0.973 |
| 2013 | 0.747 | 0.930 | 0.955 | 0.862 | 0.950 | 0.965 |
| 2014 | 0.722 | 0.892 | 0.934 | 0.841 | 0.925 | 0.951 |
| 2015 | 0.765 | 0.889 | 0.934 | 0.940 | 0.940 | 0.961 |
| 2016 | 0.694 | 0.850 | 0.911 | 0.916 | 0.937 | 0.958 |
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Source—Author’s analysis of Medicare Part D claims files. Each cell is the correlation coefficient between the observed and simulated values for the column variable in the row year. The adjusted correlation is after restricting the sample to beneficiaries who are never in the top or bottom 0.1 percentile of errors on each of the three listed measures. “TrOOP” is the true out-of-pocket, which account for spending in the Medicare Part D coverage gap.
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