United States: How Much Does That Medication Cost? A Study Of Medicare Beneficiaries’ Knowledge Of Out-Of-Pocket Costs For Prescription Drugs On The Specialty Tier

Last Updated: August 11 2011
Article by Dr. Eugene P. Ericksen and Melissa Pittaoulis

Summary

Survey results show that many Medicare Part D beneficiaries do not know that specialty tiers require coinsurance rather than co-pays. Moreover, most are unaware that the out-of-pocket costs they may face for medicines on specialty tiers can be much higher than the typical copayment costs.

Introduction

Although Medicare Part D has succeeded in increasing prescription drug coverage among Medicare beneficiaries,1,2 the program has been criticized for the complexity of its enrollment process3 and the high out-of-pocket costs associated with filling some prescriptions. One particular Part D feature that has come under greater scrutiny in recent months is the benefit design and cost-sharing mechanism known as the specialty tier. By definition, a specialty tier drug is an expensive drug in that, according to the Centers for Medicare and Medicaid Services ("CMS"), a drug cannot be placed on 2011 specialty tiers unless it costs $600 or more per month.4,5,6 Medical conditions for which specialty tier drugs are routinely used include cancer, rheumatoid arthritis, multiple sclerosis, HIV/AIDS, and kidney disease. Unlike other drugs for which beneficiaries might pay a fixed co-pay, drugs on specialty tiers require that beneficiaries pay a percentage—usually 25 or 33 percent—of the drug's cost. Thus, individuals who are prescribed specialty tier drugs face higher out-of-pocket costs for their prescription drugs than they would if those drugs were subject to co-pays.

Specialty tiers have attracted the attention of a number of different interest groups, including AARP,7 the National Multiple Sclerosis Society,8 the Leukemia & Lymphoma Society,9 and the National Psoriasis Foundation.10 Members of Congress have also expressed interest in the impact that specialty tiers have on Medicare beneficiaries' prescription drug costs. For example, Representative Pete Stark (D-California), former Chairman of the House Ways and Means Committee's Health Subcommittee, commissioned the Government Accountability Office (GAO) to investigate spending associated with high-cost drugs eligible for placement on specialty tiers.11,12 Recently, Representative Hank Johnson (D-Georgia), has questioned CMS regarding the basis for its decision to set the minimum threshold for placing a drug on the specialty tier at $600 and its reasoning for holding it at that level for the past five years.13,14 Given that the costs of prescription drugs continue to rise, Representative Johnson "is concerned this threshold is being held to artificially low levels without explanation or transparency."15

Why are specialty tiers a concern? First, advocates for older and disabled populations want to make sure that Medicare beneficiaries understand the coverage options offered under Part D plans, including the potential out-of-pocket costs they might be expected to pay. Since specialty tier drugs can cost a beneficiary hundreds of dollars each month (the minimum out-of-pocket cost for a specialty tier drug is $150), the financial impact of being prescribed a specialty tier drug is not insignificant. For seniors living on fixed incomes, these costs may even be prohibitive. It is therefore important for individuals who are prescribed specialty tier drugs to understand how tiering and formulary coverage varies by plan. Although the use of specialty tiers is common in Medicare Part D, there is some variation in the specific drugs that each plan places on its specialty tier.16 Research has shown that if a specialty-tier-eligible drug is not placed on the specialty tier, it is usually placed on a lower tier, most often the preferred brand tier.17 Thus, beneficiaries prescribed the same specialty-tier-eligible medication could pay very different out-of-pocket costs depending on their choices of plans—some might pay a fixed co-pay (generally around $3018), while those who are enrolled in plans that require they pay a percentage of the drug's cost might pay several hundred dollars.

Public health advocates are interested in specialty tiers because of the effect that out-of-pocket costs may have on beneficiaries' health. Although Medicare beneficiaries who use specialty tier drugs for a few months would likely eventually reach the catastrophic coverage threshold, there is concern that costs during the initial coverage period and doughnut hole would lead to greater cost-related medication nonadherence.19 High out-of-pocket costs may also prompt some beneficiaries to delay drug therapy or not begin it at all.20 Moreover, because specialty tier drugs are expensive, Part D plans often place additional restrictions on their use through utilization management strategies such as requiring prior authorization, step therapy, or quantity limits.21 Such strategies are a concern for public health experts, who worry that these procedures place costs ahead of patient well-being.

While interest in specialty tiers has mostly focused on their inclusion in Medicare Part D plans, there is concern that more private insurance plans on the commercial market will begin to use them.22 Although the use of specialty tiers among commercial plans is not as widespread, their use may be spreading from Medicare Part D. For example, the Kaiser Family Foundation has found that the percent of workers enrolled in employer health plans that include a fourth tier has increased from 5 percent in 2005 to 13 percent in 2010.23 While not all of these fourth tiers are specialty tiers, the growth of this segment suggests that more of these plans are including specialty tiers.24 As such, several states have taken steps to prevent specialty tiers from being adopted by the private insurance market. In 2010, New York became the first state to ban specialty tiers from health insurance plans.25 Similar legislation is either being prepared or pending in 16 other states, including California, Florida, Maryland, and Washington.26

The subject of specialty tiers is also relevant in the context of health care reform. The Patient Protection and Affordable Care Act, the health care reform law passed in 2010, requires that each state set up health insurance exchanges27 that will become operational in 2014. The US Department of Health and Human Services ("HHS") is currently working to define a package of essential benefits28 that must be covered under all plans participating in these state-run exchanges. As part of this work, HHS will be setting guidelines for prescription drug coverage cost-sharing. Given that specialty tiers can have a great impact on the affordability of prescription drugs—particularly for individuals suffering from chronic, complex diseases—the decision by HHS about whether to allow exchange plans to include specialty tiers is likely to be discussed.

The Affordable Care Act also contains a provision aimed at increasing consumer awareness of health plan coverage,29 and the question of whether the specialty tier cost-sharing structure is transparent enough to meet this requirement is an important one.30 It is easy to imagine how the unpredictability inherent in the cost-sharing requirements for specialty tiers could be confusing for health care consumers. Moreover, even if an individual is aware of what the specialty tier is, without considerable research, it would be difficult to keep up-to-date about which medications are specialty tier drugs since formularies are frequently updated (e.g., drugs newly approved by the Food and Drug Administration are added and a drug may be shifted from a lower tier to the specialty tier). This only adds to the complexity and hinders the consumer's ability to predict out-of-pocket costs for drugs covered by these plans.

Objective

In this paper, we examine Medicare beneficiaries' knowledge of the out-of-pocket costs associated with drugs placed on specialty tiers. We explore this topic in two ways. First, we ask respondents to report what they think their out-of-pocket costs would be for prescription drugs commonly used to treat three specific medical conditions. The drugs used to treat two of these conditions, rheumatoid arthritis and multiple sclerosis, are often found on specialty tiers, whereas the drugs used to treat the third condition, hay fever, are not. Asking about drugs that are found on both the specialty tier and those that are not allowed us to see whether respondents recognized that the drugs used to treat chronic, complex conditions may have substantially higher out-of-pocket costs than the drugs used to treat a typically more common, but less serious, condition.

The second way we examined this topic was by asking respondents to report what they thought their out-of-pocket costs would be for different tiers of prescription drugs. In other words, rather than asking about specific medical conditions and prescription drugs, we asked respondents to tell us how much they thought they would have to pay for generic, preferred brand, non-preferred brand, and specialty tier drugs. This approach allowed us to assess respondents' knowledge of the basic cost-structure of their plans.

Background on Specialty Tiers in Medicare Part D

To date, few studies have focused on specialty tiers, and none have examined how knowledgeable consumers are about them. Instead, existing studies generally describe the trends in the use of specialty tiers by Medicare Part D prescription drug plans or examine the impact of specialty tiers on beneficiaries' out-of-pocket expenses and health.31

The number of Part D plans using specialty tiers has increased over time

Prescription drug coverage is offered to Medicare beneficiaries through two primary channels, stand-alone prescription drug plans (PDPs) or Medicare Advantage plans ("MA-PD plans").32,33 Most Part D plans, whether PDPs or MA-PD plans, include specialty tiers. Moreover, the number of plans using specialty tiers has increased since Part D was introduced in 2006. In Part D's first year, 63 percent of PDPs and 67 percent of MA-PD plans included a specialty tier; by 2008, these percentages had increased to 76 percent and 90 percent, respectively.34 For the current year, 2011, an estimated 85 percent of all PDPs have specialty tiers.35 Some of the plans without specialty tiers do not use tiered cost sharing at all and instead use the standard benefit design of 25 percent cost sharing for all drugs. If we examine enrollment in only those plans that use tiering, we see that in 2009, 87 percent of beneficiaries enrolled in tiered-PDPs and 98 percent of beneficiaries enrolled in tiered-MA-PDPs were in plans that used specialty tiers, compared to 82 percent and 69 percent, respectively, in 2006.36 As these figures demonstrate, the majority of Medicare Part D beneficiaries are enrolled in plans that include a specialty tier.

Specialty tier drugs share some common characteristics

Drugs that are likely to be placed on the specialty tier share some common characteristics. First, there are several medical conditions for which treatments are often placed on specialty tiers. One study noted that the list of drugs that most consistently appeared on specialty tiers included drugs used to treat cancer, autoimmune disorders, AIDS, and hepatitis C.37 According to Avalere Health, three or more of the top 20 drugs used to treat multiple sclerosis, rheumatoid arthritis, cancer, hepatitis C, and psoriasis are found on the specialty tier.38 Other diseases for which specialty tier drugs are used include anemia, Crohn's disease, HIV/AIDS, Fabry Disease, and Gaucher Disease. Therapeutic class is another factor that is associated with specialty tier placement. Previous research found that four classes of drugs (antineoplastics, immunologics, antivirals, and antibacterials) accounted for nearly two-thirds of specialty tier drugs.39

A third factor related to specialty tier placement is the drug manufacturing process, with biologics having a higher likelihood of appearing on specialty tiers. Biologics are biologically-derived drugs, i.e., drugs that are made from living organisms as opposed to chemical agents, and, as such, tend to be very expensive to manufacture.40 Drugs used to treat rheumatoid arthritis, including Enbrel and Humira, are examples of biologics. A fourth common characteristic of specialty drugs is that most are available only as brands, and many do not have generic equivalents.41

Some predict that the number of drugs placed on specialty tiers will increase as more drugs that require technically-advanced manufacturing processes are developed.42 In 2009, the average PDP with a specialty tier has placed 135 drugs on a specialty tier, accounting for about 12 percent of the drugs on their formularies.43

Background on Medicare Part D

To examine how transparent out-of-pocket costs associated with specialty tiers are, we focus on Medicare Part D plans, where specialty tiers are widely used. It may be useful, therefore, to briefly summarize how Part D works. Seniors enrolling in Part D must choose a single plan from among dozens of options. Plans may vary on a number of aspects, including the premiums charged, the medications covered, and the amounts that must be paid out-of-pocket when filling a prescription at the pharmacy. Each Medicare Part D plan is required to establish a formulary that lists the drugs covered by the plan and the amounts which enrollees will be responsible to pay out of pocket. These formularies must be made available to enrollees; each plan enrollee receives a book listing the drugs covered by their plan. In addition, the formularies are available on the Medicare website, allowing beneficiaries the opportunity to research formulary coverage when making decisions about which plan to choose.

Beneficiaries participating in Part D plans share the costs of their prescription coverage with both their plan insurers and Medicare. In addition to monthly premiums and deductibles,44 beneficiaries must also pay a portion of the costs of their prescriptions. These out-of-pocket costs take one of two forms: a copayment, in which the beneficiary is responsible for a fixed dollar amount, or coinsurance, in which the beneficiary pays a percentage of the total drug cost.

The majority of Part D plans use tiered cost sharing.45 Such plans categorize prescription drugs into different tiers and the out-of-pocket costs vary by tier. Among Part D PDPs, a common tiered plan structure uses four tiers such as generic drugs, preferred brand name drugs, non-preferred brand name drugs, and specialty drugs. A typical PDP charges co-pays for the first three tiers, but coinsurance for the specialty tier.46 PDPs almost universally charge coinsurance for the specialty tier. In 2009, 57 percent of Part D PDPs with specialty tiers charged 33 percent coinsurance for specialty tier drugs, 37 percent charged 25 percent, and the remaining 6 percent charged some other percentage.47 Since 2006, Part D beneficiaries have seen coinsurance rates rise. Whereas in 2006, the median coinsurance rate was 25 percent, the median coinsurance rate in 2010 was 30 percent.48

In order for seniors to make informed decisions about which Part D plan is optimal for their situation, some knowledge about formulary coverage is necessary.49 Of course, some medications will be impossible to research in advance since individuals cannot predict which new illnesses they will have in the upcoming year. Nevertheless, if seniors have a clear understanding of what the out-of-pocket costs required by the different plans are, they can choose a plan that has a risk-level with which they are comfortable. The use of specialty tiers, however, may complicate making such an assessment and raise the possibility that gaining consumer awareness may be difficult.

Methodology

To address our research objectives, we designed a survey questionnaire, which was then administered by Knowledge Networks, using the web-enabled KnowledgePanel®, a probability-based panel designed to be representative of the US population.50,51 Knowledge Networks employs an address-based sampling frame and uses probability sampling to recruit its panel.52 Panel members are 18 and older and include persons living in cell phone only and non-Internet households. Non-Internet households that are recruited to participate are given a netbook computer with free Internet service.

Data collection began on Wednesday, 11 May 2011 and ended on 16 May 2011. The average time it took to complete the survey was 22.2 minutes.53 A total of 638 respondents qualified and completed the survey. Knowledge Networks calculated sampling weights that allow the results to be representative of the demographic make-up of the US population. Unless otherwise noted, the results presented in this report are based on weighted data.

Questionnaire

Qualified respondents included individuals who were enrolled in a Medicare Part D stand-alone prescription drug plan and did not receive a low-income subsidy.54 After qualifying for the survey, respondents were informed that the purpose of the survey was to learn about their thoughts about Medicare Part D and that they would therefore be asked some questions about their own prescription drug coverage. The first questions concerned the Medicare Part D prescription plan in which the respondent was enrolled. Respondents were first asked to report the Medicare Part D insurance plan in which they are enrolled for 2011. Respondents were encouraged to refer to their Medicare prescription card for the specific plan name. Just under half of respondents (48 percent) reported that they looked at their card for help in providing this information.55

In the next section of the interview, we asked the respondents about their prescription drug coverage for medicines used to treat three specific medical conditions: hay fever, rheumatoid arthritis, and multiple sclerosis. To guard against question order effects, we randomized the order of the medical conditions. For each condition, we asked respondents whether they had ever heard of two of the drugs most commonly used to treat that condition, whether they expected their plan to cover those drugs, what form their out-of-pocket costs would take (i.e., co-pay or coinsurance), and how much they believed their out-of-pocket costs would be if they were prescribed those drugs. All respondents were asked about the same two hay fever drugs, Flonase and Nasonex. Likewise, all respondents were asked about the same two rheumatoid arthritis drugs, Enbrel and Humira. Four multiple sclerosis drugs were used in the survey, and in order to minimize respondent burden, individual respondents were randomly assigned to be asked about only two of these—either Avonex and Betaseron or Rebif and Copaxone.

In addition to asking about specific prescription drugs, we also asked about the out-of-pocket costs associated with different tiers of prescription drugs. We first asked respondents to talk about how much they pay out-of-pocket when they fill prescriptions at a pharmacy. We next asked them if, when choosing their current plan, they had researched whether this plan covers prescription drugs that they take on a regular basis. We then described four tiers of prescription drugs—generic, preferred brand name, non-preferred brand name, and specialty drugs—that are commonly used by prescription drug plans for determining out-of-pocket costs and asked respondents whether they knew if their plan uses such tiers. For each tier level, we asked respondents what form their out-of-pocket costs would take (co-pay or coinsurance) and how much they think they would have to pay out of pocket for a 30-day supply of a prescription drug in that tier.

The questionnaire concluded with some health-related and demographic background questions. Respondents were asked whether they take prescription medicine on a daily basis, and if so, how many different prescription drugs they take each day. We also asked respondents to report their health status (excellent, very good, good, fair, or poor) and whether they or someone in their immediate family or household have ever been diagnosed with hay fever, rheumatoid arthritis, multiple sclerosis, or cancer. In addition, we asked respondents to indicate whether they or anyone in their immediate family or household have ever been prescribed any of the drugs mentioned in the survey. Appendix A lists the survey questions on which the analyses in this paper are based.

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Footnotes

1 Neuman, Patricia, and Juliette Cubanski. 2009. "Medicare Part D Update—Lessons Learned and Unfinished Business." The New England Journal of Medicine 361(4): 406-414.

2 Kaiser Family Foundation. Medicare Fact Sheet: The Medicare Prescription Drug Benefit. Available at: http://www.kff.org/medicare/upload/7044-11.pdf . Accessed 11 November 2010.

3 Thaler, Richard H. and Cass R. Sunstein. 2009. "Chapter 10: Prescription Drugs: Part D for Daunting." Nudge: Improving Decisions about Health, Wealth, and Happiness. Penguin Books.

4 Hargrave, Elizabeth, Jack Hoadley, and Katie Merrell. 2009. "Drugs on Specialty Tiers in Part D: Final Report." Report to Medicare Payment Advisory Commission.

5 Kaiser Family Foundation. Medicare Part D 2010 Data Spotlight: Coverage of Top Brand-Name and Specialty Drugs. Available at: http://www.kff.org/medicare/upload/8095.pdf . Accessed 11 November 2010.

6 CMS regulations further require that only one tier is designated as a specialty tier; cost-sharing in the specialty tier is limited to 25 percent after the deductible and before the initial coverage limit (or 33 percent in an actuarially equivalent plan with decreased or no deductible under alternative prescription drug coverage designs); and only Part D drugs with sponsor-negotiated prices that exceed the dollar per month amount established by CMS in the annual Call Letter are placed in the specialty tier. The threshold has been set at $600 for the past five years. See CMS. "Medicare Prescription Drug Benefit Manual. Chapter 6-Part D Drugs and Formulary Requirements," http://www.cms.gov/PrescriptionDrugCovContra/Downloads/Chapter6.pdf .

7 Walsh, Bill. 9 March 2009. "The Tier 4 Phenomenon: Shifting the High Cost of Drugs to Consumers." AARP Strategic Analysis & Intelligence (SAI) Briefing Report.

8 Article dated 4 May 2011. "Landmark Patient Protection Legislation to End "Specialty Tier" Health Insurance Coverage Passes in California Assembly Health Committee," http://www.nationalmssociety.org/chapters/CAN/chapter-news/chapter-news-detail/index.aspx?nid=5005 .

9 The Leukemia and Lymphoma Society's Legislative Agenda for the First Session of the 112th Congress, pages 4-5. Published in 2011.

10 National Psoriasis Foundation Advocacy Initiative to Help End Specialty Tiers. Accessed July 2011. http://www.psoriasis.org/page.aspx?pid=1915 .

11 http://www.stark.house.gov/index.php?option=com_content&task=view&id=1520&Itemid=99999999 .

12 United States Government Accountability Office. Report to the Chairman, Subcommittee on Health, Committee on Ways and Means, House of Representatives. January 2010. "Medicare Part D: Spending, Beneficiary Cost Sharing, and Cost-Containment Efforts for High Cost Drugs Eligible for a Specialty Tier."

13 Letter dated 11 May 2011 from Representative Hank Johnson to Dr. Donald Berwick of the Centers for Medicare and Medicaid Services.

14 Congressman Johnson has also raised concern about the CMS policy that precludes beneficiaries needing drugs on specialty tiers from seeking relief from the high cost-sharing by utilizing the exceptions process. For drugs on other tiers, for example, the non-preferred brand tier, beneficiaries can appeal for an exception from that tier's cost-sharing and request to pay the copayment of a lower tier by demonstrating medical necessity.

15 http://hankjohnson.house.gov/2011/05/rep-johnson-to-medicare-clarify-why-specialty-tier-drug-threshold-remains-600.shtml .

16 The primary requirement from CMS is that the monthly drug cost meet a minimum threshold (currently $600). It is therefore up to individual insurance companies to decide whether a particular drug should be put on the specialty tier.

17 Hargrave, Elizabeth, Jack Hoadley, and Katie Merrell. 2009. "Drugs on Specialty Tiers in Part D: Final Report." Report to Medicare Payment Advisory Commission.

18 The average cost sharing for preferred brand drugs in 2008 was $29.86. Kaiser Family Foundation. Medicare Prescription Drug Plans in 2008 And Key Changes Since 2006: Summary of Findings. Available at: http://www.kff.org/medicare/upload/7762.pdf . Accessed 11 November 2010.

19 Several studies have linked high out-of-pocket costs with medication nonadherence. See, for example, Milliman, Inc. 25 January 2010. "Parity for Oral and Intravenous/Injected Cancer Drugs.";Sun, Shawn X., Kwan Y. Lee, and Meghana Arura. 2009. "Examining Part D Beneficiaries' Medication Use in the Doughnut Hole." The American Journal of Pharmacy Benefits 1(1): 19-28; Ye X, Gross CR, Schommer J, Cline R, St Peter WL. Association between copayment and adherence to statin treatment initiated after coronary heart disease hospitalization: a longitudinal, retrospective, cohort study. Clin Ther. 2007 Dec;29(12):2748-57; Zhang, Yuting, Julie Marie Donohue, Joseph P. Newhouse, et al. 2009. "The Effects of the Coverage Gap on Drug Spending: A Closer Look at Medicare Part D." Health Affairs 28, w317-w325.

20 Blesser Streeter, Sonya, Schwartzberg, Lee, Husain, Nadia, and Michael Johnsrud. 2011. "Patient and Plan Characteristics Affecting Abandonment of Oral Oncolytic Prescriptions." Journal of Oncology Practice 7(3S): 46S-51S.

21 Hargrave, Elizabeth, Jack Hoadley, and Katie Merrell. 2009. "Drugs on Specialty Tiers in Part D: Final Report." Report to Medicare Payment Advisory Commission.

22 Walsh, Bill. 9 March 2009. "The Tier 4 Phenomenon: Shifting the High Cost of Drugs to Consumers." AARP Strategic Analysis & Intelligence (SAI) Briefing Report.

23 The percentage of workers enrolled in employer health plans that include a specialty tier varies by plan type, with workers enrolled in "point of service" plans being the most likely to see a fourth tier (24 percent of workers in POS plans face fourth tier) See Kaiser Family Foundation and Health Research & Educational Trust. 2010. Employer Health Benefits 2010 Annual Survey.

24 Among workers with four or more tiers of cost sharing, 24 percent faced fourth tiers that used coinsurance.

25 Collier, Andrea King. 2011. "Penny Wise: Tiers of Pain – Is your medication safe from specialty-tier pricing?" Neurology Now 7(3): 42-43.

26 http://www.fffenterprises.com/Blogs/Reimbursement/page/More-Legislation-Introduced-to-Ban-Specialty-Tiers-in-States.aspx .

27 The HHS website defines an exchange as "a State-based competitive marketplace where individuals and small businesses will be able to purchase affordable private health insurance and have the same insurance choices as Members of Congress." See http://www.healthcare.gov/news/factsheets/exchanges07112011b.html .

28 According to the Affordable Care Act, essential health benefits include the following 11 categories of services: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. See http://www.healthcare.gov/glossary/e/essential.html.

29 Specifically, section 2715 of the ACA mandates that insurance plans provide enrollees with "a summary of benefits and coverage explanation that accurately describes the benefits and coverage under the applicable plan or coverage." In addition, insurance plans must inform enrollees with 60 days notice of any material modifications to their plan.

30 http://www.dol.gov/ebsa/faqs/faq-aca5.html .

31 See, for example, Polinski, J.M., Mohr, P.E., & Johnson, L. (2009). Impact of Medicare Part D on Access to and Cost Sharing for Specialty Biologic Medications for Beneficiaries with Rheumatoid Arthritis. Arthritis & Rheumatism 61(6): 745-754; L. S. Schwartzberg, S. B. Streeter, N. Husain, M. Johnsrud. (2011). Patient and plan characteristics affecting abandonment of oral oncolytic prescriptions. American Journal of Managed Care, 17(5 Spec No.): SP38-SP44; Gleason, P. et al. (2009). Association of Prescription Abandonment with Cost Share for High-Cost Specialty Pharmacy Medications. Journal of Managed Care Pharmacy, 15(8): 648-58.

32 The stand-alone prescription drug plans are available to seniors who receive their Medicare Part A (Hospital Insurance) and B (Medical Insurance) benefits through the traditional "fee for service" Medicare program. On the other hand, beneficiaries who have enrolled in Part C, known as Medicare Advantage, have their benefits, including their prescription drug coverage, provided by private insurance companies approved by Medicare. As of February 2010, 9.9 million beneficiaries were enrolled in Medicare Advantage Plans, while 17.7 million were enrolled in stand-alone prescription drug plans. See Kaiser Family Foundation. Medicare Fact Sheet: The Medicare Prescription Drug Benefit. Available at: http://www.kff.org/medicare/upload/7044-11.pdf . Accessed 11 November 2010.

33 Centers for Medicare and Medicaid Services. Medicare & You, 2011.

34 Hargrave, Elizabeth, Jack Hoadley, and Katie Merrell. 2009. "Drugs on Specialty Tiers in Part D: Final Report." Report to Medicare Payment Advisory Commission.

35 Avalere Health LLC. November 2010. "Initial Trend Analysis of 2011 Medicare Prescription Drug Plan Formularies." Available at http://www.avalerehealth.net/news/archive/Avalere_Health_Analysis_of_2011_Part_D_Formularies.pdf . Accessed 6 January 2011.

36 Kaiser Family Foundation. Medicare Part D 2009 Data Spotlight: Specialty Tiers. Available at: http://www.kff.org/medicare/upload/7919.pdf . Accessed 18 November 2010.

37 Hargrave, Elizabeth, Jack Hoadley, and Katie Merrell. 2009. "Drugs on Specialty Tiers in Part D: Final Report." Report to Medicare Payment Advisory Commission.

38 Gustafsson, Lovisa. "Part D Plans and Specialty Products." 27 June 2006. Avalere Health LLC. Available at: http://www.ehcca.com/presentations/medicareaudio20060627/gustafsson.pdf . Accessed 6 January 2011.

39 Hargrave, Elizabeth, Jack Hoadley, and Katie Merrell. 2009. "Drugs on Specialty Tiers in Part D: Final Report." Report to Medicare Payment Advisory Commission.

40 Karaca-Mandic, Pinar, Geoffrey F. Joyce, Dana P. Goldman, and Marianne Laouri. 2010. "Cost Sharing, Family Health Care Burden, and the Use of Specialty Drugs for Rheumatoid Arthritis." Health Services Research 45(5): 1227-1250.

41 Hargrave, Elizabeth, Jack Hoadley, and Katie Merrell. 2009. "Drugs on Specialty Tiers in Part D: Final Report." Report to Medicare Payment Advisory Commission.

42 Walsh, Bill. 9 March 2009. "The Tier 4 Phenomenon: Shifting the High Cost of Drugs to Consumers." AARP Strategic Analysis & Intelligence (SAI) Briefing Report.

43 Hargrave, Elizabeth, Jack Hoadley, and Katie Merrell. 2009. "Drugs on Specialty Tiers in Part D: Final Report." Report to Medicare Payment Advisory Commission.

44 Most plans require beneficiaries to pay a monthly premium and some also require the beneficiary to pay a deductible before the plan begins to contribute to the drug costs. "Enhanced" plans may charge a higher monthly premium while waiving the deductible. See Riley, Gerald F., Jesse M. Levy, and Melissa A. Montgomery. 2009. "Adverse Selection in the Medicare Prescription Drug Program." Health Affairs 28(6): 1826-1837.

45 Part D plan providers have two options for structuring plan benefits. Plan providers may offer either the standard benefit or its actuarial equivalent. Enrollees in plans that use the standard benefit must pay 25 percent of the cost of their prescription drugs. In practice, only a small percent of Part D plans offer the standard benefit, as most choose to offer an actuarial equivalent, typically using tiered cost sharing. See Kaiser Family Foundation. Medicare Fact Sheet: The Medicare Prescription Drug Benefit. Available at: http://www.kff.org/medicare/upload/7044-11.pdf . Accessed 11 November 2010.

46 The share of Part D PDPs charging coinsurance for non-specialty brand tiers has been increasing, and in 2010, a sizeable number of plans charged coinsurance for preferred brands (25 percent of PDPs) and non-preferred brands (34 percent of PDPs). See Kaiser Family Foundation. Medicare Part D 2010 Data Spotlight: Benefit Design and Cost Sharing. Available at: http://www.kff.org/medicare/upload/8033.pdf . Accessed 28 July 2011.

47 Kaiser Family Foundation. Medicare Part D 2009 Data Spotlight: Specialty Tiers. Available at: http://www.kff.org/medicare/upload/7919.pdf . Accessed 18 November 2010.

48 Kaiser Family Foundation. Medicare Part D 2010 Data Spotlight: Benefit Design and Cost Sharing. Available at: http://www.kff.org/medicare/upload/8033.pdf . Accessed 28 July 2011.

49 Whether beneficiaries actually undertake such research when choosing their Part D plans is another issue; some studies suggest that many seniors do not. See, for example, Hibbard, J, Greene J, Tusler M. An assessment of beneficiary knowledge of Medicare coverage options and the prescription drug benefit. 2006. Available at http://assets.aarp.org/rgcenter/health/2006_12_medicare.pdf . Accessed 27 July 2011.

50 "The Knowledge Networks Experience." 2010. Retrieved 30 December 2010. http://www.knowledgenetworks.com/knexperience/index.html .

51 The survey was conducted using the web-enabled KnowledgePanel®, a probability-based panel designed to be representative of the US population. Initially, participants are chosen scientifically by a random selection of telephone numbers and residential addresses. Persons in selected households are then invited by telephone or by mail to participate in the web-enabled KnowledgePanel®. For those who agree to participate, but do not already have Internet access, Knowledge Networks provides at no cost a laptop and ISP connection. People who already have computers and Internet service are permitted to participate using their own equipment. Panelists then receive unique log-in information for accessing surveys online, and then are sent emails throughout each month inviting them to participate in research. More technical information is available at http://www.knowledgenetworks.com/ganp/reviewer-info.html.

52 Knowledge Networks. 2010. "KnowledgePanel Design Summary." Available at: http://www.knowledgenetworks.com/knpanel/docs/KnowledgePanel%28R%29-Design-Summary-Description.pdf . Accessed 22 June 2011.

53 In calculating the average survey length, we excluded interviews that were listed as lasting more than 60 minutes.

54 In other words, we eliminated respondents who reported that they were enrolled in a Medicare Advantage plan, were dual-eligible (i.e., qualified for both Medicare and Medicaid), or received a low-income subsidy. We also disqualified anyone who did not know the answer to any of these questions.

55 The percentage reported here is unweighted.

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Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.