Nancy Archibald, MHA, MBA

February 1, 2018


Rising pharmaceutical costs are a concern across many health care payers, but the issue is particularly critical for Medicare-Medicaid integrated health plans serving dually eligible individuals — a population with significant health care needs and high prescription drug use. Integrated health plans provide Medicare-covered hospital and physician services and prescription drugs, as well as Medicaid-covered long-term services and supports. The two types of integrated plans — Medicare-Medicaid Plans (MMPs) in the Financial Alignment Initiative demonstrations and Medicare Advantage Dual Eligible Special Needs Plans (D-SNPs) that are aligned with a Medicaid managed long-term services and supports plan — serve approximately 1.2 million or nearly 10 percent of all dually eligible individuals.

These individuals have a higher prevalence of chronic conditions than many Medicare-only or Medicaid-only beneficiaries. Common diagnoses — diabetes (44 percent), mental health disorders (40 percent), heart disease (40 percent), asthma/COPD (23 percent), and Alzheimer’s disease (19 percent) — reflect the complex, heterogeneous clinical profiles of this population, which includes both older adults and younger people with disabilities as well as those with serious mental illness. Not surprisingly, dually eligible individuals tend to have high Medicare Part D prescription drug costs. In 2013, Medicare spent an average of $5,120 per beneficiary on prescription drugs for dually eligible individuals, but only $1,834 for Medicare-only beneficiaries.

Adding to their clinical complexity, many dually eligible beneficiaries are homeless or living in transient housing situations, and face other social risk factors that make it difficult for them to manage their care and take medications as prescribed.

Challenges for Integrated Health Plans

Integrated health plans face challenges related to their Part D benefit design. Like Medicare’s stand-alone prescription drug plans (PDPs) and Medicare Advantage Prescription Drug (MA-PD) plans, integrated health plans have fewer tools than commercial plans when designing their formularies. For most drug classes, they must include at least two drugs that are not therapeutically equivalent or bioequivalent, and they must include all or substantially all drugs in six protected classes. However, unlike MA-PDs and PDPs, which can use cost-sharing requirements to steer members toward safer or more cost-effective medications, integrated plans can only charge dually eligible beneficiaries with limited copayments for Medicare Part D prescription medications (no more than $3.35 for generic drugs and $8.35 for brand name drugs in 2018).

Integrated health plans also face challenges related to the complex clinical profiles of their members, more of whom reach Medicare Part D’s catastrophic coverage limit than enrollees in Medicare Advantage or stand-alone prescription drug plans.

Integrated health plans also face challenges related to the complex clinical profiles of their members, more of whom reach Medicare Part D’s catastrophic coverage limit than enrollees in MA-PDs and PDPs. These members often need medications in protected classes (e.g., antivirals, antipsychotics) where formulary selection cannot be used to impact utilization and price.

An additional challenge for MMPs comes from a program design issue. Unlike other MA-PDs, including D-SNPs, which receive payments for Part D costs based on bids they submit, MMPs are paid for Part D drugs based on the standardized national average monthly bid amount (NAMBA) as well as an estimated average monthly prospective payment amount for the low-income subsidy and federal reinsurance amounts. Medicare risk adjusts the NAMBA portion of the payment so that plans with sicker enrollees are paid more, but the NAMBA dropped 24 percent in the last four years. With this portion of the payment decreasing, the impact of the risk adjustment model also declines, and plans with higher-need, higher-cost members may be disproportionately affected when drug costs exceed the risk adjustment parameters.

Policy changes could offer solutions to some of these challenges. Potential options include: (1) moving MMPs to a bid-based system for Part D payments; (2) modifying the risk-adjustment factor to better reflect the complexity of dually eligible populations; and (3) allowing plans to have more flexibility to determine which medications to include in their formularies. Some of these options are under discussion, but in the interim, integrated plans need other tools to manage members’ utilization and costs.

Approaches to Pharmacy Management

PRIDE, a national initiative led by the Center for Health Care Strategies and supported by The Commonwealth Fund, works with integrated health plans to advance best practices and improve outcomes for dually eligible members. The PRIDE plans — BlueCare Tennessee (Tennessee), CareSource (Ohio), Commonwealth Care Alliance (Massachusetts), Health Plan of San Mateo (California), Independent Care Health Plan (Wisconsin), Inland Empire Health Plan (California), UCare (Minnesota), and VNSNY CHOICE Health Plans (New York) — each offer an MMP and/or a D-SNP and have been exploring pharmacy management options for their dually eligible members. Several PRIDE plans report using a combination of efforts, including:

  • Engaging providers to impact their prescribing patterns;
  • Providing member care management to remove barriers to medication adherence;
  • Improving members’ self-care skills; and
  • Ensuring that members make and keep appointments with their physicians.

Two PRIDE plans, UCare and Inland Empire Health Plan, recently described additional pharmacy management strategies.

Targeting Adverse Outcomes from High-Risk Medications

To improve outcomes in its Minnesota Senior Health Options D-SNP, UCare wanted to reduce the number of high-risk medications (HRMs) prescribed to its members. Guided by the American Geriatrics Society’s Beers list of potentially harmful medications, the plan focused first on four major classes of HRMs — non-benzodiazepine hypnotics; first-generation antihistamines; long-duration sulfonylureas; and skeletal muscle relaxants — then later looked at tricyclic antidepressants, benzodiazepines, and systemic estrogen therapy. UCare removed several HRMs from its formulary and promoted safer alternatives, and it implemented prior authorization criteria and step therapy for the remaining HRMs.

UCare removed several high-risk medications from its formulary and promoted safer alternatives, and it implemented prior authorization criteria and step therapy for the remaining high-risk medications.

Prior to making these formulary changes, UCare sent letters to both physicians and members explaining what changes were occurring, why they were occurring, and providing a list of safer alternative medications. There was some member dissatisfaction with the changes, and some filed coverage determination requests, but overall, the plan found that good communication was key to helping both members and physicians understand and accept the formulary changes. In some cases, physicians contacted the plan to discuss therapeutic strategies and safer alternatives that would be appropriate for members. HRM utilization decreased 3.27 percent between 2015 and 2016, even as plan enrollment increased slightly. UCare continues to actively manage HRMs.

Piloting Pay-for-Performance with Community Pharmacists

Inland Empire Health Plan (IEHP) wanted to improve the rate at which physicians followed pharmacists’ Medication Therapy Management (MTM) recommendations for its MMP members. The plan saw an opportunity for its members to be a bridge connecting physicians and pharmacists. In October 2016, IEHP initiated the Pharmacy Home Program, which assigns members to a community pharmacy where pharmacists work with them on MTM. Pharmacists receive a consultation fee if they have at least one contact with a member per month. Pharmacists are expected to follow members for 12 months, and if, at the end of that time the members achieve outcome targets, the pharmacists receive $1,000.

Pharmacists are expected to follow members for 12 months, and if, at the end of that time the members achieve outcome targets, the pharmacists receive $1,000.

By developing a relationship with members, IEHP hoped pharmacists would, in turn, forge relationships with physicians who might then involve those pharmacists in prescribing decisions and accept their recommendations. The program gained momentum slowly, but it is showing progress: members are more engaged with pharmacies, and pharmacists are asking more clinically relevant questions about members. Although not all pharmacies have participated, IEHP is optimistic about the program’s long-term impacts and plans to continue it with a greater focus on improving in-person (rather than telephonic) contacts with community-based pharmacists.

Outlook for 2018 and Beyond

In 2017, the utilization and costs of prescription medications were the focus of major national policy conversations. Payers across the board experienced increases in pharmaceutical costs. For 2018 and beyond, PRIDE’s integrated care plans will continue to share pharmacy management strategies for their dually eligible populations. Their work may also be informed by CHCS’ new initiative, the Community Management of Medication Complexity Innovation Lab, supported by the Moore Foundation, which will test new ways to promote medication safety for high-need, high-cost individuals and their providers. Also, new proposed rules for Medicare Advantage and the Part D prescription drug benefit may influence PRIDE plans’ efforts. In any event, pharmacy management is sure to remain a top-of-mind issue for those serving dually eligible individuals in 2018 and beyond.


Correction: February 2, 2018

This blog post has been updated to clarify that dually eligible beneficiaries can be charged with co-payments for Medicare Part D medications.

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