Higher cost sharing reduces plans' drug expenditures, but boosts enrollee costs

BETHESDA, Md.-Employer health plans that charge retirees higher copayments for retail pharmaceuticals saved themselves 18.7 percent per member on average in 2001, but their enrollees on average had 59.4 percent higher out-of-pocket costs ($389 versus $244), according to a new study published as a Health Affairs Web exclusive.

The study demonstrates the effects that plan design might have on costs and drug use under any Medicare prescription benefit, write authors Cindy Parks Thomas, Stanley S. Wallack and colleagues from Brandeis University's Schneider Institute for Health Policy. The authors write that the study shows that higher copayments lead to the use of less-expensive drugs and fewer retail purchases, although they argue that Medicare should consider using copayment strategies in combination with other cost-containment mechanisms such as encouraging generics, mail-order delivery of prescriptions, prior authorization, and provider education.

The authors studied prescription drug claims made by more than 29,000 retirees age 65 and older enrolled in 96 employer plans managed by one pharmacy benefit management firm. They compared prescription drug use and costs in a number of plan designs, including those with multiple "tiers" of benefits and cost-sharing requirements.

They compared plans with cost sharing categorized as "more-aggressive" and "less-aggressive," defined by whether they required an above- or below-average copayment for brand-name drugs, or whether they required coinsurance of more or less than 30 percent for brand-name drugs. The "more-aggressive" cost-sharing plans had average per-enrollee costs to the plan of $1,155 and average enrollee out-of-pocket costs of $389 in 2001. The "less-aggressive" plans had average per-enrollee plan costs of $1,421 and average enrollee out-of-pocket costs of $244 in 2001.

Enrollees in the more-aggressive plans had on average overall costs of $1,544 in 2001, compared to less-aggressive plans,

Contact: Jon Gardner
Health Affairs

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