Two provisions of the Medicare Improvements for Patients and Providers Act of 2008 may increase per member per month costs (PMPM) for plan sponsors to cover additional drugs for Medicare Part D beneficiaries.

A provision to protect formulary classes could have the broadest impact, while a new requirement to cover barbiturates and benzodiazepines may have more of an impact on plans that serve the frailest Medicare populations.

Under the protected class provision effective in 2010, the U.S. Health and Human Services (HHS) secretary will identify drug classes that meet one of these criteria:

• Restricted access to the drugs would have major or life-threatening clinical consequences for individuals treated by the drugs.
  
• There is a significant need for individuals to have access to multiple drugs in the category or class due to unique chemical actions and pharmacological effects.
  

Through a formal rulemaking process, the HHS secretary may designate such drug classes as protected and Part D plan sponsors will be required to cover all drugs in the protected classes. The HHS secretary could make exceptions based on scientific evidence and medical standards of practice.

The Centers for Medicare and Medicaid Services (CMS) already requires Part D plans to include all or substantially all drugs in six categories as listed in Figure 4. The new legislation codifies current policy on protected classes of drugs under Part D and may encourage more government regulation in this area.

“If the protected class is already excluded from an MA-PD (Medicare Advantage Prescription Drug Plan) or PDP (Medicare Prescription Drug Plan) formulary, or if it is heavily weighted with generic drugs, the cost impact may be minor,” says Frank Kopenski, Jr., ASA, MAAA, associate actuary, Milliman. “On the other hand, if the protected class is restricted on existing formularies, a new requirement to cover all drugs in the class will have a greater impact. When the marketplace knows what classes are affected, formulary cost modeling tools can be used to calculate the potential cost impact.”

Drugs for Mental Health Disorders
Another provision in the 2008 legislation requires Part D plans to cover barbiturates if used to treat epilepsy, cancer or a chronic mental health disorder, and benzodiazepines. “This will increase the cost of the drug benefit to some extent for all plan sponsors, depending upon the frailty of its Medicare population,” says Kopenski. “Special Needs plans and Programs of All Inclusive Care for the Elderly (PACE), which serve a disproportionate number of dual eligibles (Medicaid/Medicare) and higher risk patients, should see the biggest impact.”

In the case of dual eligibles, state Medicaid programs typically have picked up the cost of barbiturates and benzodiazepines, according to Kopenski. With this new legislation, the cost will shift to Medicare.

“A potential increase in the PMPM cost as a result of adding coverage of these sedative-hypnotics is likely to vary by geographic area and population,” says Kopenski. “Where there is a higher incidence of mental health issues, usage may be higher. Because this requirement is not effective until 2013, there is time to estimate what the costs could be.”

Although none of the provisions discussed here will take effect immediately, it is important for payers to be aware of their potential for triggering cost increases.