Medicare Payment Policy

to formularies, benefit structure, and administrative
processes. If beneficiaries are unwilling to switch, even
when faced with significant premium increases, sponsors
will have less of an incentive to compete on premiums
and control drug spending. On the other hand, if enough
beneficiaries switch plans to maximize coverage of their
medications, it could increase costs for the plans and in
turn increase Medicare spending for Part D, as Medicare
subsidizes a significant portion of Part D benefit costs.
On the basis of the Commission’s analysis of enrollment
data, we find that a higher share of enrollees than was
reported earlier has switched plans voluntarily—13.6
percent between 2009 and 2010 and 13 percent between
2010 and 2011 (see text box). 28 Although many
beneficiaries who participated in our focus groups
found the annual open enrollment process for selecting
or changing plans to be confusing, more beneficiaries
reported using the Internet to research and compare plan
options than in previous years. Several participants knew
about the Medicare Plan Finder and CMS’s star rating
system (Hargrave et al. 2012). Some beneficiaries reported
researching their plan options regularly to compare costsharing
amounts and the formulary status of specific
medications, although researching their plan options did
not always lead beneficiaries to switch plans.
Relationship between medical and drug
spending
Policymakers and health services researchers have
given much attention to the relationship between drug
spending and medical spending. The results of studies
that examined this relationship have been mixed (e.g.,
McWilliams et al. 2011, Stuart et al. 2013, Zhang et al.
2009). Our analysis of the patterns of service use for
Part A and Part B of Medicare and for Part D across
metropolitan statistical areas showed no consistent
relationship between medical service use and drug use
(Suzuki and Zabinski 2010). We may not have been able
to observe the relationship between medical and drug
spending because that study aggregated Part D spending
to the level of a metropolitan statistical area. For future
work, the Commission will investigate the relationship
between medical and drug spending at the individual
beneficiary level and explore whether better adherence to
drugs used for certain conditions reduces Medicare Part
A and Part B spending. ■
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