Medicare and Patients with Schizophrenia Could Save $150 Million on Part D Plans

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A recent analysis by the University of Pittsburgh uncovers millions in savings for Medicare and schizophrenia patients with intelligent assignment to Part D plans.

Yuting Zhang

Yuting Zhang, Ph.D.

This situation highlights why it would be beneficial for the government to use intelligent assignment.

Using an “intelligent,” rather than random, method for assigning people with schizophrenia to Medicare Part D prescription drug coverage plans could save Medicare and patients a combined $150 million annually, a new University of Pittsburgh Graduate School of Public Health analysis discovered.

The results are reported in the March issue of the journal Health Affairs and build upon an earlier study finding that Medicare could have saved more than $5 billion in its Part D low-income subsidy program in 2009 if it had used intelligent assignment among all beneficiaries who received a subsidy.

Medicare Part D provides prescription drug coverage assistance to people enrolled in Medicare who have incomes below 150 percent of the federal poverty level. Since 2006, the government has randomly assigned low-income enrollees to stand-alone Part D plans, based upon the region in which they live.

“If the government pilots intelligent assignment of Medicare Part D beneficiaries, people with schizophrenia would be an ideal group to start with,” said lead author Yuting Zhang, Ph.D., associate professor of health economics at Pitt Public Health’s Department of Health Policy and Management. “The majority of these patients are already randomly assigned to Part D plans. They spend considerably more on medication than the general Medicare population, but most of their drug spending is subsidized by the government, and these patients often have a difficult time selecting ideal plans themselves.”

Dr. Zhang and her team obtained data on nearly 120,000 beneficiaries with schizophrenia and developed a computer algorithm to intelligently assign them to plans available in their regions based on their medication needs.

Intelligent assignment translated into an annual savings of $466 per beneficiary with schizophrenia.

Schizophrenia – a chronic, disabling brain disorder often treated with medications – affects 2.6 percent of Medicare beneficiaries enrolled in stand-alone Part D plans. More than 9 out of 10 people with the disorder are eligible for a low-income subsidy for their Part D prescription drug benefit, meaning they pay little or no premium for their Part D plan and have only nominal copayments. Although Medicare beneficiaries are allowed to select a plan other than the one to which they were randomly assigned, there is little financial reason for people with schizophrenia to do so.

“This situation highlights why it would be beneficial for the government to use intelligent assignment,” said Dr. Zhang. “We recommend that Medicare use intelligent assignment as the default approach for all beneficiaries with schizophrenia who receive a low-income subsidy, and consider it as an option for all Part D beneficiaries, regardless of their income.”

Additional authors on this research are Seo Hyon Baik, Ph.D., of Pitt Public Health; and Joseph P. Newhouse, Ph.D., of Harvard University.

This research was supported by National Institute of Mental Health grants RC1 MH088510 and R21 MH100721; and the Agency for Healthcare Research and Quality grant R01 HS018657.

Dr. Newhouse is director of, and holds equity in, Aetna, which sells Part D plans.

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About the University of Pittsburgh Graduate School of Public Health
The University of Pittsburgh Graduate School of Public Health, founded in 1948 and now one of the top-ranked schools of public health in the United States, conducts research on public health and medical care that improves the lives of millions of people around the world. Pitt Public Health is a leader in devising new methods to prevent and treat cardiovascular diseases, HIV/AIDS, cancer and other important public health problems. For more information about Pitt Public Health, visit the school’s Web site at http://www.publichealth.pitt.edu.

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