Working Paper: CEPR ID: DP17937
Authors: Lea Bignon; Alessandro Iaria; Laura Lasio
Abstract: We study the role of tier design in Medicare Part D. In the period 2013-2017, plans expanded the number of tiers in their formularies from three/four to five and systematically shifted generics to higher tiers subject to higher cost sharing. The systematic tier upgrading caused significant increases in the out-of-pocket costs, up to six times for some generics. This resulted in additional average per-enrollee spending on generics of $76 in 2017, totalling $1.5 billion for the Part D population, and increased mortality by 5.4% due to reduced utilization of generics with documented mortality benefits.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in out-of-pocket costs (G52) | additional average spending of $76 per enrollee in 2017 (H51) |
| increase in out-of-pocket costs (G52) | totaling $15 billion for the Medicare Part D population (H51) |
| 54% increase in mortality (I12) | reduced utilization of generics with documented mortality benefits (I18) |
| systematic tier upgrading of generics (C69) | increase in out-of-pocket costs (G52) |
| systematic tier upgrading of generics (C69) | 54% increase in mortality (I12) |