Strategic tier design in health insurance : the case of Medicare Part D

Author / Creator

Bignon, Léa, author

Available as

Online

Summary

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 ...

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.

Show More