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Medicare Part D at Ten Years: The 2015 Marketplace and Key Trends, 2006-2015

Introduction
  1. Centers for Medicare & Medicaid Services, Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan Contract Report - Monthly Summary Report (Data as of April 2015) (available at http://www.cms.gov/MCRAdvPartDEnrolData/MCESR/list.asp).

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  2. Part D allows employer or union group health plan sponsors to enroll Part D eligible individuals in PDPs or MA-PD plans that are designed and open only to individuals affiliated with these sponsors. CMS publishes enrollment numbers for these employer-only plans, but does not release benefit design characteristics. As a result, employer-only plans are excluded from much of the analysis in this report.

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  3. Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act of 2010 (HCERA)

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  4. This report is being released along with a companion article in the journal Health Affairs; see John F. Hoadley, Juliette Cubanski, and Patricia Neuman, "Medicare Part D Drug Benefit At 10 Years: Firmly Established But Facing Challenges," Health Affairs; October 2015. Analysis from previous years of the Medicare Part D program conducted by the authors is available at www.kff.org.

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Section 1: Part D Enrollment and Plan Availability
  1. Department of Health and Human Services, "Over 38 Million People With Medicare Now Receiving Prescription Drug Coverage," June 14, 2006, available at http://archive.hhs.gov/news/press/2006pres/20060614.html.

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  2. Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, Chapter 14, March 2015.

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  3. There is evidence that Medicare Advantage enrollment growth (as a whole, beyond Part D) reflects decisions by baby boomers newly eligible for Medicare, but also small shifts in the larger pool of current beneficiaries switching from traditional Medicare to Medicare Advantage plans. Gretchen Jacobson, Patricia Neuman, and Anthony Damico, “At Least Half of New Medicare Advantage Enrollees Had Switched From Traditional Medicare During 2006-11,” Health Affairs 34(1): 48-55, January 2015.

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  4. For additional discussion of this topic, see Frank McArdle, Tricia Neuman and Jennifer Huang, “Retiree Health Benefits at the Crossroads,” Kaiser Family Foundation, April 2014, available at http://kff.org/medicare/report/retiree-health-benefits-at-the-crossroads/.

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  5. 2015 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, July 2015.

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  6. This look at market concentration focuses on the total program, including both PDPs and MA-PD plans. Other analysis shows that enrollment in Medicare Advantage plans (including plans that do and do not offer the Part D benefit) is concentrated in a handful of firms, with two firms (UnitedHealth and Humana) having 39 percent of Medicare Advantage enrollment. Gretchen Jacobson et al., “Medicare Advantage 2015 Spotlight: Enrollment Market Update,” June 2015, available at http://kff.org/medicare/issue-brief/medicare-advantage-2015-spotlight-enrollment-market-update/.

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  7. The marketplace analysis in this section, unlike other parts of the analysis, incorporates both PDPs and MA-PD plans and includes plans in the territories and plans offered exclusively to retirees from a particular employer.

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  8. According to current guidelines used by the Department of Justice and the Federal Trade Commission, the Part D market is not concentrated. The guidelines indicate that markets in which the index is between 1,500 and 2,500 points are considered to be moderately concentrated. Those in which the index is in excess of 2,500 points are considered to be highly concentrated.

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  9. The Herfindahl-Hirschman index for MA-PD plans nationally is 957, compared to 1,362 for PDPs and 1,047 for both types of plans combined. For more on Medicare Advantage enrollment shares at the local level, see Gretchen Jacobson, Anthony Damico, and Tricia Neuman, “Data Note: Medicare Advantage Enrollment, by Firm, 2015,” July 14, 2015, available at http://kff.org/medicare/issue-brief/data-note-medicare-advantage-enrollment-by-firm-2015/.

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  10. This analysis if based only on PDP offerings. Most MA-PD plans are not offered on a regional basis, so breaking down enrollment by PDP region is not readily available.

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  11. This estimate includes only those MA plans that include Part D benefits. Overall, the average beneficiary has 18 MA plans available. Gretchen Jacobson et al., “Medicare Advantage 2015 Spotlight: Overview of Plan Changes,” Kaiser Family Foundation, December 2014, available at http://kff.org/medicare/issue-brief/medicare-advantage-2015-data-spotlight-overview-of-plan-changes/.

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  12. CMS, “Announcement of Calendar Year (CY) 2016 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter,” April 2015.

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  13. Enhanced PDPs offered by two firms that entered the market in 2014 average 67 enrollees (Symphonix Premier/Rite Aid Premier Rx PDP) and 153 enrollees (Transamerica Medicare Rx Classic PDP).

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  14. This count excludes plans without drug coverage and all cost plans. It also excludes drug plans offered by Special Needs Plans (SNPs), a type of Medicare Advantage Plan that limits membership to beneficiaries with specific diseases or characteristics, and Medicare-Medicaid plans (MMPs) participating in the financial alignment initiative (known as dual demo plans). In 2015, 533 SNPs (excluding the territories) and 332 MMPs are offered.

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Section 2: Part D Premiums
  1. The 2015 average reported here ($37.02) is lower than the amount reported in the 2015 “First Look” spotlight ($38.83) because the new average is weighted by actual 2015 enrollment. Jack Hoadley et al., “Medicare Part D: A First Look at Plan Offerings in 2015,” October 2014, available at http://kff.org/medicare/issue-brief/medicare-part-d-a-first-look-at-plan-offerings-in-2015/. The average amount is lower because net switches in plan enrollment in the fall open enrollment season (including LIS beneficiaries reassigned to new plans by CMS) were to lower-premium plans. Averages for some previous years differ by small amounts because different months are used for comparability.

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  2. This increase is lower than the 57 percent increase in the monthly premium between 2006 and 2015 for a single person enrolled in FEHB BC/BS (from $125.82/month in 2006 to $197.23/month in 2015).

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  3. For additional discussion of factors involved in the slow growth in costs, see Jack Hoadley, “Medicare Part D Spending Trends: Understanding Key Drivers and the Role of Competition,” May 2012, available at http://kff.org/health-costs/issue-brief/medicare-part-d-spending-trends-understanding-key/.

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  4. The average premium excludes Special Needs Plans (SNPs) and Medicare-Medicaid plans participating in the financial alignment initiative (known as dual demo plans). The average Part D premium for SNPs ($22.95) is higher than the MA-PD average, but most costs are incurred by the government since 90 percent of SNP enrollees are LIS beneficiaries. Zero premiums are reported for all MMP plans, which are only open to Medicare-Medicaid beneficiaries. The overall premium in 2015 for MA plans (including services for Parts A, B, and D) that include drug coverage is $38 per month, up 7 percent from 2014 but down 14 percent from 2010; see Gretchen Jacobson et al., “Medicare Advantage 2015 Spotlight: Enrollment Market Update,” June 2015, available at http://kff.org/medicare/issue-brief/medicare-advantage-2015-spotlight-enrollment-market-update/.

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  5. Information on these rebates is not available at the plan level. CMS (personal communication) calculated that the average MA-PD premium prior to rebates in 2015 was about $3 per month lower than those for PDPs, down from $6.68 in 2014 and $9.50 in 2013.

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  6. Jack Hoadley et al., “To Switch or Not to Switch: Are Medicare Beneficiaries Switching Drug Plans To Save Money?” October 2013, available at http://kff.org/medicare/issue-brief/to-switch-or-not-to-switch-are-medicare-beneficiaries-switching-drug-plans-to-save-money/.

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  7. Jack Hoadley et al., “To Switch or Not to Switch: Are Medicare Beneficiaries Switching Drug Plans To Save Money?” October 2013, available at http://kff.org/medicare/issue-brief/to-switch-or-not-to-switch-are-medicare-beneficiaries-switching-drug-plans-to-save-money/.

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  8. Our estimates for MA-PD plan sponsor shares of enrollment are slightly different from enrollment estimates in another Kaiser Family Foundation issue brief. Gretchen Jacobson et al., “Medicare Advantage 2015 Spotlight: Enrollment Market Update,” June 2015, available at http://kff.org/medicare/issue-brief/medicare-advantage-2015-spotlight-enrollment-market-update/. That analysis included enrollees in Medicare Advantage plans that do not include Part D coverage. Our enrollment shares include employer plans.

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  9. Like the national averages, other averages presented here are weighted based on April 2015 enrollment.

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  10. Andrew Stocking et al., “Examining the Number of Competitors and the Cost of Medicare Part D,” Working Paper 2014–04, July 2014, available at http://www.cbo.gov/sites/default/files/113th-congress-2013-2014/workingpaper/45553-PartD_1.pdf.

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Section 3: Part D Benefit Design and Cost Sharing
  1. For this section, findings on MA-PD plans exclude plans without drug coverage, cost plans, Special Needs Plans (SNPs), and Medicare-Medicaid plans (MMPs) participating in the financial alignment initiative.

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  2. Kaiser Family Foundation/HRET Survey of Employer-Sponsored Health Benefits, 2015, available at http://kff.org/health-costs/report/2015-employer-health-benefits-survey/.

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  3. In the program’s first two years, a small subset of enrollees were in PDPs with one tier each for brand and generic drugs, but use of this model had nearly disappeared by 2012.

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  4. Kaiser Family Foundation/HRET Survey of Employer-Sponsored Health Benefits, 2015, available at http://kff.org/health-costs/report/2015-employer-health-benefits-survey/.

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  5. CBO reports that 70 percent of brand spending was for drugs on the preferred brand tier, 19 percent were non-preferred brands, and 10 percent were specialty drugs. Excluding specialty drugs, the share of preferred brand spending was thus 79 percent. Congressional Budget Office, “Competition and the Cost of Medicare’s Prescription Drug Program,” July 30, 2014.

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  6. Medicare Payment Advisory Commission, A Data Book: Health Care Spending and the Medicare Program, June 2015. Medicare Payment Advisory Commission, A Data Book: Medicare Part D Program, March 2010.

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  7. Jack Hoadley et al., “Medicare Part D 2010 Data Spotlight: A Comparison of PDPs Offering Basic and Enhanced Benefits,” December 2009, available at http://kff.org/medicare/report/medicare-part-d-2010-data-spotlight-a/.

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  8. Calculation from Kaiser Family Foundation/HRET Survey of Employer-Sponsored Health Benefits, 2015.

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  9. Norman V. Carroll, “A Comparison of Costs of Medicare Part D Prescriptions Dispensed at Retail and Mail Order Pharmacies,” Journal of Managed Care and Specialty Pharmacy 20(9):959-67, September 2014.

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  10. Express Scripts, “The 2014 Drug Trend Report,” March 2015.

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  11. CMS, “Medicare Part D Specialty Tier,” April 7, 2015, available at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/CY-2016-Specialty-Tier-Methodology.pdf.

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  12. CMS, “Medicare Part D Manual, Chapter 6, Part D Drugs and Formulary Requirements,” March 9, 2007.

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  13. Tricia Neuman, Jack Hoadley, and Juliette Cubanski, “The Cost Of A Cure: Medicare’s Role In Treating Hepatitis C,” available at http://healthaffairs.org/blog/2014/06/05/the-cost-of-a-cure-medicares-role-in-treating-hepatitis-c/.

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  14. As of 2015, CMS no longer refers to preferred or non-preferred pharmacies; instead refers to pharmacies that offer standard or preferred cost sharing.

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  15. Cost-sharing differentials across pharmacy types do not apply to LIS beneficiaries, because LIS cost-sharing amounts are set by law and updated in regulation each year. The government, however, is responsible for the higher cost sharing if the LIS beneficiary uses a pharmacy that does not offer preferred cost sharing.

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  16. CMS, “Analysis of Part D Beneficiary Access to Preferred Cost Sharing Pharmacies,” April 28, 2015, available at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/PCSP-Key-Results-Report-Final-v04302015.pdf.

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  17. Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, Chapter 14, March 2014.

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  18. CMS, “Part D Claims Analysis: Negotiated Pricing Between Preferred and Non-Preferred Pharmacy Networks,” April 30, 2013, available at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/PharmacyNetwork.pdf. Note that this study did not name the plans.

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  19. Jack Hoadley, “Maintaining Access to Medications When Plans Implement Tiered Pharmacy Networks,” JAMA Internal Medicine, published online, September 8, 2015.

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  20. Medicare rules do not count mail order options in meeting access standards.

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  21. CMS, “Analysis of Part D Beneficiary Access to Preferred Cost Sharing Pharmacies,” April 28, 2015, available at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/Downloads/PCSP-Key-Results-Report-Final-v04302015.pdf.

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  22. Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, Chapter 14, March 2015.

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  23. CMS, ““Announcement of Calendar Year (CY) 2016 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter,” April 2015.

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  24. These results are from analysis for MedPAC, conducted by Elizabeth Hargrave and Katie Merrell (see Methodology note). For that analysis, the universe of drugs includes all unique chemical entities in the CMS reference file. For example, plans are considered to cover a drug if they cover any version of drug, for example if they cover a generic version but not the brand version or if they omit certain forms or strengths of the drug. Formulary data were unavailable for plans under sanction at the time of the annual enrollment period.

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  25. Plans must list at least two drugs in every drug category and class, as well as most or all drugs in six protected classes. See CMS, Chapter 6, “Part D Drugs and Formulary Requirements” in the Medicare Part D Manual, available at http://www.cms.hhs.gov.

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  26. Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, Chapter 14, March 2015.

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  27. These results are also from the analysis for MedPAC (see Methodology note). That analysis classifies a drug as having a particular type of utilization management if that characteristic applies to any form or strength of the drug that is on the lowest possible tier used by that plan for that drug.

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  28. Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, Chapter 3, March 2009.

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Section 4: The Low-Income Subsidy Program
  1. Total LIS enrollment in April 2015 calculated from the Medicare Beneficiary Summary File is modestly higher than the total derived from plan enrollment files: 12.2 million versus 11.7 million.

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  2. Authors’ analysis of the 5-percent sample, 2006-2013.

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  3. Laura Summer, Jack Hoadley, and Elizabeth Hargrave, “The Medicare Part D Low-Income Subsidy Program: Experience to Date and Policy Issues for Consideration,” Kaiser Family Foundation, September 2010,” available at http://kff.org/medicare/issue-brief/the-medicare-part-d-low-income-subsidy/.

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  4. For example, in 2015, enrollees in different benchmark PDPs sponsored by Cigna in 16 regions were consolidated into a single benchmark PDP as a result of the acquisition of HealthSpring by Cigna in 2012.

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  5. This excludes 10 plans where 69,000 LIS enrollees had the option of being transferred to other benchmark plans offered by the same sponsor as a result of mergers.

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  6. In addition, enrollees in MA-PD plans that exited the market are classified as reassigned to a new PDP by CMS, but are not included in our counts. Many of these were reassigned to PDPs operated by the same sponsor as their MA-PD plan, unless they chose another MA-PD plan. Those who had no PDP available from the same sponsor were randomly reassigned to a PDP.

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  7. Jack Hoadley et al., “To Switch or Be Switched: Examining Changes in Drug Plan Enrollment among Medicare Part D Low-Income Subsidy Enrollees,” July 2015, available at http://kff.org/medicare/report/to-switch-or-be-switched-examining-changes-in-drug-plan-enrollment-among-medicare-part-d-low-income-subsidy-enrollees/.

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Section 5: Part D Performance Ratings
  1. Star ratings are assigned at the contract level, not the plan level, and many plan sponsors operate all their PDPs under the same contract. Thus, Humana’s older and more expensive Enhanced PDP, the Preferred Rx PDP, and the newly offered Walmart Rx PDP are all assigned the same ratings even if enrollees in one plan rate them differently on satisfaction measures or have different outcomes.

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  2. Because the cut points by which CMS translates scores on the ratings criteria to stars is different for PDPs and MA-PD plans, comparisons between the star ratings should be viewed with some caution.

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  3. See Jack Hoadley et al., “To Switch or Not to Switch: Are Medicare Beneficiaries Switching Drug Plans To Save Money?” October 2013, available at http://kff.org/report-section/to-switch-or-not-to-switch-issue-brief/, for the data and methods used for this finding.

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  4. Gretchen Jacobson et al., “How Are Choosing and Changing Health Insurance Plans?” Kaiser Family Foundation, May 2014, available at http://kff.org/medicare/report/how-are-seniors-choosing-and-changing-health-insurance-plans/.

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Conclusion
  1. Jack Hoadley, “Medicare Part D Spending Trends: Understanding Key Drivers and the Role of Competition,” May 2012, available at http://kff.org/health-costs/issue-brief/medicare-part-d-spending-trends-understanding-key/.

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  2. “2015 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds,” July 2015; Tricia Neuman, Jack Hoadley, and Juliette Cubanski, “The Cost Of A Cure: Medicare’s Role In Treating Hepatitis C,” available at http://healthaffairs.org/blog/2014/06/05/the-cost-of-a-cure-medicares-role-in-treating-hepatitis-c/.

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  3. Jack Hoadley et al., “To Switch or Not to Switch: Are Medicare Beneficiaries Switching Drug Plans To Save Money?” October 2013, available at http://kff.org/report-section/to-switch-or-not-to-switch-issue-brief/.

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  4. Drew Altman, “Why Higher Drug Costs Are Consumers’ Biggest Cost Worry,” Wall Street Journal, Washington Wire, available at http://blogs.wsj.com/washwire/2015/09/08/why-higher-drug-costs-are-consumers-biggest-cost-worry/.

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  5. Jack Hoadley, Katie Merrell, Elizabeth Hargrave, and Laura Summer, “In Medicare Part D Plans, Low or Zero Copays and Other Features to Encourage the Use of Generic Statins Work, Could Save Billions,” Health Affairs 31(10): 2266-2275, October 2012.

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Exhibit 1.1

Medicare Part D Enrollment, by Type of Plan (Employer and Non-Employer PDP and MA-PD), 2006-2015
x

Exhibit 1.2

Share of Medicare Beneficiaries Enrolled in Medicare Part D Plans, by State, 2015
x

Exhibit 1.4

Enrollment in Employer-Only Medicare Part D Plans, by Plan Type, 2006-2015
x

Exhibit 1.5

Distribution of Medicare Part D Enrollment, by Firm, 2015
x

Exhibit 1.6

Top 10 Firms Offering Medicare Part D Plans Ranked by 2015 Enrollment
x

Exhibit 1.7

Distribution of Medicare Part D Enrollment, by Firm and Plan Type, 2006 and 2015
x

Exhibit 1.8

Enrollment in Medicare Stand-Alone PDPs offered by Major PDP Sponsors, 2006-2015
x

Exhibit 1.9

Top 10 Medicare Part D Plans Ranked by 2015 Enrollment
x

Exhibit 1.10

Top 5 Medicare Part D Stand-Alone PDPs, Ranked by 2015 LIS Enrollment and Non-LIS Enrollment
x

Exhibit 1.11

Average Number of Medicare Part D Plans Offered to Enrollees, 2006-2015
x

Exhibit 1.12

Number of Medicare Part D Stand-Alone Prescription Drug Plans, 2006-2015
x

Exhibit 2.1

Medicare Part D Weighted Average Monthly Premiums, Overall and by Plan Type, 2006-2015
x

Exhibit 2.2

Examples of Medicare Part D Stand-Alone PDPs with Lowest and Highest Premiums, 2015
x

Exhibit 2.3

Premiums for Medicare Part D Stand-Alone PDPs with Highest 2015 Enrollment
x

Exhibit 2.4

Premiums for Medicare Part D Stand-Alone PDPs with Highest 2015 Enrollment, 2006-2015
x

Exhibit 2.6

Minimum and Maximum Monthly Premiums for National and Near-National Basic Stand-Alone PDPs, 2015
x

Exhibit 2.7

Minimum and Maximum Monthly Premiums for Medicare Part D Basic Stand-Alone PDPs, by Region, 2015
x

Exhibit 2.8

Weighted Average Monthly Premiums for Stand-Alone PDPs, by Type of Plan and Benefit Package, 2015
x

Exhibit 3.1

Distribution of Enrollment in Medicare Part D Stand-Alone PDPs, By Deductible Amount, 2006-2015
x

Exhibit 3.2

Share of Enrollment in Medicare Part D Stand-Alone PDPs, By Formulary Tier Design, 2006-2015
x

Exhibit 3.3

Median Cost Sharing for Medicare Part D Plans, 2006-2015, and Employer-Sponsored Plans, 2015
x

Exhibit 3.4

Median Cost Sharing for Generic and Brand-Name Drugs, by Medicare Part D Plan Type, 2015
x

Exhibit 3.5

Share of Enrollment in Medicare Part D Plans with Specialty Tiers, by Coinsurance Rate, 2006, 2010, 2014, 2015
x

Exhibit 3.6

Number of Medicare Part D Stand-Alone PDPs using Tiered Pharmacy Networks, 2011-2015
x

Exhibit 3.7

Distribution of Medicare Part D Plans, by Plan Type and Use of Tiered Pharmacy Networks, 2015
x

Exhibit 3.8

Share of Covered Drugs with Utilization Management (UM) Restrictions Across All Medicare Part D Stand-Alone PDPs, 2007-2015
x

Exhibit 3.9

Distribution of Medicare Part D Plans and Enrollment, By Type of Plan and Level of Gap Coverage, 2015
x

Exhibit 3.10

Weighted Average Monthly Premiums for Medicare Part D Stand-Alone PDPs, by Gap Coverage Level, 2015
x

Exhibit 4.1

Share of Medicare Part D Enrollees Receiving Low-Income Subsidies, by State, 2015
x

Exhibit 4.2

Number of Medicare Part D Stand-Alone PDPs, by Benchmark Status, 2006-2015
x

Exhibit 4.3

Distribution of Monthly Premiums for Low-Income Subsidy PDP Enrollees Paying Premiums, 2006-2015
x

Exhibit 4.4

Weighted Average Monthly Premiums for Low-Income Subsidy PDP Enrollees Paying Premiums, 2006-2015
x

Exhibit 4.5

Number of Low-Income Subsidy PDP Enrollees Paying Monthly Premiums, 2006-2015
x

Exhibit 5.1

Distribution of Medicare Part D Plans and Enrollment, by Plan Type and Plan Star Ratings, 2015