Growing Reinsurance Payments Weaken Competitive Bidding in Medicare Part D

Jeah Jung, Roger Feldman

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


Objectives: To examine variation in risk-adjusted reinsurance payments across Part D plans, analyze its implications for the program, and explore options to reduce reinsurance payments. Data/Study Design: 2007–2015 Part D Plan Payment and Premium data; 2010–2013 Part D Prescription Drug Event data; and 2013 Part D Plan Formulary Files. Principal Findings: Risk-adjusted reinsurance payments varied widely across plans at a given out-of-pocket (OOP) premium. The variance in risk-adjusted reinsurance in common OOP premium ranges increased between 2010 and 2015. High risk-adjusted reinsurance payments were negatively correlated with use of utilization management tools for high-cost drugs. Conclusions: Growing reinsurance payments shrink plans’ liability for managing drug spending for high-cost enrollees, creating plan moral hazard, and making OOP premiums a noisy signal of plans’ total costs.

Original languageEnglish (US)
Pages (from-to)4371-4380
Number of pages10
JournalHealth Services Research
Issue number6
StatePublished - Dec 2018

All Science Journal Classification (ASJC) codes

  • Health Policy


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