Medicare Part D

From Wikipedia, the free encyclopedia

Medicare Part D is a federal program to subsidize the costs of prescription drugs for Medicare beneficiaries in the United States. It was enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).^[1] The benefit started on January 1, 2006.

Contents 1 Program specifics 2 Number of participants 3 Enrollment 4 Costs to beneficiaries 5 Formularies 6 Implementation issues 7 Criticisms 8 See also 9 References 10 External links 10.1 Government resources 10.2 Articles 10.3 Other resources

[edit] Program specifics

The drug benefit is not part of the original Medicare program, which includes Part A for hospital care Part B for physician, home health and medical equipment care. Rather, it is being administered by private insurance plans that will be reimbursed by the Centers for Medicare and Medicaid Services (CMS).^[2]

Beneficiaries can obtain the Medicare Drug plan through two types of private plans: beneficiaries can join a Prescription Drug Plan (PDP) for drug coverage only or they can join a Medicare Advantage plan (MA) that covers prescriptions drugs (MA-PD).^[3] There are 34 PDP regions and 26 MA regions in the U.S. The drug plans will control drug costs through a system of tiered formularies in which lower cost drugs are assigned to lower tiers and thus are easier to prescribe.

Medicare beneficiaries have to affirmatively choose and enroll in the plan, unless they are dual eligible, having both Medicare and Medicaid. Dual eligibles are automatically enrolled into a random Prescription Drug Plan (PDP) in their area. If the dual eligible person is already enrolled in an MA-only plan, they are automatically removed from the MA plan upon enrollment in the PDP.

[edit] Number of participants

At the start of the program in January 2006, it was expected that eleven million Americans would be covered by Medicare Part D. Of those, six million people would be eligible for both Medicare Part D and Medicaid, the state-federal program for the poor, otherwise known as dual eligible. About two million people who are currently covered by employers would likely lose their employee benefits.

According to The Wall Street Journal, as of April 18, 2006, a total of 26.5 million people were benefiting from the Medicare Part D program. Conflicting numbers were released by the government on April 28, 2006 claiming that there were 13.9 million enrollees in Medicare prescription drug plans.^[4] The primary private insurance plans were UnitedHealth with 3.8 million subscribers, or 27 percent of the total, Humana with 2.4 million, or 18 percent, and WellPoint with 1 million, or 7 percent. Companies with the next largest shares were MemberHealth, with 924,100 subscribers (7 percent); WellCare Health Plans, with 849,700 (6 percent); and Coventry Health Care, with 596,100 (4 percent).

In updated figures released June 15, 2006, CMS claimed that 38.2 million individuals are now receiving drug coverage (31.8 million in Medicare, 5.4 million other sources) and 4.4 million of those eligible are not covered, including 3.2 million estimated to be eligible for extra help.^[5] The 5.4 million with coverage from other sources are getting coverage from sources that include the Department of Veterans Affairs (VA), primary coverage from an employer (from beneficiaries who are working after age 65), and state prescription drug programs that are not yet combined with Medicare Part D. Other reports from the same time period give conflicting numbers^[6] that appear to be derived from the same source data. The report also stated that more than 3.5 million Part D prescriptions are being filled each day.

CMS offers updated enrollment numbers on their website.^[7]

As of January 2006, the expected per capita drug spending was $2,250, making the total cost of the program $42.75 Billion.^[8] This budget compares with revenues of $54 Billion for Pfizer and $48.6 Billion for Johnson & Johnson, the two largest pharmaceutical companies. Other estimates put the 2006 costs at $37.4 billion.^[9] Total costs through 2015 are estimated to be $724 billion. Some of these revenues will be provided by "clawback" of revenues currently provided to the states for Medicaid. The "clawback" is a mechanism by which federal expenditures that benefit states (specifically in the realm of dual eligibles) are reimbursed back to the federal government. This reimbursement starts at 90%, but then falls to 75% in 2015. It also depends on per capita estimates of dual eligible expenditures and the number of dual eligibles that receive benefits.

[edit] Enrollment

Enrollment for most beneficiaries is voluntary. The initial enrollment period took place from November 15, 2005 through May 15, 2006. However, if a Medicare beneficiary did not enroll by the May 15 deadline, there is a late enrollment penalty of 1% per month based on the average cost of the premium until one does enroll. Some critics have argued that this is an improperly coercive practice. This penalty is levied on all future premiums, so the effect is permanent. However, if a potential beneficiary can show that they are enrolled in a "creditable" prescription plan that is at least as good as the Medicare Part D drug benefit, the penalty is waived. Part D Providers do not have the right to autonomously waive the penalty as this shows preferential treatment of members, which is forbidden by CMS.

Annual enrollment periods for Medicare Part D begin on November 15th of the prior plan year. The initial enrollment period for the second year of Medicare Part D started November 15, 2006.^[10] In its first year, beneficiaries eligible for both Medicaid and Medicare (dual eligibles) were transferred from Medicaid prescription drug coverage to a Medicare Part D plan on January 1, 2006.

Dozens of Medicare prescription drug plans are available, allowing participants to choose a plan that best meets their individual needs. Plans can choose to cover different drugs, or classes of drugs, at various co-pays, or choose not to cover some drugs at all. Medicare has made available an interactive online tool called the Prescription Drug Plan Finder that allows for comparison of drug availability and costs for all plans in a geographic area. The Prescription Drug Plan Finder can be used to perform a personalized or general search for plans; in either case, the tool allows one to enter a list of medications along with pharmacy preferences. The Plan Finder output includes the beneficiary's total annual costs for each plan, along with a detailed breakdown of the plans' monthly premiums, deductibles, and prices for each drug during each phase of the benefit design (initial coverage period, coverage gap, and catastrophic coverage period). Plans are required to update this site with current prices and formulary information every other week throughout the year. Some enrollees criticize the Prescription Drug Plan Finder as complex to use, especially for many Medicare beneficiaries who have limited computer skills and Internet access^{[citation needed]}. Nonetheless, use of this tool is essential in order for people to make an informed choice considering the actual costs for each plan.

[edit] Costs to beneficiaries

The MMA establishes a standard drug benefit that Part D plans may offer.^[11] The standard benefit is defined in terms of the benefit structure and not in terms of the drugs that must be covered. In 2006, this standard benefit requires payment of a $250 deductible. The beneficiary then pays 25% of the cost of a covered Part D prescription drug up to an initial coverage limit of $2250.

Once the initial coverage limit is reached, the beneficiary is subject to another deductible, known officially as the Coverage Gap but referred to more commonly as the "donut hole," in which they must pay the full cost of medicine. When total out-of-pocket expenses on formulary drugs for the year, including the deductible and initial coinsurance, reach $3600, the beneficiary then reaches catastrophic coverage, in which he or she pays $2 for a generic or preferred drug and $5 for other drugs, or 5% coinsurance, whichever is greater. This limit is equivalent to a total drug cost of $5100. The $3600 amount is calculated on a yearly basis, and a beneficiary who amasses $3600 in out-of-pocket costs by December 31 of one year will start their deductible anew on January 1. Most low-income subsidy patients are exempt from the donut hole and the deductible.

The only out-of-pocket costs that count toward coverage gap or catastrophic coverage limits are True Out-Of-Pocket (TrOOP) expenditures. TrOOP expenditures accrue only when drugs on the enrolled-in plan's formulary are purchased in accordance with the restrictions on those drugs. Any other purchases do not count toward either the coverage gap or catastrophic coverage. Monthly premium payments do not count towards TrOOP.

Updated estimates indicate that 8 percent or fewer of Medicare beneficiaries (up to 3 million or less)may face the coverage gap – and even these beneficiaries have some opportunities to reduce their costs.^[12],

In 2007, the structure of the benefit remains the same, but the amounts involved increase.^[13] The deductible phase will cover the first $265 dollar of the benefit, the Initial Coverage Limit will extend from $265 to $2400 (with a maximum patient pay in that phase of $533.75), the donut hole will extend from $2400 in total drug spend to $5451.25. From a TrOOP perspective, the catastrophic phase kicks in at $3850.

It should be noted that the thresholds above related only to the "standard" defined benefit structure. Individual health insurance providers often offer their own variations of the standard benefit (sometimes known as "enhanced" benefit plans) that may eliminate the deductible phase completely and/or extend the Initial Coverage limit to shrink the size of the donut Hole. Typically, the premiums for these enhanced plans are higher to offset the increased benefit.

[edit] Formularies

Part D plans are not required to pay for all covered Part D drugs.^[14] They may establish their own formularies, or list of covered drugs for which they will make payment, as long as the formulary and benefit structure are not found by CMS to discourage enrollment by certain Medicare beneficiaries. Part D plans that follow the formulary classes and categories established by the United States Pharmacopoeia will pass the first discrimination test. Plans can change the drugs on their formulary during the course of the year with 60 days notice to affected parties.

Typically, each Plan's formulary is organized into tiers, and each tier is associated with a set copay amount. Most formularies have between 3 and 5 tiers. The lower the tier, the lower the copay amount. For example, Tier 1 might include all of the Plan's preferred generic drugs, and each drug within this tier might have a copay of $5 - 10 per prescription. Tier 2 might include the Plan's preferred brand drugs with a copay of $20 - $30, while Tier 3 may be reserved for non-preferred brand drugs which are covered by the plan at a higher copay level - perhaps $40 - $50. Tiers 4 and higher typically contain specialty drugs, which have the highest copays because they are generally quite expensive.

The Plan's tiered copay amounts for each drug only apply during the initial period before the coverage gap. Once in the gap, the person must pay for 100% of the prescription costs, based on prices established by the Plan.

Availability of tools such as RxPlan allow physicians and other care providers to check the coverage information for most U.S. health plans including Medicare Part D and State Medicaid plans to look up information by drug names or therapeutic category.

[edit] Implementation issues

• The Medicare Part D marketplace is an evolving, dynamic environment with multiple players attempting to achieve individual goals.
• Plan and Health Care Provider goals are not aligned: PDP's and MA's are rewarded for focusing on low cost drugs to all beneficiaries, while Providers are rewarded for quality of care – sometimes involving expensive technologies.
• Plans are charged with conflicting goals: They must offer access to a wide variety of drugs that beneficiary doctors prescribe, but also offer restrictive formularies and hence lower prices and premiums.
• More conflicting goals: Plans are required to have a tiered exemptions process for beneficiaries to get a higher-tier drug at a lower cost, but plans must grant exception when medically necessary. However, the rule denies beneficiaries the right to request a tiering exception for certain high-cost drugs.
• Lack of standardization: Drugs appearing on Tier 2 in one plan may be on Tier 3 in another. Tier 2 drugs may have a different co-pay with different plans. There are plans with no deductibles and the coinsurance for the most expensive drugs varies widely. Some plans may insist on step therapy, which means that the patient must use generics first before the company will pay for higher priced drugs. There is an appeal process, but the burden is on the beneficiary, as the insurer will not pay for the desired drug during the appeal process.
• Standards for electronic prescribing for Medicare Part D conflict with regulations in many US states. ^[15]

[edit] Criticisms

By the design of the program, the federal government it is not permitted to negotiate for more favorable rates on drugs. Many critics regard this as poor stewardship of tax dollars, and cite the vast sums of campaign contributions that pharmaceutical companies have delivered to American lawmakers as the reason this plan was accepted. However, other experts, such as Stanford Professor Alain Enthoven, argue that it is not obvious that allowing the government to negotiate with drug companies would lower prices.^[16] Enthoven says that because a drug company holds a monopoly on its drug, bargaining power comes not from size of the purchaser, but from the ability of the purchaser to say no and to not cover the drug. There is no evidence that the government is more willing to not cover a drug than private health plans, and therefore it is not obvious that the government could negotiate lower prices.

The plan requires Medicare beneficiaries whose total drug costs reach $2250 to pay 100% of prescription costs until $3600 is spent out of pocket. This coverage gap is known as the "Donut Hole." While this coverage gap will not affect the majority of program participants, many will find themselves without prescription drug coverage for this portion of the plan. Critics of this term note that a standard 3" donut with a 1" hole is almost 90% edible donut, destroying the vindictive application of this term.

Medicare Part D initially had a six month enrollment window of November 2005 to May 2006. Beneficiaries who enrolled after this window were penalized by a 1% increase in the current average premium price per month they waited. This time constraint pressured beneficiaries to select one of a large number of plans from a complicated system of tiers, and once a beneficiary committed to a plan, it could, in some cases, not be changed.

[edit] See also

• Biotechnology
• Health
• Medicaid
• National pharmaceuticals policy
• Pharmaceutical company
• Pharmacology
• Prescription drug prices in the United States

[edit] References

[edit] External links

[edit] Government resources

• Centers for Medicare & Medicaid Services (CMS).
• Medicare.gov, the official website for people with Medicare.
  • Prescription Drug Coverage homepage at Medicare.gov, a central location for Medicare's web-based information about the Part D benefit.
    • "Landscape of Plans", at Medicare.gov, state-by-state breakdown of all Part D plans available by area, including stand-alone (drug coverage only) plans and other coverage plans.
    • Enroll in a Medicare Prescription Drug Plan at Medicare.gov, the web-based tool for enrolling online in a Part D plan.
  • Official Medicare publications at Medicare.gov, includes official publications about the Part D benefit.
    • Medicare & You handbook for 2006 at Medicare.gov, includes information about the Part D benefit.
  • Information about the 1-800-MEDICARE helpline from Medicare.gov, a 24X7 toll-free number where anyone can call with questions about the Part D benefit.

[edit] Articles

• "Medicare Part D Gets a Bipartisan F", by Jerry Mazza, Online Journal, February 3, 2006.
• "Part D From Outer Space", by Trudy Lieberman, The Nation, January 30, 2006.
• "The Great Society Meets the 21st Century", by Michael Johns, Orthopedic Technology Review, January 2004.

[edit] Other resources

• "Patient's Digest - Your Guide To Medicare Part D", Help is available in the premiere issue of Patient's Digest, a publication devoted to providing clear, concise and practical information for patients.
• "Medicare Part D Briefing Room", from the American Society of Consultant Pharmacists.
• "Medicare Prescription Drug Benefit Weekly Q&A Column", from the Kaiser Family Foundation.
• "My Medicare Matters", from the National Council on Aging.
• "Medicare Part D Health Issues", from the National Senior Citizens Law Center.
• "Bob Dole On Medicare", from Enrollment/Education campaign of former Senator Bob Dole
• "Medicare Prescription Drug Plan Guide", from America's Health Insurance Plans.