The Perils and Promise of Medicare Part D

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The Perils and Promise of Medicare Part D

• Marc Steinberg, Families USA
• Making Public Programs Work for Communities of
  Color
• January 25, 2006 Washington, DC
• msteinberg_at_familiesusa.org
• [phone]

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Medicare Modernization Act of 2003 (MMA)

• Biggest changes in Medicares history
• Biggest changes to Medicaid in a generation or
  more
• Major philosophical change in delivery of public
  coverage
• Dangers, opportunities for beneficiaries,
  especially minorities

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Medicare Beneficiaries by Race/Ethnicity,
2002source Kaiser, 2005
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Medicare Benefits

• Part A hospital coverage
• Part B outpatient coverage
• Part C managed care (Medicare Advantage)
• Option for beneficiaries varies by region
• About 15 of all beneficiaries enrolled 2005
• Received big subsidies under 2003 law
• No outpatient Rx coverage prior to 2006

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Part D Prescription Drugs

• 2003 MMA added Medicare Part D Rx Benefit
• Benefit delivered by private plans ONLY
• Basic benefit with lots of variation
• Substantial cost-sharing for most beneficiaries
• Subsidy for low-income beneficiaries
• Formularies and utilization management
• Pharmacy Network
• Voluntary, opt-in enrollment
• Open to anyone with Part A or Part B
• Penalties for late enrollment

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Overall concerns

• Huge number of plans (often 40 in a region)
• Overwhelming number of variables to consider
• Troubled enrollment systems
• Intersection with other retiree coverage
• Substantial penalties for late enrollment
• Culturally appropriate outreach is new challenge
  for Medicare

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Low-Income Provisions

• MMA includes substantial assistance for
  low-income beneficiaries
• Premiums and co-payments heavily subsidized
• Limited choice of plans
• Enrollment automatic for dual eligibles and some
  others

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Dual Eligibles Medicares Neediest

• 6.2 Million Full Dual Eligibles
• Qualify for Medicare based on age or disability
• Qualify for Medicaid based on income
• Poorer and sicker than average beneficiaries
• 60 live below poverty
• 71 have a functional limitation (vs. 45 of
  non-duals)
• Medicaid covered Rx prior to January 1, 2006

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Dual and non-dual beneficiaries by
race/ethnicity, 2002source MedPAC, 2005
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Changes from Medicaid for dual eligibles

• Higher co-pays in about half the states indexed
  to inflation
• Co-pays not automatically waived
• Formularies with utilization management
• Duals can change plans monthly
• Some drugs not covered under Part D
• More restrictive appeals

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Automatic enrollment of dual eligibles

• Automatically assigned to low-cost standard plan
  in region
• Random assignment for those who do not choose
• Right to change plans at any time
• Those in Medicare Advantage (MA) assigned to that
  MA-PD
• Plans should provide all current meds during
  initial transition

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Non-dual Low-Income Coverage (Extra Help)
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Concerns for non-dual low-income beneficiaries

• Enrollment voluntary must sign up
• Exception Medicare savings programs
  beneficiaries
• Enrollment is 2-step process
• Must apply and get subsidy (Extra Help) AND
  choose Part D plan
• Major outreach needed Social Security
  Administration is lead agency

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Where we are so far

• Confusion
• Complexity of plans
• Initial new enrollment about 3.6 million as of
  1/13/06
• Chaotic transition for dual eligibles
• Conflict with retiree coverage
• Enrollment or subsidy info lost
• Transitional benefits limited
• Many states have filled gaps
• Slow enrollment for Extra Help
• About 1 million out of 5.5 7 million eligible
  have enrolled

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Conclusion Agenda for improvement

• Short term make it work
• Correct enrollment for all low-income
• Deliver transitional benefits
• Standardize exceptions and appeals
• Long term fix the program
• Liberalize / drop asset test for subsidy
• Allow Medicare to negotiate directly for lower
  prices and richer benefit

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Dual eligible coverage
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Part D Basic Benefit