Medicare Part D: The Silver Bullet For Seniors

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Medicare Part D
The Silver Bullet For Seniors?
Medicare Part D
The Silver Bullet For Seniors?
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Charles E. Lea
Panelists Tony Hammond, ASA,MAAA VP, Health
Services Chief Actuary, Sr. Products Humana
Inc. Tricia Neuman, Ph.D. VP, Kaiser Family
Foundation
Panel Moderator
Charles E. Lea
President Lea Associates
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Medicare Part D Implementation

• The Medicare Modernization Act added prescription
  drug coverage to Medicare on 1/1/06 through
  stand-alone Prescription Drug Plans (PDP) and
  Medicare Advantage Plans (MA-PD)
• 42 million Medicare beneficiaries affected
• Many operational hurdles overcome
• Some still to resolve, but the result is

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Medicare Part D Implementation

• 75 or more of enrollees
  are satisfied
• Competitive bidding lowered
  the Part D basic premium 42 below
  expectations
• 90 of all Medicare beneficiaries
  are receiving prescription
  drug coverage
• Medicare beneficiaries are
  living better, healthier lives,
  and they are saving money

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Overview

• Customer Satisfaction
• Regulatory Challenge
• Volume Challenge
• Product Development
• Operations
• The New Landscape and Beyond

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Customer Satisfaction

• CMS reported 75 or more of beneficiaries are
  satisfied
• Among dual eligibles, another survey showed 90
• American Health Insurance Plans of America (AHIP)
  and CMS report plan sponsors are exceeding
  expectations plans more affordable with better
  benefits
• JD Power evaluated plan sponsors in three states
  identifying top service providers (Humana rated
  as 1 in Florida and 2 in Texas)
• Plans developed better tools for sharing benefit
  history
• AHIP created Pharmacy and Beneficiary Issue
  Advisory Groups to build a bridge of cooperation
  between plans and other stakeholdersstandardizing
  messages to pharmacies, simplifying the
  exceptions process, supporting pharmacists and
  ensuring continuity of care

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Regulatory Challenge

• An aggressive timetable for all, including CMS
  much went right but much went wrong, too
• Bids had to be submitted in June but new bid
  forms were created as late as May
• Regulations were being issued right up to January
  1st and beyond for operations
• Point of Service (POS) enrollment
  rules were problematic
• Low Income Subsidy (LIS) rules
  were hindered by data issues

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Volume Challenge

• Existing Medicare plan sponsors had to enhance
  data flow capabilities and stress test
  but for how many new members?
• A new program with totally new
  benefit designs for seniors means
• Lots of phone calls
• New vendors, back-ups for back-ups
• New methods to take applications
• Electronic

• Telephonic

• Full employment for sales, actuaries,
  programmers, customer service, product
  development

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Product Development

• Regulatory issues and delays
• Bid instructions incomplete MA and PD
  disconnected
• Guidance delayed still waiting on some
• What do the different segments
  of Medicare consumers want?
• Solving the puzzle
• What will the cost be?
• Actuarial equivalence?
• National plan designs?

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Operations CMS

• Data Inconsistencies
• LIS from multiple sources inconsistent
• Monthly Membership Report (MMR) and Transaction
  Reply Report (TRR) at odds
• Date of death without termination record
• Data Integrity
• Special TRRs
• Code 165
• Phantom and erroneous transactions

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Operations CMS

• Change Control
• New codes and data definitions without notice
  caused service issues
• Access to Care
• LIS delays caused service issues and rework
• SSA Deductions
• Lags and inconsistencies
• Part B premium reduction lags
• Changes in deduction

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Operations Plan Sponsors

• Call Volume
• Exceeded expectations
• Refitting in flight
• Constant vigilance
• CMS released operational
  standards
• Average Speed of Answer (ASA)

• Enrollment Applications
• Incomplete or inaccurate data (address, agent,
  attachments)
• Wrong plan
• Wrong agent

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Operations Plan Sponsors

• CMS Transmissions
• Changes
• Inconsistencies and errors created significant
  testing and service delays
• Disenrollments
• SSA Deductions
• Created billing issues for plans

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Operations Pharmacies

• Confusion led some to refuse to honor alternative
  forms of proof of coverage
• Competitors logos on cards helped plan sponsors
  with cost but generated confusion for pharmacies

• Calls from Pharmacists exceeded expectations
  generating average speed to answer of 8 minutes
  in January that was reduced to under 30 seconds
  by May
• AHIP, created standard messaging to promote
  consistent use of key terms and standardized
  codes for informing pharmacists when drugs are
  included or excluded from Part D

Source AHIP Testimony on Medicare Part D
Program, U. S. House Ways Means Committee, June
2006
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Operations PDE Reporting

• Guidance for the prescription drug event (PDE)
  first issued August 2005 at a CMS training
  conference
• Guidance inconsistent, sometimes reversing
  direction
• Lack of guidance on various issues such as
• Plan to Plan
• State to Plan
• LIS
• SS premium withhold
• Etc.
• Lack of subject matter experts to resolve issues
  on calls sometimes led to uncertain
  direction
• Limitations on file submission size
• Enrollment data issues
• Plan-to-plan issues still a problem

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Competitors MA-PD Membership as of July 26, 2006
United Healthcares acquisition of PacifiCare
made it the largest MA-PD player in the U.S.,
with Humana the second largest
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Medicare Advantage Plans Have Grown Substantially
During 2006, With PFFS Plans Leading The Way

• As of July 2006, more than 7 million people were
  enrolled in some type of Medicare Advantage plan
• This accounts for about 17 of all Medicare
  beneficiaries, up from 14 in December 2005

• PFFS plans have accounted for a large portion of
  this growth
• August 2006 PFFS plans account for over 800,000
  members
• Up from just 20,000 members 3 years ago
• Humana is the largest provider of PFFS plans with
  460,000 enrollees in July 2006
• WellPoint has taken notice of this growth and
  plans to offer PFFS in all 50 states in 2007
• Up from 15 states in 2006

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Competitors PDP Membership as of August 2006

• Comprise nearly 50 of the over 16 million PDP
  members in the U.S.
• The top 10 companys account for over 82 of the
  total

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Competitors PDP Membership as of August 2006
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Nationally, a Few Key Companies Comprise the Bulk
of Medicare Business
Source Medicare Advantage, Cost, PACE, Demo, and
Prescription Drug Plan Organizations - Annual
Report by Plan (v07.26.06), CMS Humana Senior
Products Team http//www.cms.hhs.gov/PrescriptionD
rugCovGenIn/02_EnrollmentData.asp
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The New Landscape and Beyond

• Part D and Humanas aggressive growth in PFFS
  plans has changed the complexion of Medicare
  plan sponsors now and for the future
• Expect more aggressive competition in PFFS
• Baby Boomers will fuel expansion in Part D/MA
• Competition in Part D will drive some
  consolidation
• Even with lower costs for Part D than expected,
  Congress will eventually have to deal with the
  total cost of Medicare as it is inadequately
  funded under current law

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Charles E. Lea
Panelists Tony Hammond, ASA,MAAA VP, Health
Services Chief Actuary, Sr. Products Humana
Inc. Tricia Neuman, Ph.D. VP, Kaiser Family
Foundation
Panel Moderator
Charles E. Lea
President Lea Associates
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Medicare Part D One Year Later
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Medicare Covers A Diverse Population
SOURCE Medicare Current Beneficiary Survey, 2002
Cost and Use File Income data from CBO, July
2004.
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Overview

• Part D represents fundamentally
  new approach for delivering
  a Medicare benefit
• Drug benefit is offered exclusively
  through private organizations,
  not directly traditional Medicare

• Includes new means-tested benefit for low income
  beneficiaries, with income and asset test
• Administered by CMS with other government
  agencies, including Social Security, IRS, and
  State agencies, including Medicaid, Dept of
  Insurance, Dept of Aging, and others

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Beneficiaries in Most States Have A Choice
of 50 PDPs in 2007
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All Beneficiaries Have Access to One or More
Medicare Advantage Plans in 2007
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According to HHS, 90 of all Medicare
Beneficiaries have creditable Drug Coverage
(June 2006)
Total Number of Beneficiaries 42.6 Million
SOURCE Centers for Medicare and Medicaid
Services (CMS), State Enrollment Data, June 11,
2006.
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Rough Estimate of Prescription Drug Coverage in
Louisiana (June 2006)
Total Number of Beneficiaries 659,249
SOURCE Centers for Medicare and Medicaid
Services (CMS), State Enrollment Data, June 11,
2006.
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Standard Medicare Prescription Drug Benefit, 2007
Annual premium based on 27.35 national average
monthly beneficiary premium (CMS, August 2006).
Rounded. SOURCE Kaiser Family Foundation
illustration of standard Medicare drug benefit as
updated by CMS for 2007.
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The Doughnut Hole
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Part D and the Doughnut Hole

• An estimated 11 million Part D enrollees had no
  coverage in the doughnut hole in 2006
• Of that total, 4 million Part D enrollees were
  expected to have spending in the doughnut hole
• Between 2006 and 2007, the number of PDPs that
  cover brand-name drugs in the doughnut hole
  decreased somewhat
• From 33 PDPs in 2006 to 27 PDPs in 2007
• Of the 53 PDPs in LA, 1 covers brand and generics
  in the doughnut hole (110 per month) and 14
  PDPs cover generics in the doughnut hole
• In 2006, 1 PDP covered brand and generics in the
  doughnut hole (69.92 per month)

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Low-Income Part D Subsidies
Nationwide, 1 in 4 beneficiaries estimated to be
eligible for low-income Part D subsidies are not
receiving them
Includes 0.1 million (1) beneficiaries who are
anticipated to experience facilitated
enrollment. SOURCE Centers for Medicare and
Medicaid Services (CMS), State Enrollment Data,
June 11, 2006.
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Part D Plans Vary Widely

• PDP premiums range from 9.50 to 135.70
• 9 of PDPs are standard, about half are
  actuarially equivalent, and 43 are enhanced
• Formularies, tier placement, cost-sharing by tier
  and utilization management tools all vary widely
  across plans
• Beneficiaries may be unaware differences

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Choice Matters Even for Healthy Seniors
Meet Carolyn Carolyn, age 60, on SSDI and is
about to go on Medicare. She has rheumatoid
arthritis and other chronic conditions and takes
8 medications.
Meet Esther Esther is 67 and lives in
Bethesda. She takes only one drug, Fosamax, for
her osteoperosis.

• There is a 3-fold difference between the most and
  least expensive option in her area about 800

• There is a 3-fold difference between the most and
  least expensive plan about 8,000

Esther would pay between 484 and 1,295 per year
in a PDP, and between 360 and 928 in an MA-PD
plan, including premiums, depending on the plan
she chooses.
Carolyn would pay between 4,202 and 13,468 per
year in a PDP, and between 4,245 and 13,425 in
an MA-PD plan, including premiums, depending on
the plan she chooses
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Only a Third of Surveyed Seniors Say There are
Important Differences Among Part D Plans
ASKED OF SENIORS ONLY Would you say there are
important differences among the Medicare drug
plans now available, or do you think they are all
basically the same?
Source KFF/HSPH The Publics Health Care Agenda
for the New Congress and Presidential Campaign
(conducted November 9-19, 2006)
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Most Didnt Call 1-800 Medicare or Go Online
Source Kaiser Family Foundation Health Poll
Report Survey (conducted April 6-11, 2006)
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Enrollment in Medicare Drug Plans Is
Concentrated in a Few Organizations, 2006
Top 10 Parent Organizations
SOURCE CMS Medicare Drug Coverage Enrollment
Data, July 26, 2006.
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In Louisiana, 3 plans account for 50 of PDP
enrollment (April 2006)
SOURCE CMS Medicare Drug Coverage Enrollment
Data, April 27, 2006.
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Most Seniors Who Say They Are Enrolled in a Part
D Plan are Satisfied But One in Four Report
Problems
All in all, have your experiences using your new
Medicare drug plan been
Have you experienced problems associated with
your Medicare drug plan, or not?
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Problems Filling Prescriptions by Number of
Prescriptions and by Income (June 2006)
Among Seniors Who Have Used Their Medicare Drug
Plans
Percent who report having problems related to
getting prescriptions by the number of
prescriptions taken daily
Percent who report having problems related to
getting prescriptions by 2005 income
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Message to Congress About Medicare Part D
Among Seniors Overall, what message would you
send to policymakers in Washington regarding the
new Medicare drug benefit?
Note Dont know/refused responses not
shown Source KFF/HSPH The Publics Health Care
Agenda for the New Congress and Presidential
Campaign (conducted November 9-19, 2006)
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Seniors, Pharmacists and Doctors Agree Medicare
Drug Benefit is Too Complicated
Percent Who Agree or Disagree that the Medicare
Prescription Drug Benefit is Too Complicated
Source for seniors KFF/HSPH The Publics Health
Care Agenda for the New Congress and Presidential
Campaign (conducted November 9-19, 2006) Source
for pharmacists Kaiser Family Foundation
National Survey of Pharmacists (conducted April
21-June 27, 2006) Source for doctors Kaiser
Family Foundation National Survey of Physicians
(conducted April 25-July 8, 2006)
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Support for Limiting Plan Choice
Asked of Seniors Only Which statement better
reflects your opinion?
Statement A Medicare should offer seniors dozens
of plans so they can select their own
Statement B Medicare should select a handful of
plans that meet certain standards, so seniors
have an easier time choosing
Dont know/ Refused
Source KFF/HSPH The Publics Health Care Agenda
for the New Congress and Presidential Campaign
(conducted November 9-19, 2006)
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Proposals to Change Medicare Part D
Percent of seniors who favor each of the
following
Somewhat Favor
Strongly Favor
Source KFF/HSPH The Publics Health Care Agenda
for the New Congress and Presidential Campaign
(conducted November 9-19, 2006)
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Policy Issues for the Future

• Drug prices
• Doughnut hole
• Outreach
• Part D
• Low-Income
• Asset test
• Penalty for late enrollment
• Simplification
• Consumer protections
• Monitor program to assess how well it works for
  low income, chronically ill, and most vulnerable
  beneficiaries

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Questions and Answers
Questions and Answers