Brief Overview of Medicare Part D and Part C

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1 Brief Overview of Medicare Part D and Part C National Health Policy Forum February 22, 2007 Jack Ebeler

2 Medicare Part D Brief history Overview Plans Payments Benefits Low-income subsidies Preview of issues

3 Medicare Part D: Brief history Outpatient prescription drugs not included in original Medicare benefits; became significant uncovered acute care liability for beneficiaries First included in Medicare in late 1980s as part of Medicare catastrophic coverage act: but repealed immediately Drugs remained uncovered acute care liability until Medicare Modernization Act of 2003 First full year of coverage CY 2006

4 Out of pocket spending by Medicare beneficiaries, 2002 (prior to MMA) Medical serv/supplies, 21% Rx Drugs, 22% In/out hosp, 9% Dental, 8% SNF/HH, 3% LTC, 36% Kaiser Family Foundatioon

5 Medicare Modernization Act of 2003 Prescription drug coverage: overview Voluntary, premium-based, with general revenue subsidy Only available through private plans No government price negotiation re: payment for drugs National bidding/benchmarking/payment process: beneficiary pays full amount above national average Benefit design: balance cost/coverage Cost sharing with catastrophic limit True out of pocket cost (TrOOP) limits Focus on low income subsidy program Medicaid beneficiary shift to Medicare/ state clawback Subsidies for employer/union retiree plans with coverage

6 PDP Regions/Plan HHS established 34 Prescription Drug Plan (PDP) Regions, 26 MA plan regions (single state/ multistate) Two types of plans available for Part D PDP only: beneficiary gets parts A/B of Medicare through traditional Medicare FFS program Medicare Advantage/PD (MA-PD) Plan: beneficiary gets parts A/B of Medicare, and Part D, through MA plan Beneficiaries have choice of about 50 plans in most regions Annual coordinated election period November 15-December 31; other election periods (initial/special)

7 Payments to plans: general National average bidding, benchmarking process Medicare subsidizes about 75% of average premium; beneficiary pays about 25% Beneficiary pays less for plans below average, and more for those above that average Risk adjusted payments from Medicare Subsidies for those with low income, so long as they enroll in plans with average or lower premium (with special adjustments) Special subsidies for employment-based plans that offer prescription drug coverage

8 Benefits: Standard Medicare Prescription Drug Benefit, % Plan pays 15% Medicare pays 80% $5,451 total drug costs $3,850 OOP (TrOOP) Enrollee Pays 100% $3,051 Coverage Gap Doughnut Hole $2,400 total drug costs 25% 100% Plan pays 75% $265 deductible $265 Premium Source: Kaiser Family Foundation 11/06 Fact Sheet

9 Benefit options: standard, actuarially equivalent, and enhanced benefits 2006 % 2006 % Plans 2007 % Plans Enrollees Standard 22% 9% 12% Actuarially equivalent 61% 48% 41% Enhanced 17% 43% 47% Hoadley, et al, Kaiser Family Foundation,,Nov 2006

10 Medicare beneficiaries, by income as percent of Federal Poverty Level (FPL), 2003 >400% FPL, 20% <100% FPL, 19% % FPL, 11% % FPL, 29% % FPL, 21% MedPAC, Data Book, 2006

11 Low income protections, Part D Complicated scheme (need to consult detailed chart). In general Full dual eligibles (Medicare/Medicaid), and others with income <135% of federal poverty level and assets of <$7,500: no premium, no deductible, no coverage gap, very limited copays ($1-$2.15 generic; $3.10-$5.35 brand) Those with income below 135% of federal poverty level but higher assets ($11,710) pay limited deductible, some coinsurance Those with income up to 150% of federal poverty level pay sliding scale premium

12 Beneficiary eligibility for low income subsidy for Part D (in millions) Total Medicare 43.0 Eligible for low income subsidy 13.2 Status: Medicaid duals/auto enrolled 7.3 Applied/accepted 1.7 Other creditable coverage 1.0 Eligible, not enrolled 3.2 Kaiser Family Foundation Fact Sheet, 2006

13 Medicare beneficiary enrollment in drug benefits Type of Plan 2007 Enrollees PDP Plans 16.7 million Medicaid duals 6.3 million PDP 10.4 million MA-PD Plans 6.7 million Creditable employer/union coverage* Other creditable coverage* No creditable coverage* 10.4 million 5.4 million 4.4 million PDP/MA PD from Mathematica Monthly Tracking, Jan, 2007; * creditable coverage from Kaiser Family Foundation, November, 2006

14 Additional provisions Benefits subject to formulary CMS policy framework, requirements Plan options within that framework Typically have tiered copayments Pharmacy benefit management typical 1% per month late enrollment penalty

15 Preview of issues Secretarial authority to negotiate drug payment levels Benefit design/ doughnut hole Formulary design Disclosure/transparency Medicaid/dual eligibles Number of competitors: Too many? Too few? Employer plan trends?

16 Medicare Part C Brief history Medicare Advantage Plans Enrollment Payment Preview of issues

17 Medicare Part C: brief history Little attention to private plan options in original Medicare intermediaries and carriers were the private plans to implement the program With growth and favorable view of HMOs in 1970s, beginning of demonstration program 1983: HMOs brought into Medicare ( TEFRA HMOs ) 1997: Revised into Medicare+Choice program 2003: Revised into Medicare Advantage as part of MMA

18 Medicare enrollment in private health plans (MA plans and their predecessors), '00 '01 '02 '03 '04 '05 '06 MedPAC Data Book 2006

19 Medicare Advantage Plans Medicare Advantage is a vehicle for providing Medicare Parts A and B; Medicare Part D; Supplemental benefits Beneficiaries sort through a mix and match set of decisions Traditional Medicare Supplements to Medicare Medicare savings programs for low income Part D, and low income subsidy to Part D Medicare Advantage Plans with/without Part D Medicaid Employer/Union plans

20 Mechanisms to Access Medicare and Supplemental Benefits None PDP only MA/ MA- PD Part D Supp X X Medi- Gap Part D Drugs X X Parts A/B Supp X X Parts A/B Trad. M Care Trad. M Care X Trad. M Care

21 Enrollment Annual coordinated election period: November 15 December 31 of each year Open enrollment period: January 1 March 31 (one switch to comparable plan) Other enrollment periods: initial, special

22 Medicare Advantage Payment Benchmark set through combination of county-specific rates based on FFS, other floors, and premium bids under new MA program If plan bids below benchmark, 25% rebate goes to government, 75% retained for beneficiary premium reduction/benefit enhancement Risk adjusted payments

23 Medicare Advantage Enrollment, January 2007 (in thousands) MA Local Coordinated Care 5,988 HMO 5,575 Local PPO/POS 413 Regional PPO 100 Private FFS 1,047 Cost 295 Other 299 TOTAL MEDICARE ADVANTAGE Medicare Tracking Report, Mathematica/ Kaiser Family Founation, Jan ,729

24 Medicaid/Dual Eligibles The dual eligibles about 16 percent of Medicare beneficiaries, have lower incomes than the rest of the Medicare population and are more likely to: Older Disabled Report poorer health status This dual eligible population accounts for: 16 percent of Medicare beneficiaries 24 percent of Medicare spending MedPAC Data Book 2006

25 Medicare Savings Programs for low income individuals Category Income Resources Benefits Full Medicaid duals SSI Level FPL) $2,000 $3,000 QMB <100% FPL $4,000 $6,000 SLMB % FPL $4,000 $6,000 QI % FPL $4,000 $6,000 M Caid M Care prem., copays M Care prem., copays M Care prem. M Care prem Nemore et.al., Center for Medicare Advocacy, 2006

26 Preview of issues Payment levels compared with FFS Plan type issues: PFFS Future of special needs plans Regional PPOs Disclosure/transparency

27 For further information: Jack Ebeler (phone) (fax)