Medicare Part D

Medicare Part D is a prescription drug benefit for people with Medicare (United States) in the United States. It was enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).http://www.cms.hhs.gov/PrescriptionDrugCovGenIn/ The benefit started on January 1, 2006.

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 offered through private insurance plans that will be reimbursed by the Centers for Medicare & Medicaid Services (CMS).http://www.medicareadvocacy.org/FAQ_PartD.htm Medicare beneficiaries will have to affirmatively choose and enroll in the plan, which is called Part D.

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 plans plan (MA) that covers prescriptions drugs (MA-PD).http://www.kff.org/medicare/upload/7044-02.pdf 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.

Size of the program

At the start of the program in January 2006, it was expected that eleven million Amerians 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 eligibles". 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, 19.7 million beneficiaries were obtaining pharmaceutical insurance from Medicare.http://tricare.osd.mil/eenews/downloads/042106%20Are%20Medicare%20Estimates%20Too%20High.doc Of that group, 5.8 million already had coverage from Medicaid. An additional 6.8 million people were obtaining pharmaceutical coverage from former employers; the coverage is partially subsidized by Medicare. This means that, as of April 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 That report claimed that there were 13.9 million enrollees in Medicare prescription drug plans.http://www.nytimes.com/2006/04/29/washington/29medicare.html?_r=1&oref=slogin 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).

As of January 2006, the expected per capita drug spending was $2,250, making the total cost of the program $42.75 Billion.http://www.medicareadvocacy.org/FAQ_PrescDrugs.htm 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.http://www.kff.org/medicare/upload/7044-02.pdf 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.

Enrollment

Enrollment for most beneficiaries is voluntary. The initial enrollment period took place from November 15, 2005 till May 15, 2006. However, if a Medicare beneficiary did not enroll by the May 15 deadline, there is a 1% per month penalty based on the average cost of the premium until one does enroll, which some critics have argued is improperly coercive. 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. The next enrollment period begins November 15, 2006.http://www.medicareadvocacy.org/PrescDrugs_PartDTimeline.htm On January 1, 2006, beneficiaries eligible for both Medicaid and Medicare (dual eligibles) were transferred from Medicaid prescription drug coverage to a Medicare Part D plan.

Costs to beneficiaries

The MMA establishes a standard drug benefit that Part D plans may offer.http://www.medicareadvocacy.org/FAQ_PrescDrugs.htm] 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 as the “doughnut 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. The only out-of-pocket costs that count toward "doughnut hole" 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 "doughnut hole" or catastrophic coverage.

Estimates of how many beneficiaries will be subject to the "doughnut hole" range from 3.4 millionhttp://healthdecisions.org/Medicare/News/default.aspx?doc_id=71146 to 6.9 millionhttp://www.kff.org/rxdrugs/index.cfm, although as of the 3rd of June, 2006, there were already 3.4 million beneficiaries who were in the "doughnut hole."

Formularies

Part D plans are not required to pay for all covered Part D drugs.http://www.medicareadvocacy.org/FAQ_PrescDrugs.htm#Formularies 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.

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.
In short, the most confusing part of Medicare Plan D is the lack of standardization. Drugs appearing on Tier 2 in one plan may be on Tier 3 in another. Furthermore, Tier 2 drugs may have a different co-pay with different plans. Also, there are plans with no deductibles and the coinsurance for the most expensive drugs varies widely. In addition, 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, however,the burden is on the subscriber as the insurer will not pay for the desired drug during the appeal process.

References

External links

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.