Juliette Cubanski, Ph.D.

1
MEDICARE PART D Where Do We Stand?Where Are We
Going?

• Juliette Cubanski, Ph.D.
• The Henry J. Kaiser Family Foundation
• Medicare Policy Project - www.kff.org/medicare
• Families USA
• Health Action 2007
• Washington, D.C.
• 25 January 2007

2
Overview
Exhibit 1

• Part D Plan Landscape and Enrollment
• Private plan availability is higher in 2007 than
  2006, and there continues to be wide variation in
  coverage and benefit design
• The majority of beneficiaries now have drug
  coverage, but around 10 (4 million) are not
  enrolled
• Views and Experiences of Beneficiaries and
  Providers
• Most enrollees say they are satisfied with their
  Part D plans so far, but many are still
  vulnerable to high out-of-pocket costs
• Pharmacists and physicians have played a key role
  in helping beneficiaries navigate their Part D
  plans
• Unanswered Questions and Issues to Monitor

3
Part D - The Medicare Drug Benefit
Exhibit 2

• Drug benefit is offered exclusively through
  private organizations, not traditional Medicare
• 2 types
• Stand-alone prescription drug plans (PDPs) that
  supplement traditional fee-for-service Medicare
• Medicare-Advantage prescription drug (MA-PD)
  plans integrated medical and drug benefits
  primarily HMOs, PPOs
• Plans can change from year to year add, drop,
  modify
• New approach to delivering a Medicare benefit
• Take-up is voluntary, not automatic
• Standard benefit available, but plans can vary
• Coverage and cost depends on plan chosen
• Additional subsidies (extra help) available to
  people with low incomes, but subject to income
  and asset test
• Dual eligibles no longer have drug coverage
  through Medicaid

4
Changes in Plan Options from 2006 to 2007
Exhibit 3

• Plan participation
• Mostly the same organizations but far more plan
  options
• PDPs 1,429 in 2006 to 1,875 in 2007
• MA plans 3,195 in 2006 to 3,971 in 2007
• Monthly premiums
• Lowest increasing from 1.87 to 9.50
• Highest increasing from 104.89 to 135.70
• Benefit design and formularies
• Minor changes in many plan offerings, along with
  major changes in some others
• According to CMS, at least a 13 increase in
  number of drugs covered

5
Exhibit 4
Beneficiaries in Most States Had a Choice of At
Least 50 PDPs in 2007
1,875 Stand-alone PDPs Offered Nationwide
53
51
57
53
53
53
53
51
57
61
54
53
57
56
54
66
53
53
53
56
61
54
56
54
66
53
56
54
55
55
DC
53
53
51
57
45
57
59
58
53
57
56
57
53
53
60
58
46
6
Exhibit 5
Most Beneficiaries Had Access to One or More
Medicare Advantage Plans in 2007
3,971 MA Plans Offered Nationwide
Polk County 20 MA-PD Plans ( 53 PDPs and 2
SNPs)
San Diego County 24 MA-PD Plans ( 55 PDPs
and 2 SNPs)
Miami/Dade County 43 MA-PD Plans ( 57 PDPs
and 19 SNPs)
7
Standard Medicare Prescription Drug Benefit, 2007
Exhibit 6
Beneficiary Out-of-Pocket Spending
Plan Pays 15 Medicare Pays 80
Enrollee Pays 5
5,451 in Total Drug Costs (3,850 out of
pocket)
3,051 Coverage Gap (Doughnut Hole)
Enrollee Pays 100
2,400 in Total Drug Costs
Enrollee Pays 25
Plan Pays 75
265 Deductible
328 Average Annual Premium
NOTE Annual premium amount based on 27.35
national average monthly beneficiary premium
(CMS, August 2006). Amounts for premium, coverage
gap, and catastrophic coverage threshold rounded
to nearest dollar. SOURCE Kaiser Family
Foundation illustration of standard Medicare drug
benefit, updated with Part D benefit parameters
for 2007 (from CMS, OACT, May 22, 2006).
8
Exhibit 7
The Standard Drug Benefit Design is Not the
Typical Part D Plan Offering in 2007
Percent of plans
Generic Only
No Coverage
Brand and Generic
Enhanced
Actuarially Equivalent
Standard
250
0
Partial(Benefit Design
Coverage in the Gap
Deductible Amount
SOURCE Hoadley et al. Benefit Design and
Formularies of Medicare Drug Plans A Comparison
of 2006 and 2007 Offerings November 2006.
9
Part D and the Doughnut Hole
Exhibit 8

• Of 22.5 million Part D enrollees in 2006
• 9 million received low-income subsidy and face no
  gap in coverage
• Less than 1 million enrolled in plans with full
  gap coverage
• 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
  estimated to have spending in the doughnut hole
• 2 million were estimated to reach catastrophic
  coverage level
• Between 2006 and 2007, the number of PDPs that
  cover brand-name drugs in the doughnut hole
  decreased slightly
• From 33 PDPs in 2006 to 27 PDPs in 2007
• In 11 states there are no plans available with
  full coverage of brands and generics in the gap

10
Average Monthly Premiums Are Highest for PDPs
Offering Full Gap Coverage
Exhibit 9
Number of PDPs in 2007
1,337
511
27
SOURCE Hoadley et al. Benefit Design and
Formularies of Medicare Drug Plans A Comparison
of 2006 and 2007 Offerings November 2006.
11
HHS Estimates 90 of Medicare Beneficiaries Have
Drug Coverage
Exhibit 10
No Creditable Coverage
Stand-Alone PDP
Other Creditable Coverage1
Total in Part D Plans 22.5 Million (53)
Dual Eligibles in PDPs
Creditable Employer/Union Coverage2
Medicare Advantage Drug Plan3
Total Number of Beneficiaries 43 Million
NOTES Numbers do not sum to 100 due to
rounding. 1 Includes coverage from Veterans
Administration, Indian Health Service, employer
plans without retiree subsidies, and employer
plans for active workers. 2 Includes
employer/union, FEHB, and TRICARE coverage. 3
Approximately 0.5 million dual eligibles are
enrolled in Medicare Advantage drug plans and are
reported in this category. SOURCE HHS, June 14,
2006. Data as of June 11, 2006.
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Exhibit 11
Enrollment in Medicare Drug Plans Is
Concentrated in a Few Organizations
Top 10 Parent Organizations
5.7 million
UnitedHealth
Humana
4.4 million
Wellpoint
1.2 million
WellCare Health Plans
1.0 million
3 organizations have 50 of total Part D
enrollmentof 22.5 million
Member Health
1.0 million
Kaiser Permanente
0.8 million
Coventry Health Care
0.7 million
Universal American Financial Corporation
0.5 million
All other parent organizations (n216) have fewer
than 400,000 PDP and/or MA-PD enrollees
0.4 million
Health Net
Medco Health Solutions
0.4 million
SOURCE CMS Medicare Drug Coverage Enrollment
Data, July 26, 2006.
13
Variation in Costs for 2007 Among the 10 PDPs
with the Highest Enrollment
Exhibit 12
Note Marketed as Pacificare Saver in 2006.
Monthly premium amount is weighted average across
all regions where plan is offered.SOURCE
Hoadley et al. Benefit Design and Formularies of
Medicare Drug Plans A Comparison of 2006 and
2007 Offerings November 2006.
14
Variation in 2007 Cost Sharing in Top 10 PDPs for
Top 10 Brand-Name Drugs
Exhibit 13
Note indicates drugs covered by all 10 PDPs
with highest 2006 enrollment. SOURCE Hoadley et
al. Benefit Design and Formularies of Medicare
Drug Plans A Comparison of 2006 and 2007
Offerings November 2006.
15
Choice Matters Even for Healthy Seniors
Exhibit 14
ESTHER
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.
Esther is 67 and lives in Bethesda. She takes
only one drug, Fosamax, for osteoporosis.

• The difference between her most and least
  expensive plan option is at least 3,000
  greater for PDPs

• The difference between her most and least
  expensive plan option is roughly 700 for either
  PDP or MA-PD

Esther would pay between 577 and 1,309 per year
in a PDP, and between 300 and 970 in an MA-PD
plan, including premiums, depending on the plan
she chooses.
Carolyn would pay between 4,423 and 11,522 per
year in a PDP, and between 4,608 and 7,973 in
an MA-PD plan, including premiums, depending on
the plan she chooses.
16
Exhibit 15
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?
Important differences
They are basically the same
Dont know/ Refused
SOURCE KFF/HSPH The Publics Health Care Agenda
for the New Congress and Presidential Campaign
(conducted Nov 9-19, 2006)
17
Part D Plan Enrollment Decisions in 2006
Exhibit 16

• Contrary to conventional wisdom, beneficiaries
  did not report conducting extensive research
  before choosing a Medicare drug plan
• Many relied on trusted sources including
  pharmacists, family members, and friends
• Most beneficiaries did not use resources provided
  by Medicare to help choose a plan
• Only 10 of beneficiaries said they or a family
  member used Medicare.gov
• Name recognition and prior experience with the
  company were key factors for many in selecting a
  Part D plan, possibly trumping other
  considerations

18
Exhibit 17
Trends in Seniors Impressions of Drug Benefit
AMONG SENIORS Given what you know about it, in
general, do you have a favorable or unfavorable
impression of the new Medicare drug benefit?
Question prior to Apr-05 referred to new
Medicare prescription drug law. Note The
increase in the percent saying favorable is
statistically significant between Jun-06 and
Nov-06. SOURCE Kaiser Family Foundation surveys.
19
Exhibit 18
Many Part D Plan Enrollees Say They Are
Satisfied and Saving Money
AMONG SENIORS WHO SAY THEY ARE ENROLLED IN A
MEDICARE PRESCRIPTION DRUG PLAN
Compared to what you paid for prescriptions last
year, are you now saving money, paying more or
paying about the same overall?
All in all, have your experiences using your new
Medicare drug plan been
Somewhat positive
Very positive
Saving money
Paying more
Somewhat negative
Paying about the same
Dont know
Very negative
Dont know/ refused
SOURCE KFF/HSPH The Publics Health Care Agenda
for the New Congress and Presidential Campaign
(conducted Nov 9-19, 2006)
20
Exhibit 19
Yet Many Seniors Report Problems Related to
Getting Prescriptions Under Their Part D Plan
AMONG SENIORS WHO SAY THEY ARE ENROLLED IN A
MEDICARE PRESCRIPTION DRUG PLAN
Yes, had a MINOR problem
Yes, had a MAJOR problem
Have you had administrative problems, such as
problems getting enrollment cards, problems with
premium payments, or billing mistakes associated
with your Medicare plan, or not?
12
Have you had any problems getting your Rx drugs,
such as drugs not being covered by your plan or
being unable to afford the cost of drugs under
your plan, or not?
12
Have had either type of problem
23
SOURCE KFF/HSPH The Publics Health Care Agenda
for the New Congress and Presidential Campaign
(conducted Nov 9-19, 2006)
21
Exhibit 20
Problems Filling Prescriptions by Number of
Prescriptions and by Income
AMONG SENIORS WHO HAVE USED THEIR MEDICARE DRUG
PLAN
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
41
46
33
34
27
3 Rx daily
6 Rx daily
4 or 5 Rx daily
Income 20K
Income 20K
SOURCE Kaiser Family Foundation Health Poll
Report Survey (conducted June 8-18, 2006)
22
Exhibit 21
Most Pharmacists Say Benefit Works Well for Their
Customers
How well would you say the new Medicare drug
benefit works for your customers in each of the
following areas
Very well
Not well at all
Somewhat well
Not too well
Lowering their out-of-pocket costs
3
Getting them access to the prescription drugs
they need
4
SOURCE Kaiser Family Foundation National Survey
of Pharmacists (conducted April 21-June 27, 2006)
23
Exhibit 22
Yet nearly one in five pharmacists say most of
their Medicare customers have had problems with
their drug plan
To the best of your knowledge, have any of your
Medicare customers experienced problems getting
their prescriptions filled since joining a new
Medicare drug plan? IF YES Would you say most,
some or just a few of your customers who joined
Medicare drug plans have had problems filling
prescriptions?
Most
Some
None
Just a few
SOURCE Kaiser Family Foundation National Survey
of Pharmacists (conducted April 21-June 27, 2006)
24
Exhibit 23
Specific Problems Reported by Pharmacists
Percent of pharmacists who say any of their
customers have experienced the following specific
problems filling prescriptions since joining a
Medicare drug plan
Left the pharmacy without their prescription
because the drug wasnt on their plans formulary
Had problems getting enrollment cards or letters
of enrollment after signing up for a plan
Had to pay out-of-pocket for their prescription
because pharmacist couldnt verify their
enrollment
Left the pharmacy without their prescription
because they couldnt afford the copayment
SOURCE Kaiser Family Foundation National Survey
of Pharmacists (conducted April 21-June 27, 2006)
25
Exhibit 24
About half of surveyed doctors say the Medicare
drug benefit works well for their patients
Among the 78 of doctors who say at least a few
of their patients are enrolled in Medicare drug
plans How well would you say the new Medicare
drug benefit works for your patients in each of
the following areas
Very well
Not well at all
Somewhat well
Not too well
Dont know/ Refused
Lowering their out-of-pocket costs
Getting them access to the prescription drugs
they need
SOURCE Kaiser Family Foundation National Survey
of Physicians (conducted April 25-July 8, 2006)
26
Exhibit 25
Yet most doctors say at least some of their
Medicare patients experienced problems in their
drug plan
Among the 78 of doctors who say at least a few
of their patients are enrolled in Medicare drug
plans
To the best of your knowledge, have any of your
Medicare patients experienced problems getting
their prescriptions filled since joining a new
Medicare drug plan, or not?
Would you say that most, some, or just a few of
your patients who joined Medicare drug plans have
had problems filling prescriptions?
Most
No
Yes
Some
Dont know/ Refused
Just a few
SOURCE Kaiser Family Foundation National Survey
of Physicians (conducted April 25-July 8, 2006)
27
Exhibit 26
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
Agree
Disagree
Dont know/Refused
Ages 65 and over
Pharmacists
Doctors
SOURCES KFF/HSPH The Publics Health Care Agenda
for the New Congress and Presidential Campaign
(conducted Nov 9-19, 2006) Kaiser Family
Foundation National Survey of Pharmacists
(conducted April 21-June 27, 2006) Kaiser Family
Foundation National Survey of Physicians
(conducted April 25-July 8, 2006)
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Exhibit 27
Support for Limiting Plan Choice
ASKED OF SENIORS ONLY
Which statement better reflects your opinion?
Statement B Medicare should select a handful of
plans that meet certain standards, so seniors
have an easier time choosing
Statement A Medicare should offer seniors
dozens of plans so they can select their own
Dont know/ Refused
SOURCE KFF/HSPH The Publics Health Care Agenda
for the New Congress and Presidential Campaign
(conducted Nov 9-19, 2006)
29
Exhibit 28
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?
Is not working well and should be repealed
Is working well and no real changes are needed
Is not working well and needs major changes
Could be improved with some minor changes
Note Dont know/refused responses not
shown SOURCE KFF/HSPH The Publics Health Care
Agenda for the New Congress and Presidential
Campaign (conducted Nov 9-19, 2006)
30
Exhibit 29
Proposals to Change Medicare Part D
Percent of seniors who favor each of the
following proposals
Somewhat favor
Strongly favor
Allow government to negotiate with drug companies
for lower prices
81
Waive the penalty for late enrollment
76
Spend more federal money to get rid of doughnut
hole
68
Allow seniors to get drug plan directly from
Medicare
66
Reduce the number of available drug plans
65
Cut the program back because it is costing the
government too much money
26
25
Keeping the program exactly as it is
Source KFF/HSPH The Publics Health Care Agenda
for the New Congress and Presidential Campaign
(conducted Nov 9-19, 2006)
31
Nationwide, 1 in 4 beneficiaries estimated to be
eligible for Part D low-income subsidies are not
receiving them
Exhibit 30
Beneficiaries Eligible for Low-Income Subsidies
(LIS) 13.2 million
3.1 million (24)NOT receiving subsidy
7.5 million (57)Full/partial dual eligibles
and SSI recipients receiving subsidy
Total 5.7 Million Non-Duals Eligible for LIS
2.0 million (15) Eligible by SSA and
receiving subsidy
0.5 million (4)Eligible but estimated to have
creditable coverage
0.1 million (1) Anticipated facilitated
enrollment
SOURCE Testimony of Mark McClellan, CMS
Administrator, June 14, 2006. Data from CMS, as
of June 11, 2006, and updated LIS eligibility
determinations from SSA, as of July 14, 2006.
32
Part D Successes and Challenges to Date
Exhibit 31

• According to HHS, 90 of all Medicare
  beneficiaries now have creditable drug coverage
  including over 23 million in Part D plans
• Plan participation was greater than expected in
  2006, and the market expanded in 2007
• Initial implementation problems were overcome,
  and not repeated on a large scale in 2007
• Most enrollees say they are satisfied with their
  plans so far
• HOWEVER
• Some beneficiaries still lack drug coverage and
  could face late enrollment penalty
• Plans vary greatly in terms of coverage and
  benefit design
• Unknown how well beneficiaries can choose a plan
  that meets their individual needs with so many
  choices
• Difficulty getting extra help to those with low
  incomes
• LIS participation lower than projected outreach
  difficult
• Asset test excludes many with low incomes
• Even with drug coverage, many enrollees could
  face high costs
• No coverage in the doughnut hole
• High cost sharing for specialty drugs

33
Questions and Unknowns about Part D
Exhibit 32

• Enrollment and Plan Participation
• Which plans will stick around over time? What
  will happen to other sources of coverage,
  especially retiree plans? Do beneficiaries
  understand changes to their coverage? How do
  beneficiaries react?
• Variations Across Drug Plans and Formularies
• What are the implications of these variations for
  patients, especially those with chronic and/or
  rare conditions?
• Experiences in the Doughnut Hole
• How many people will be affected each year? What
  will their experiences be? Does utilization
  change?
• Exceptions and Appeals Processes
• How many enrollees are affected? How do these
  processes work for enrollees?
• Outreach to the Unenrolled
• What more can be done to get low-income subsides
  to those who are eligible but not receiving them?
  What happens to beneficiaries whose LIS status
  changes? How many beneficiaries will end up
  paying the late enrollment penalty?
• Future Directions for Part D
• How will the benefit and the program evolve over
  time? What are the prospects for possible
  reforms, such as drug price negotiation,
  simplification?

34
thank you. Any questions?