The Medicare Drug Benefit: Overview

1
The Medicare Drug Benefit Overview Issues
NMHM Conference April 27, 2005
Schofield Consulting
2
Medicare Prescription Drug, Improvement, and
Modernization Act of 2003

• Known as MMA
• Medicare already has parts A, B, C
• New drug benefit established as Part D, as in
  drug!
• Final regulations were out in Jan and
  implementation in full swing

3
Basic Drug Benefit Structure
Access to negotiated prices when no benefit paid
by PDP for covered drug Average beneficiary with
costs of 1,891, will pay 660 OOP 420 premium
PDP will pay 1,231
4
TrOOP True Out-of-Pocket Costs

• OOP costs count towards annual OOP limit ONLY if
• Paid by beneficiary or their family
• Paid by SPAP or HSA
• Paid by a PAP
• Not if paid by any other third party payor
• Retiree plan
• PDP with supplemental benefits
• Even Ryan White AIDS program
• Medigap

5
Benefits Enhanced For Low Income

• Beneficiary premium subsidy
• No or reduced deductible
• Reduced cost sharing
• Voluntary or random assigned enrollment of duals
• Low income status determined by State or SSA
• CMS to notify PDP of status so PDP can
  reduceco-pays and deductibles
• Application for subsidy and enrollment in PDP two
  separate processes

6
Medicare Part D Low Income Subsidies
Duals 100 FPL
non-dual SSI
Subsidies
Subsidy phasedout at 150 of FPL
0
0
Monthly Premiums
0
50
0
Deductible (250)
1 generic 3 brand
Patient pays 15
2 generic 5 brand
Cost-sharing, Initial Benefit (1 generic 3 brand
Patient pays 15
2 generic 5 brand
Cost-sharing, Coverage Gap (Donut Hole)
0
2 generic 5 brand
0
Cost-sharing, Catastrophic Benefit (5,100)
Note No copays applied to duals when
institutionalized
7
Concerns for Duals

• Medicaid has generally less restrictive
  formularies than PDPs expected to have
• Medicaid turn-around time on prior auth requests
  is quicker
• Emergencies supplies available in Medicaid, not
  in PDPs
• New system to navigate in every PDP

8
Dual Eligible Population Disproportionately
Minority

• 20 of duals are African American
• Compared to 10 of Medicare enrollees
• 15 of duals are Latino
• Compared to 6 of Medicare enrollees

9
Benefit Sources

• PDPs
• MA-PDPs HMOs and PPOs
• Retiree plans
• Fall-back plans
• Note Medigap and Medicaid no longer will cover
  Part D drugs

10
Eligibility and Enrollment

• Enrollment is voluntary enrollee pays 25.5,
  feds pay 74.5 of premium.
• Enroll directly with PDP
• Note MA enrollees may only enroll in MA-PDP
• Enroll November 15, 2005 May 15, 2006 (or
  within 6 months of eligibility)
• Re-enrollment automatic each year unless switch
  plans in Nov-Dec
• Duals randomly assigned if fail to enroll by Dec
  31st, 2005
• 1 year lock-in, except duals can change at will
• Late penalty

11
Late Enrollment Penalties

• Enroll late pay higher premium forever
• Penalty 1 of base premium for every month late
• Creditable coverage for actuarial equivalent
  plans not late if covered by alternative plan
  e.g. approved retiree benefits, veterans
• Medigap Rx benefits not likely to continue or to
  be creditable

12
Low Income Eligibility Enrollment

• Application for subsidies a separate process from
  enrollment in PDP
• Applying for Premium Subsidies
• If on Medicaid now (full or Medicare Savings
  Program), subsidy is automatic
• Others apply to SSA or Medicaid office State
  will also screen for Medicare Savings Programs by
  State
• Subsidies available if under 150 FPL
  (14,355/19,245 per year) with asset test
• Applying for Enrollment in PDP
• Full benefit duals to choose (Will get info sent
  to them) or be randomly assigned to a PDP by Dec
  31st
• MSP duals to be assisted with enrollment
• Others to contact Part D plans directly to enroll
  CMS considering auto enrollment as a fallback

13
Eligibility of Medicare Beneficiaries for
Low-Income Subsidies

• About 33-38 of Medicare enrollees eligible for
  low income subsidies
• 12-16 already getting drug coverage through
  Medicaid
• An additional 17-26 will be newly eligible for
  low income assistance though some of these
  already have coverage through a retiree plan or
  SPAP

14
Take-Up Rates for Assistance Programs
Note Medicare Part D includes employer coverage.
Medicare Part D and low-income subsidies begin
in January 2006. Part D rates are estimates from
CBO. Numbers appearing as a range were averaged.
Take-up rates for Medicare Parts A and B,
Medicaid, and SSI are from 1975-1996. SOURCE
Medicare Part D, Part D Low-Income Subsidy, QMB,
and SLMB rates from CBO, July, 2004 National
Bureau of Economic Research, March 2001. Note
Medicare Rx Card participation WITH
auto-enrollment and including MA plan cards
20
15
Clinical Components

• Formularies
• Expected to resemble current commercial
  formularies
• CMS will review for clinical adequacy
• Formulary may change during the year with 60 days
  notice
• MDs will need to help patients switch drugs or
  appeal, when they run into formulary denials in
  new Part D plans
• Some drugs on formulary may have 100
  coinsurance (counts toward TrOOP)
• Tiered copays are permitted/expected
• Beneficiaries with federal subsidies are not
  exposed to tiered copays have flat copays for
  brand/generic.
• UM prior authorization, step therapy, dose
  limits allowed
• Generic incentives

16
Formulary Issues

• Concerns about availability of adequate array of
  drugs One size does not fit all. PDPs may have
  fail first approaches.
• Low Income folks may not be able to afford to buy
  non-formulary drugs out-of-pocket
• Medicaid plans unlikely to cover
• Some SPAPs may choose to cover, but wont count
  towards TrOOP
• Importance of choosing a plan with the drugs you
  need duals can switch to new plan any time
• Continuity of care transition for Medicaid SPAP
  recipients moving into Part D drug plans with
  different formularies transition requirements
  (30 day first fill supply)
• 29 states exempt psych drugs from PDLs and access
  limits no such protections in Part D plans
• Inpatient to outpatient discharge planning issues
  (e.g., for mentally ill stabilized in state
  hospital on drug that isnt on formulary)

17
Costs of Switching

• Additional physician visits and lab tests to
  prescribe new drug, monitor effectiveness and
  side effects, and titrate levels
• Failed switches may result in
• Duplicate medicines
• Additional physician visits, ER visits and
  hospitalizations
• Un-reimbursed time and costs for
• Physicians to respond to calls re denied
  medications and to seek exceptions
• Pharmacists to deal with denials and transaction
  costs for denied claims

18
Network Requirements

• Any willing pharmacy
• May have preferred and non-preferred in-network
  pharmacies with different co-pays
• Network geographic access standards, based on
  both preferred and non-preferred in-net
  pharmacies
• CMS test network cannot discourage enrollment
  of a subset population
• Concerns about discrimination in low income areas
  if only non-preferred available

19
Member Services and Protections

• EOB to be sent monthly if benefit used, giving
  tally on deductible/donut hole, information on
  specific transactions of the month
• Exceptions and appeals
• For formulary and other denials
• For copay tiers
• Not a simple process
• No denial notice telling enrollees of their
  rights
• 3 days for exception, 7 days for re-determination
• Then appeal to Independent Review Entity, ALJ,
  and MAC
• Authorized representative

20
Key Issues Summary

• Low income enrollment Education and outreach
  needed to encourage assist prompt application
• PDP selection enrollment Education and
  outreach needed to assist with selection of best
  PDP to meet individual needs to promote prompt
  enrollment
• Assistance to navigate new PDPs and to seek
  exception/appeals when denied access
• Network adequacy