THE COMMONWEALTH

FUND

Medicare Part D:What Are The Concerns?

Stuart GutermanDirector, Program on Medicare’s Future

The Commonwealth Fund

Association of Healthcare JournalistsMarch 17, 2006

(revised to reflect new data May 16, 2006)

THE

COMMONWEALTH FUND

What Do We Want FromThe New Drug Benefit?

• Continuity—Will beneficiaries with coverage before have corresponding (or better) coverage under Part D?

• Availability—Will beneficiaries be able to find a plan that’s best for them?

• Access—Will beneficiaries be able to get the drugs they need?

THE

COMMONWEALTH FUND

Concern AboutVulnerable Populations

• Medicaid recipients• Other low-income beneficiaries• Nursing home residents• Frail and disabled beneficiaries• Chronically ill beneficiaries• Racial and ethnic minorities

THE

COMMONWEALTH FUND

Source of Prescription Drug CoverageSource of Prescription Drug Coveragefor Community-Dwellingfor Community-Dwelling

Medicare Beneficiaries, 1998-2000Medicare Beneficiaries, 1998-2000

24.7

16.5

10.5

34.8

11.815.8

0

5

10

15

20

25

30

35

40

45

50

None Medicare

HMO

Medicaid Employer Medigap Other

Source: B. Stuart, et al. “Riding the Roller Coaster: The Ups and Downs in Out-of-Pocket Spending Under the Standard Medicare Drug Benefit.” Health Affairs. 24(4). (July/August 2005): 1025.

Percent

THE

COMMONWEALTH FUND

Source of Prescription Drug Coverage for Source of Prescription Drug Coverage for Medicare Beneficiaries Residing in Nursing Medicare Beneficiaries Residing in Nursing Homes, 2001Homes, 2001

No Rx coverage 20%

Other supplement

with Rx coverage

9 %

Other supplement with Rx coverage unknown

15 %

Full Medicaid 56%

Source: Stuart, B. et al. “Coverage and Use of Prescription Drugs in Nursing Homes: Implications for the Medicare Modernization Act.” Medical Care. 44(3). (March 2006): 243.

THE

COMMONWEALTH FUND

Coverage, Income, and Chronic Illness Are Coverage, Income, and Chronic Illness Are Factors in Adherence toFactors in Adherence to

Prescribed Drug RegimensPrescribed Drug Regimens

26.3

36.835.2 34.9

0

10

20

30

40

50

All seniors No prescription drug

coverage

Low income Three or more chronic

conditions

Source: Safran, D. et al. “Prescription Drug Coverage and Seniors: Findings From a 2003 National Survey.” Health Affairs Web exclusive. April 19, 2005.

Percent of Seniors Not Adhering to Prescribed Drug Regimens

THE

COMMONWEALTH FUND

Beneficiary Out-of-Pocket Costs Under the Beneficiary Out-of-Pocket Costs Under the Medicare Part D Standard Benefit, 2006Medicare Part D Standard Benefit, 2006

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

Total Covered Drug Cost

Total Out-of-pocket Out-of-pocket+premium

Out-of-Pocket Cost

THE

COMMONWEALTH FUND

Deductibles Offered by Medicare Stand-Deductibles Offered by Medicare Stand-Alone Prescription Drug Plans, 2006Alone Prescription Drug Plans, 2006

$0

58% of plans

$50-$100

8%

$250

34% of plans

$150-$175

0%

Source: CMS, PDP Landscape of Local Plans Source File as of November 15, 2005.

THE

COMMONWEALTH FUND

Availability of Coverage in theAvailability of Coverage in thePart D “Coverage Gap”Part D “Coverage Gap”

No coverage

84% of plans

Generics and Brand

3% of plans

Generics only

13% of plans

Source: CMS, PDP Landscape of Local Plans Source File as of November 15, 2005.

THE

COMMONWEALTH FUND

Average Plan Premiums by Deductible and Average Plan Premiums by Deductible and Availability of Coverage in theAvailability of Coverage in the

Part D “Coverage Gap”Part D “Coverage Gap”

$30.74$35.91

$48.09

$61.28

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$250deductible and

no coverage

$0 deductibleand no

coverage

$0 deductibleand generics

only

$0 deductibleand generics

+brand

Plan Premium

Source: CMS, PDP Landscape of Local Plans Source File as of November 15, 2005.

THE

COMMONWEALTH FUND

Reported Enrollment in Medicare Part D or Reported Enrollment in Medicare Part D or Equivalent Coverage, by Category,Equivalent Coverage, by Category,

As of May 7, 2006As of May 7, 2006No identified source of

creditable coverage 6.1 million

Federal retiree 3.5 million

Retiree subsidy 6.9 million

Medicare Advantage (MA) plans 5.9

million

Dual eligibles (in MA plans) 0.5

million

Dual eligibles (in PDPs) 5.9

million

Prescription Drug Plans (PDPs) 8.9

million

Source: DHHS News Release, “37 Million Medicare Beneficiaries Now Receiving Prescription Drug Coverage,” May 10, 2006.

Other creditable coverage5.8 million

THE

COMMONWEALTH FUND

Medicare Part D Enrollment With Low-Medicare Part D Enrollment With Low-Income Subsidy, as of March 31, 2006Income Subsidy, as of March 31, 2006

(Not Including Dual-Eligibles)(Not Including Dual-Eligibles)

8.2

3.8

1.6

0

1

2

3

4

5

6

7

8

9

10

Projected eligible Applications received

Applications approved

Source: Kaiser Family Foundation, Medicare Prescription Drug Coverage Enrollment Update, April 2006.

THE

COMMONWEALTH FUND

Disposition of ApplicationsDisposition of Applicationsfor Low-Income Subsidies, as of December for Low-Income Subsidies, as of December

30, 200530, 2005

Denied--

excess

resources,

34%Denied--

excess

income,

20%

Received

but not

processed,

12%

Denied,

excess

income and

resources,

7%

Approved,

27%

Kaiser Family Foundation, Tracking Prescription Drug Coverage Under Medicare, February 2006.

THE

COMMONWEALTH FUND

So Where Are We?So Where Are We?• The Medicare Drug Benefit holds promise for

improving access, coordination, and quality of care

• It has a long way to go until it achieves that potential

• The experience in the first few months has been plagued with political and public relations battles, instead of focusing on improving how the policy works

• The new program needs to be monitored for indications of how it can be improved for its beneficiaries—particularly its most vulnerable groups

THE

COMMONWEALTH FUND

An Alternative: Medicare ExtraAn Alternative: Medicare Extra

• Comprehensive benefits option for Medicare beneficiaries

• Single $250 deductible• Part B coinsurance reduced from 20% to 10%• No coinsurance for long hospitals stays, home

health, selected preventive care• Prescription drugs:

– No separate deductible– 25% coinsurance– No doughnut hole

• Ceiling on out-of-pocket costs• Lower premiums, lower total out-of-pocket costs,

than Medicare fee-for-service plus Medigap