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State Options for Supplementing Medicare Part D Drug Coverage

Invitational Summit on Medicare Part D Implementation Issues

Jack Hoadley

Georgetown University

Health Policy Institute

October 7, 2004

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Our Projects

• Interview-based case studies of 14 SPAPs– RWJF funding– Project continues through at least the end of 2004

• Interview-based study of Medicare drug discount cards– MedPAC funding– Mostly SHIPs and pharmacies

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• Auto-enrollment works

• Working with a single card simplified the process

• Real savings for states and usually for beneficiaries

• Education and outreach challenging

• Coordination of benefits generally smooth

Lessons from the Discount Card Experience

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Constraints: MMA and Proposed Rule

• Explicit recognition of SPAP role

• Expenses paid by SPAPs count toward TrOOP

• No preference for a single drug plan

• Avoid interference with plans’ cost management tools

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Unknowns about the Part D Benefit

• Final program rules

• Number and types of regions

• Number of competing plans per region

• Model therapeutic classification system

• Plan approaches to formularies and tiered cost sharing

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General Reactions from the Field

• Still early in the planning stage

• States vary considerably– How far along in planning– Likely future of state programs

• Will require major transition effort regardless

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Overall Options for Medicare Part D

• Fill in gaps in coverage and pay certain costs

• Maintain program as an alternative to Part D coverage

• Drop program altogether

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Options for Filling in Coverage Gaps

• Pay the premium

• Cover cost sharing

• Cover purchases in the doughnut hole

• Cover non-formulary drugs

• Cover out-of-network purchases

• Buy plan’s supplemental coverage

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Option: Pay the Plan Premium

• Relatively predictable amount

• Amount paid dependent on plan chosen

• Would all plans be eligible?

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Option: Cover Initial Cost Sharing

• Deductible– Generally a predictable amount– Helps only with low-end expenses– Relatively limited coordination of benefits

• Coinsurance– Costs unpredictable– Requires complex coordination of benefits– Impact on plan’s cost management approaches– If tiered, can SPAP fill in entire difference?

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Option: Cover the Doughnut Hole

• Helps those with higher costs and greater vulnerability

• Requires some coordination of benefits, but not per claim

• Less impact on plan’s cost management approaches

• Would SPAP apply its own review of drugs used?

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Option: Cover Non-Formulary Drugs

• Most complex coordination of benefits

• Greater impact on plan’s cost management approaches

• Interaction of plan’s and SPAP’s drug lists

• How would midyear formulary changes be handled?

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Option: Cover Non-Network Pharmacies

• Limited cost, but limited impact

• Would help with coverage for out-of-area travel

• Potential high expenses for nursing home residents

• What if non-network pharmacies are not in the SPAP network?

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Option: Buy Supplemental Coverage from Plan

• If available, pay premium for supplemental coverage

• Simpler way to provide coverage

• Dependent on whether and what plans offer

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Options for What Populations to Cover

• Current Medicaid beneficiaries

• Others under 135% of poverty

• Those between 135% and 150% of poverty

• Those at 150% and up, if SPAP-eligible

• Those at 150% and up, if not SPAP-eligible

• Disabled beneficiaries under age 65

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Working with Private Drug Plans

• Establishing relationships with multiple plans

• Different priorities

• How many plans will be in the region?

• How will coordination over cost management occur?

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Switching to Secondary Payer Role

• New roles for some states in coordination of benefits

• What happens to SPAP policies on DUR, prior authorization, etc.?

• Engineering the actual transition– Technical issues– Educating current enrollees

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Timing Issues

• January 1, 2005: CMS decision on regions• Early 2005: Final rule published• June 6, 2005: Drug plan bids due to CMS• September 2005: CMS awards PDP contracts• October 15, 2005: Information campaign begins• November 15, 2005: Open season begins• December 31, 2005: Medicaid drug coverage

and Medicare discount cards end• January 1, 2006: Part D benefit begins

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Final Thoughts

• Long year ahead, regardless

• Trying to keep beneficiaries first

• States will have varied responses

• How will politics intervene?