The Perils and Promise of Medicare Part D

Marc Steinberg, Families USAMaking Public Programs Work for

Communities of ColorJanuary 25, 2006 ** Washington, DC

msteinberg@familiesusa.org (202) 628-3030

Medicare Modernization Act of 2003 (“MMA”)

Biggest changes in Medicare’s history

Biggest changes to Medicaid in a generation or more

Major philosophical change in delivery of public coverage

Dangers, opportunities for beneficiaries, especially minorities

Medicare Beneficiaries by Race/Ethnicity, 2002source: Kaiser, 2005

41.7 Million Total Beneficiaries

White, non-Hispanic 79%

Black, non-Hispanic 9%

Hispanic 7%

Asian 2%

Other 2%

Medicare Benefits Part A – hospital coverage

Part B – outpatient coverage

Part C – managed care (“Medicare Advantage”)

Option for beneficiaries – varies by region About 15% of all beneficiaries enrolled 2005 Received big subsidies under 2003 law

No outpatient Rx coverage prior to 2006

Part D: Prescription Drugs 2003 MMA added Medicare Part D Rx

Benefit Benefit delivered by private plans ONLY Basic benefit with lots of variation

Substantial cost-sharing for most beneficiaries Subsidy for low-income beneficiaries Formularies and utilization management Pharmacy Network

Voluntary, opt-in enrollment Open to anyone with Part A or Part B Penalties for late enrollment

Overall concerns Huge number of plans (often 40+ in a

region) Overwhelming number of variables to

consider Troubled enrollment systems Intersection with other retiree coverage Substantial penalties for late enrollment Culturally appropriate outreach is new

challenge for Medicare

Low-Income Provisions

MMA includes substantial assistance for low-income beneficiaries

Premiums and co-payments heavily subsidized

Limited choice of plans Enrollment automatic for dual

eligibles and some others

Dual Eligibles: Medicare’s Neediest 6.2 Million Full Dual Eligibles Qualify for Medicare based on age or

disability Qualify for Medicaid based on income Poorer and sicker than average beneficiaries

60% live below poverty 71% have a functional limitation (vs. 45% of non-

duals) Medicaid covered Rx prior to January 1,

2006

Dual and non-dual beneficiaries by race/ethnicity, 2002source: MedPAC, 2005

Race/Ethnicity Non-dual eligibles

Dual eligibles

White, non-Hispanic

84% 55%

Black, non-Hispanic

7% 22%

Hispanic 6% 15%

Other 3% 8%

Changes from Medicaid for dual eligibles Higher co-pays in about half the

states; indexed to inflation Co-pays not automatically waived Formularies with utilization

management Duals can change plans monthly

Some drugs not covered under Part D

More restrictive appeals

Automatic enrollment of dual eligibles Automatically assigned to low-cost

standard plan in region Random assignment for those who do not

choose Right to change plans at any time Those in Medicare Advantage (MA) assigned

to that MA-PD Plans should provide all current meds

during initial transition

Non-dual Low-Income Coverage (“Extra Help”)

Subsidy “A” Subsidy “B”

Income 135% FPL 150% FPL

Assets $7,500 individual $12,000 couple

$11,500 individual $23,000 couple

Copays $2 generic / $ 5 non-generic in 2006 (indexed)

15% coinsurance to catastrophic maximum

Premiums

Avg. basic premium covered

Sliding scale

Concerns for non-dual low-income beneficiaries

Enrollment voluntary – must sign up Exception: Medicare savings programs

beneficiaries Enrollment is 2-step process

Must apply and get subsidy (“Extra Help”) AND choose Part D plan

Major outreach needed – Social Security Administration is lead agency

Where we are so far Confusion

Complexity of plans Initial new enrollment about 3.6 million as of 1/13/06

Chaotic transition for dual eligibles Conflict with retiree coverage Enrollment or subsidy info lost Transitional benefits limited Many states have filled gaps

Slow enrollment for “Extra Help” About 1 million out of 5.5 – 7 million eligible have

enrolled

Conclusion: Agenda for improvement Short term: make it work

Correct enrollment for all low-income Deliver transitional benefits Standardize exceptions and appeals

Long term: fix the program Liberalize / drop asset test for subsidy Allow Medicare to negotiate directly

for lower prices and richer benefit

Dual eligible coverage

Status/ Income 2006 Co-payments

In Institutions None

Income up to 100% FPL

$1 generics/ $3 non-generics

Income over 100% FPL

$2 generics/$5 non-generics

Premiums: Avg. basic premium in region covered

No copays after total drug costs reach $5,100 (in 2006)

Part D Basic Benefit

Total Costs You Pay

Medicare Pays

Premium (avg.)

$32.20/mo. 100% 0%

Deductible $0-$250 100% 0%

Initial Coverage

$251-$2,250 25% 75%

Coverage Gap $2,251-$5,100

100% 0%

Catastrophic Above $5,100

5% 95%