US Medicare Prescription Drug Coverage

• Abstract
• Characteristics of this policy
• Purpose and process analysis
• Expected outcome
• References

Featured in half-yearly report: G-politik in Industrieländern 7/8

Abstract

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act (MMA) became law. The act created the Medicare Part D drug benefit to provide drug coverage to the elderly, through private, stand-alone drug plans. Medicare Part D was implemented on January 1, 2006. This survey describes the early implementation stage of the legislation.

Neue Entwicklungen

Innovationsgrad	traditionell		innovativ
Kontroversität	unumstritten		kontrovers
Strukturelle Wirkung	marginal		fundamental
Medienpräsenz	sehr gering		sehr hoch
Übertragbarkeit	sehr systemabhängig		systemneutral
current    previous

This policy provides drug coverage for many elderly and disabled people who did not previously have it. The stand-alone prescription drug plans that are the lynchpin of the program did not previously exist. The structure of the program is clearly intended to increase the role of private plans in Medicare; the degree that this objective conflicts with or enhances the effectiveness of the program will be an important determinant of its success.

Purpose and process analysis

Current Process Stages

	Idee	Pilotprojekt	Strategiepapier	Gesetzgebung	Umsetzung	Evaluation	Veränderung/Richtungswechsel
Implemented in this survey?

Initiators of idea/main actors

• Regierung: The Bush Administration and the majority of Republicans are very supportive of Medicare Part D. Most Democrats opposed the legislation and continue to criticize the legislation. Both groups have very strong influence.

Stakeholder positions

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act (MMA) became law.  The act created the Medicare Part D drug benefit to provide drug coverage to the elderly, through private, stand-alone drug plans (see survey dated March 2003-November 2003, by Robin Osborn to get full details of the legislation).  Medicare Part D was implemented on January 1, 2006.  Prescription drug coverage under Medicare Part D will not be offered directly by Medicare but by private prescription drug plans and Medicare Advantage organizations (private health plans available under Meidcare).  The law outlines the standard benefit, but the private plans can modify the benefit design.  The private plans set their premiums, design their own formularies and are free to use cost management tools such as prior authorization, step therapy, or quantity limits.  Medicare reimburses plans for a share of their drug costs. (J. Hoadley, Medicare's New Adventure: The Part D Drug Benefit, The Commonwealth Fund, March 2006; M. Gold, The Growth of Private Plans in Medicare, 2006, The Henry J. Kaiser Family Foundation, March 2006)  

The Bush Administration has acknowledged that there have been problems with implementation of the Medicare drug benefit but also contend that the benefit has helped most beneficiaries.  On Febraury 12, 2006, President Bush stated that competition between Medicare prescription drug plans has reduced costs for beneficiaries and taxpayers and that, on average, Medicare beneficiaries will pay about half of the amount that they paid for medications before the drug benefit was implemented.  (American Health Line, Monday, February 13, 2006, www.nationaljournal.com/pubs/healthline)

Democrats have been quick to criticize Medicare Part D.  Democratic leaders have called for members of the Democratic Caucus to hold town hall meetings and other public events to continue criticism of the Medicare prescription drug benefit and the Bush administration's management of the program. (American Health Line, Monday, February 13, 2006, www.nationaljournal.com/pubs/healthline)

Actors and positions

Regierung
private health plans/providers	sehr unterstützend		stark dagegen
elderly/disabled (patients)	sehr unterstützend		stark dagegen
current    previous

Influences in policy making and legislation

(Please see section 4.4 on Adoption and Implementation for background on issues the proposals below are aiming to address.)  

Democrats

Democratic lawmakers would like to see a variety of legislative changes to the Medicare Part D drug benefit including: more drugs added to the formularies drug plans cover, a delay in the deadline for beneficiaries to sign up for the drug benefit (The current open enrollment deadline is May 15, 2006).  Beneficiaries who enroll after the deadline must pay a higher premium which is increased by 1% of the premium amount for each month not enrolled for the duration of their participation in the program.  Individuals who first become eligible for Medicare after December 31, 2005, are given 3 months later their date of eligibility to enroll in the program before they are subject to the late enrollment penalty.  Democrats argue that beneficiaries need more time to consider their options to decide among the many different private health plans), steps to standardize Medicare drug plans to simplify comparative shopping, a provision to bar insurance plans from dropping a drug from their formularies during the same year a beneficiary enrolls, and extending the deadline for states to apply for reimbursement (for costs they incurred covering drugs for low-income dual eligibles when their Medicare Part D coverage did not begin on time).

Democrats have also proposed that Medicare drug plans be required to provide beneficiaries with a 60-day supply of any drug that is not covered by the plan and to provide a 60-day supply of medication when a pharmacist cannot confirm a beneficiary's enrollment in a Medicare drug plan.  They also propose creating a standardized appeals process, with medications provided during the appeal. Other provisions include prohibiting drug plans from eliminating medications from a formulary once a beneficiary has enrolled or from raising the cost of drugs in mid-year, and beneficiaries could change drug plans if a plan did not cover needed medications. Democrats have also proposed requiring Medicare to reimburse family members, charity organizations, and states that covered drug costs for beneficiaries unable to obtain drugs because of administrative problems with the drug benefit, and allowing pharmacists to bill Medicare directly for prescription costs for beneficiaries whose enrollment could not be confirmed because of administrative issues. (American Health Line, http://www.nationaljournal.com/pubs/healthline)

Senators Harry Reid (Democrat, Nevada) and Max Baucus (Democrat, Montana) have urged the Bush Administration to ease the challenges of implementation by: ensuring accurate information is provided to plans and beneficiaries; enforcing requirements of the Medicare drug law on plans offering coverage, and requiring health plans to cover the same drugs for a year. (CQ HealthBeat, "What Went Wrong and Why: An Analysis of the Drug Benefit's First Few Weeks", Thursday, January 26, 2006).

Senator Hillary Rodham Clinton (Democrat, New York) announced that she is working on legislation to improve the Medicare drug benefit by creating a regulatory structure to find and remove less-efficient private drug plans.  She also said that the government should have the authority to negotiate for lower drug prices in Medicare (which is strongly opposed by the pharmaceutical companies) and that pharmacists should be reimbursed for filling prescriptions for Medicare beneficiaries who were unable to prove eligibility because of computer glitches; and the February 15 deadline for reimbursing states offering Medicaid coverage to address coverage gaps should be extended.

On February 28, 2006, Senators Edward Kennedy (Democrat, Massachusetts) and Debbie Stabenow (Democrat, Michigan) introduced legislation to change the Medicare prescription drug benefit to allow beneficiaries to obtain drug coverage directly from Medicare, eliminate the "doughnut hole" (the coverage gap when beneficiaries have to pay full costs of drugs when their annual drug spending is between $2,250 and $5,100) and allow the Department of Health and Human Services to negotiate drug prices with pharmaceutical companies.

Advocacy groups

Advocacy groups such as the National Mental Health Association, the Epilepsy Foundation, Paralyzed Veterans of America, and United Cerebral Palsy called for changes in Medicare Part D to guarantee prompt reimbursement to beneficiaries who have been overcharged for copayments and pharmacists who have covered the cost of medications for beneficiaries because of problems with the drug benefit. (American Health Line, Thursday, February 16, 2006, www.nationaljournal.com/pubs/healthline)

AARP, a membership and advocacy organization which represents over 35 million people over age 50, supported the MMA and prescription drug bill.  AARP's support was considered a critical factor in the bill's passage. "AARP believes the Medicare Prescription Drug Program is an important step in providing access to affordable prescription drugs for older Americans and those with disabilities."  AARP has said that it is encouraged by the number of Medicare beneficiaries who have enrolled in the drug benefit and is doing its part to educate its members about the drug benefit.  AARP has so far been supportive of the drug benefit, stating, "Our goal is lowering the cost of prescription drugs. The new Medicare prescription drug benefit is an important first step. We are working to improve the program by supporting legislation that would: Eliminate the asset test which has proven to be a barrier for low income beneficiaries; and Give the Secretary of HHS the authority to negotiate for lower costs on behalf of Medicare beneficiaries."  (AARP Issues Blog: Medicare, http://aarp.typepad.com/socialsecurity/medicare/index.html)

US Senate

On March 15, 2006, the US Senate approved an amendment to the fiscal year 2007 budget resolution that would authorize (but not require) Health and Human Services Secretary Michael O. Leavitt to extend the May 15 enrollment deadline.  The Bush administration does not support extension of the deadline.

Bush Administration and Republicans

The Bush Administration and Republicans argue that implementation problems with Medicare Part D should be fixed by management tools, rather than legislation.

Actors and influence

Regierung
private health plans/providers	sehr groß		kein
elderly/disabled (patients)	sehr groß		kein
current    previous

Positions and Influences at a glance

Adoption and implementation

On January 28, 2005, the US Secretary of Health and Human Services published a final rule that translated the MMA and Medicare Part D drug benefit into regulatory language and elaborated on most of the provisions. 

Enrollment of beneficiaries

By October 2005, private plans who had contracted to offer Medicare Part D plans were made public and Medicare beneficiaries could enroll as of November 15, 2005, with open enrollment for the first year available through Mary 15, 2006.  For beneficiaries who enrolled before the end of 2005, the drug benefit began on January 1, 2006.  

Implementation of the new Medicare prescription drug benefit involved the enrolment of all Medicare beneficiaries into private plans, including moving beneficiaries currently using Medicaid coverage to Medicare drug plans.  Beneficiaries with prescription drug coverage through former employers or the Veterans Administration can keep their current coverage.  (Medicare is offering employers who continue to offer drug coverage a tax-free subsidy of 28% of allowable drug costs between $250 and $5,000.) Medicare beneficiaries with prescription drug coverage covered under Medicaid (dual eligibles) were automatically switched to enrollment in Medicare Part D.  All other Medicare beneficiaries have the option of coverage through Medicare Part D. (J. Hoadley, Medicare's New Adventure: The Part D Drug Benefit, The Commonwealth Fund, March 2006)

Implementation problems

In the first month of coverage for beneficiaries through Medicare Part D began, administrative challenges were a problem.  Many pharmacists reported not being able to determine beneficiaries drug coverage because enrolled beneficiaries could not be found in the system.  Pharmacists have also argued that they are losing money because of payment delays, and the Association of Community Pharmacists is pushing Congress to pass a bill that would require health plans to pay pharmacies for medications filled under Medicare Part D within 14 days.  (American Health Line, March 31, 2006, http://www.nationaljournal.com/pubs/healthline)

Another challenge faced in implementation of Medicare Part D has been with the automatic enrollment of dual eligibles.  Many states have had to cover the cost of medications for beneficiaries eligible for both Medicare and Medicaid who experience problems with access under Medicare Part D.  The federal government has said that it will reimburse states for emergency coverage for dual eligibles through February 15, 2006. Some states have asked for an extension to this deadline.  The Bush Administration opposes any extensions of this deadline. (V. Smith, K. Gifford, S. Kramer, and L. Elam, The Transition of Dual Eligibles to Medicare Part D Prescription Drug Coverage: State Actions during Implementation, The Henry J. Kaiser Family Foundation, February 2006)

To avoid interuption in coverage of certain drugs beneficiaries were taking before drug coverage under Medicare Part D, health plans agreed to offer 30 days of emergency coverage for drugs beneficiaries had been taking but that would not be covered under their new Medicare Part D plan.  In February, Medicare requested health plans to extend this transitional coverage period to 90 days (ending on March 31, 2006).  Beneficiaries who enroll in the drug benefit beginning April 1, 2006 will receive a 30-day transitional period.  There is concern that some beneficiaries are not aware that they have been receiving their drugs during this 90-day transitional period and will face difficulty getting their drugs beginning April 1, 2006.  (American Health Line, March 31, 2006, www.nationaljournal.com/pubs/healthline)

Critics argue that the Medicare Part D drug benefit offers too many private plans to choose from, which confuses beneficiaries.  Health and Human Services Secretary Michael O. Leavitt and Centers for Medicare and Medicaid Services (CMS) Adminstrator Mark McClellan predict that market forces will reduce the number of plans offered (e.g. less popular plans would drop out).  In addition, Leavitt and McClellan said that CMS is increasing its monitoring of health plans' call centers and their speed at processing enrollment applications.  CMS is designing performance measures to track these two functions and will release the data to the public.  (American Health Line, Wednesday, March 8, 2006, www.nationaljournal.com/pubs/healthline).

To address concerns about coverage gaps (when annual drug spending is between $2,250 and $5,100), the government is sending letters to beneficiaries to alert them when their drug costs are approaching the "doughnut hole" to give them time to switch plans to avoid the doughnut hole. (American Health Line, www.nationaljournal.com/pubs/healthline)

(Generally, beneficiaries enrolled in a Medicare Prescription Drug Plan can only change plans under certain circumstances. Beneficiaries can choose to switch their current plan from November 15 through December 31 of every year.  Enrollment is generally for the calendar year. In certain cases, such as if a beneficiary moves or enters a nursing home, he/she can switch his/her plan at other times.  If a beneficiary has both Medicare and Medicaid, he/she can change plans at any time. www.medicare.gov)

Monitoring and evaluation

As of March 23, 2006, Secretary Leavitt reported that 27 million Medicare beneficiaries are enrolled in the drug benefit program (CQ HealthBeat, March 20, 2006).  CMS also announced that it would automatically enroll 1.2 million beneficiaries if they did not enroll on their own by April 30, 2006.  The Bush Administration's goal is to have 28 to 30 million enrollees in the first year of the drug benefit. Some advocacy groups argue that these numbers are misleading as many of the enrolled beneficiaries already had drug coverage before the drug benefit began (their prescription benefits are now subsidized by the Medicare program).  (American Health Line, Thursday, February 23, 2006, www.nationaljournal.com/pubs/healthline)  

However, Medicare Part D drug coverage only began for beneficiaries on January 1, 2006.  Therefore, it is too early to evaluate its outcomes.

Expected outcome

Almost since its implementation 40 years ago, policy observers and advocates have noted the lack of prescription drug benefit in Medicare. There was great excitement about the prospect of a new drug benefit, but even before its implementation it had become a partisan issue. The structure of the benefit, being offered only through private plans, creates a discontinuity that impedes its effectiveness in integrating pharmaceuticals with medical care for a beneficiary population that is increasingly typified by chronic illness. It also has created a great deal of confusion about how to choose an appropriate plan and how to coordinate coverage among traditional Medicare, which offers coverage for medical care, Medigap, Medicaid, or retiree coverage, which supplements Medicare benefits, and now drug coverage, for the most part obtained from a third source.  

That said, the availability of drug coverage should provide substantial assistance for low-income beneficiaries and moderate assistance to others.  There are numerous details that need to be worked out as the program unfolds, but the politicization of the issue may impede progress in that regard.

Impact of this policy

Qualität	kaum Einfluss		starker Einfluss
Gerechtigkeit	System weniger gerecht		System gerechter
Kosteneffizienz	sehr gering		sehr hoch
current    previous

At this point, some of the problems that arose with the implementation of the program have been at least partially addressed, but those problems have at least in part distracted policy-makers from focusing on some of the longer-run issues that need to be addressed. The implementation process probably will continue through most of 2006, so the program will continue to evolve.

References

Sources of Information

J. Hoadley, Medicare's New Adventure: The Part D Drug Benefit, The Commonwealth Fund, March 2006

American Health Line, February 213, 2006 to March 31m 20006, www.nationaljournal.com/pubs/healthline

B. Stuart, B.A. Briesacher, D.G. Shea, et al, "Riding the Rollercoaster: The Ups and Downs in Out-of-Pocket Spending Under the Standard Medicare Drug Benefit," Health Affairs July/August 2005 24 (4): 1022-31

B. Stuart, L. Simoni-Wastila, and D. Chauncey, "Assessing The Impact Of Coverage Gaps In The Medicare Part D Drug Benefit," Health Affairs Web Exclusive, April 19, 2005

The Henry J. Kaiser Family Foundation, Key Implementation Dates for the Medicare Prescription Drug Benefit, www.kff.org/medicare/mma_timeline.cfm

M. Gold, The Growth of Private Plans in Medicare, 2006, The Henry J. Kaiser Family Foundation, March 2006

V. Smith, K. Gifford, S. Kramer, and L. Elam, The Transition of Dual Eligibles to Medicare Part D Prescription Drug Coverage: State Actions during Implementation, The Henry J. Kaiser Family Foundation, February 2006

Henry J. Kaiser Family Foundation, Medicare Prescription Drug Coverage Enrollment Update, March 2006

J. Hoadley, E. Hargrave, J. Cubanski et al. An In-Depth Examination of Formularies and Other Features of Medicare Drug Plans, The Kaiser Family Foundation. April 2006

Reform formerly reported in

Medicare Drug Coverage for Seniors Process Stages: Strategiepapier, Idee, Pilotprojekt

Expansion Of Prescription Drug Benefits Process Stages: Umsetzung, Strategiepapier, Gesetzgebung, Idee

Author/s and/or contributors to this survey

Phuong Trang Huynh and Stuart Guterman, The Commonwealth Fund

Empfohlene Zitierweise für diesen Online-Artikel:

Phuong Trang Huynh and Stuart Guterman, The Commonwealth Fund. "US Medicare Prescription Drug Coverage". Health Policy Monitor, 12/04/2006. Available at http://www.hpm.org/survey/us/c7/3