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Progress Report on the Medicare Prescription Drug Benefit
Decision Resources, Inc., Dec 2005, Pages: 17
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (commonly known as the Medicare Modernization Act, or MMA) is arguably the most significant development in U.S. health care policy in recent years. The dominant feature of the MMA is a major new prescription drug benefit that is scheduled to take effect on January 1, 2006. The U.S. health care system has spent much of 2005 gearing up for the launch of this benefit.
In this report, we examine progress to date. We begin with a review of the evolution of the Medicare program and an overview of the key features of the new prescription drug benefit. We then consider employers’ responses to Medicare drug coverage and enrollment in Medicare prescription drug plans. We also analyze the prescription drug plan designs of the three main types of providers-national prescription drug plan organizations (PDPOs), stand-alone plans, and Medicare Advantage drug plans. We conclude with an assessment of the outlook and implications for the main stakeholders in the Medicare drug benefit: Medicare beneficiaries, employers, prescription drug plans, government, and the pharmaceutical industry.
Business Implications
- A recent survey found that in October 2005, more seniors had an unfavorable than favorable view of the prospective new Medicare drug benefit (37% and 31%, respectively). This finding, together with evidence that only 20% of seniors expect to enroll in a prescription drug plan, does not augur well for the program.
- The ten newly appointed national prescription drug plan organizations (PDPOs) will cover most of the drugs that are prescribed most often to seniors, but they will use a range of cost-containment measures to control their Medicare pharmaceutical expenditures. The majority will use differential copayments linked to multitier formularies to promote extensive use of generics. In addition, plans intend to use quantity limits, step therapy protocols, prior authorization, and precertification.
- Seventy-seven percent of stand-alone prescription drug plans will offer premiums in the range of $20.01-$50.00. However, 29% of all
stand-alone plans will waive the monthly premium for low-income Medicare beneficiaries. Enrollees in stand-alone prescription drug plans can expect coverage of the vast majority of the top 100 drugs.
- One-fourth of Medicare Advantage plans that offer the Medicare drug benefit will not charge a premium for this coverage. Fifty-four percent will charge Medicare premiums in the range of $10.01-$40.00 per month. Sixty-seven percent of Medicare Advantage prescription drug plans intend to waive the drug deductible completely; another 15% will offer a reduced deductible.
- Drug manufacturers should not presume that Medicare Part D will mean a bonanza for them. A recent study by authors from the
Office of the Actuary in CMS forecast that spending on prescription drugs would increase by 11.6% in 2006 but that Medicare Part D would be responsible for growth of only 0.5%. Furthermore, the gains that the industry derives from the Medicare prescription drug benefit could be offset by the continued growth in the number of uninsured.
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