Utilization of Selected Services Among Non-Elderly People with Disabilities

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Medicare and the New Prescription Drug Benefit
Presented byTricia Neuman, Sc.D. Vice President
and Director, Medicare Policy ProjectThe Henry
J. Kaiser Family Foundation for KaiserEDU.org
January 2004
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Background and Context Why Drug Coverage Matters
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Key Characteristics of the Medicare Population
Exhibit 1
Percent of total Medicare population
Lack Drug Coverage (Full and Part Year)
Low Income (lt150 FPL or less than 13,965 in
2004)
1 Functional Limitation
Fair/Poor Health
Rural
Cognitive Impairment
Under 65 Disabled
Nursing Home/Assisted Living Resident
SOURCE Stuart and Briesacher, estimates based on
2000 MCBS Medicare Current Beneficiary Survey,
1997-2002 Low-income estimate from Urban
Institute based on March 2003 Current Population
Survey.
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Skipping Doses of Medication Among Chronically
Ill Seniors With and Without Drug Coverage
Exhibit 2
Percent of seniors in 8 states who skipped doses
of medicine to make it last longer
SOURCE Kaiser/Commonwealth/New England Medical
Center 2001 Survey of Seniors in Eight States.
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Medicare Beneficiaries Out-of-Pocket
Prescription Drug Spending, 2000-2013
Exhibit 3
Average annual out-of-pocket drug costs among
the Medicare population
Projected
Without Medicare drug benefit. SOURCE
Actuarial Research Corporation analysis for The
Kaiser Family Foundation, June 2003 and November
2004.
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The Medicare Modernization Act of 2003
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History of Medicare and Prescription Drugs,
1965-2003
Exhibit 4
1969 HEW Task Force on Prescription Drugs
Report issued
1993 Clinton proposed a new Medicare Rx benefit
as part of the Health Security Act
1965 Medicare enacted -no outpatient
prescription drug coverage included
1989 Repeal of MCCA
2000 Clinton releases plan to provide drug
coverage under a new Medicare Part D
1988 Passage of Medicare Catastrophic Coverage
Act (MCCA)drug benefit included
1965 1970 1975 1980
1985 1990 1995 2000
2003
2000 Republican-sponsored bill to create a
Medicare drug benefit (H.R. 4680) passes the
House of Representatives, 217-214
2002 Republican-sponsored bill to create a
Medicare drug benefit. (H.R. 4954) passes the
House of Representatives, 221-208 Several
competing proposals for a Medicare drug benefit
fail to pass the Senate
2003 Medicare Prescription Drug, Improvement,
and Modernization Act signed into law by
President Bush on December 8
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Medicare Prescription Drug, Improvement, and
Modernization Act of 2003
Exhibit 5

• Phase 1 Medicare-Approved Drug Discount Card
  Program (June 2004 December 31, 2005)
• Cards provide discounts (not same as insurance)
• New 600 credit in 2004 and 2005 for low-income
  beneficiaries who do not have Medicaid, with
  incomes below 135 poverty
• 5.8 million beneficiaries currently enrolled
  (CMS, Dec 2004)
• 1.4 million low-income beneficiaries receiving
  600 subsidy (of 7.2 million eligible)
• Phase 2 Medicare Prescription Drug Benefit
  (begins January 1, 2006)
• Beneficiaries will have access to private plans
  that provide new prescription drug benefit under
  Medicare
• Estimated cost 400 billion (CBO) to 553
  billion (HHS) over 2004-2013 period

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Medicare Prescription Drug Benefit (Part D)
Exhibit 6

• Beginning in 2006, beneficiaries will have choice
  of   
• Fee-for-service Medicare, with access to private
  plans offering prescription drug coverage only
  (PDPs)
• Medicare Advantage plans covering Medicare
  benefits and prescription drugs (MA-PD plans
• New plans will provide standard prescription
  drug benefit or its actuarial equivalent
• Plans have flexibility (subject to certain
  constraints) to establish varying features
• Levels of cost-sharing requirements and coverage
  limits other than standard coverage
• Lists of drugs to include on their formulary, and
  on which tier
• Cost management tools
• Premium and cost-sharing subsidies for
  beneficiaries with incomes up to 150 FPL
  (13,965 for an individual in 2004) and modest
  assets up to 10,000

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Standard Medicare Part D Drug Benefit, 2006
Exhibit 7
Beneficiary Out-of-PocketSpending
Catastrophic Coverage
Medicare Pays 95
5
5,100 in Total Drug Costs
2,850 Gap Beneficiary Pays 100
No Coverage
2,250 in Total Drug Costs
Partial Coverage up to Limit
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Medicare Pays 75
250 Deductible
420 average annual premium
2,250 in total spending is equivalent to 750
in out-of-pocket spending.

5,100 in total
spending is equivalent to 3,600 in out-of-pocket
spending. SOURCE Kaiser Family Foundation
analysis of Medicare Prescription Drug,
Improvement, and Modernization Act of 2003.
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Provisions in the MMA for Low-Income Beneficiaries
Exhibit 8

• Premium and cost-sharing subsidies, with most
  generous assistance provided to those with lowest
  incomes
• 6.5 million Medicare beneficiaries eligible for
  full Medicaid benefits (dual eligibles)
• Beneficiaries with incomes lt135 FPL
  (12,569/individual in 2004) and assets
  lt6,000/individual
• Beneficiaries with incomes 135-150 FPL
  (12,569-13,965/individual in 2004) and assets
  lt10,000/individual
• Treatment of dual eligibles
• Medicaid stops paying for prescription drugs
  after December 31, 2005
• Dual eligibles can enroll in Part D plans, or
  will be auto-enrolled, if necessary
• Key questions
• Will dual eligibles transition from Medicaid to
  Medicare plans without falling through cracks?
• Will dual eligibles be able to get needed
  medications under new Medicare plans?

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The MMA is Projected to Reduce Average
Out-of-Pocket Spending but the Extent of the
Reduction is Likely to Vary
Exhibit 9
All Other Part D Participants(20.3 million)
Part D Participants Who Receive Low-Income
Subsidies(8.7 million)
Average Change- 37
SOURCE Actuarial Research Corporation analysis
for the Kaiser Family Foundation, November 2004.
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Gap in Standard Part D Benefit in 2006 Could
Leave Many Part D Participants Vulnerable to High
Out-of-Pocket Spending
Exhibit 10
8.6 million
6.9 Million Part D Participants Reach the
Doughnut Holein 2006
10.5 million
3.0 million
Total 29 Million Part D Participants
NOTE Estimates exclude premiums and assume no
supplementation of Part D coverage. SOURCE
Actuarial Research Corporation analysis for the
Kaiser Family Foundation, November 2004.
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Challenges for Beneficiaries
Exhibit 11

• Learning about Part D
• Comparing features of plans available within a
  region, including premiums, cost-sharing,
  formularies, and pharmacy networks
• Learning about low-income subsidy programs and
  eligibility rules
• Learning about the rules of enrollment, including
  premium penalty for delayed enrollment and annual
  plan lock-in
• Enrolling in Part D
• Choosing between traditional fee-for-service and
  a stand-alone PDP, or a Medicare Advantage plan
  that covers prescription drugs (where available)
• Enrolling in low-income subsidy program, if
  eligible, at Social Security or state Medicaid
  office
• Using the New Benefit
• Tracking total and out-of-pocket drug spending
• Coordinating Part D with other sources of drug
  coverage (state pharmacy assistance programs,
  employer coverage, etc.)

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Exhibit 12
Decisions for Medicare Beneficiaries, 2006
Enroll in Part D Plan
Traditional Medicare
Medicare Advantage
Part D Prescription Drug Plan
No Part D coverage
HMO (local)
PPO (regional)
Private Fee-for-Service
Apply for Low-Income Subsidy
Social Security Office
Medicaid Office
Dual Eligibles
Meet Income and Asset Test?
If yes, qualify for
Below 150 FPL
Subsidy for premium on sliding scale, 50
deductible, 15 coinsurance to 5,100 in Rx
costs, 2/generic Rx, 5/brand name Rx after
5,100
Below 100 FPL No
premium or deductible, 1/generic Rx, 3/brand
name Rx, pay nothing after 5,100 in Rx costs
Below 135 FPL
Subsidy for premium, no deductible, 2/generic
Rx, 5/brand name Rx, pay nothing after 5,100 in
Rx costs
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Conclusions
Exhibit 13

• Implementation deadlines pose big challenge for
  CMS, plans, beneficiaries
• Plan bids due in June, awarded September, plans
  announced Oct 15, 2005
• Low-income subsidy enrollment begins June 2005
• Initial enrollment period from Nov 15, 2005 to
  May 15, 2006
• Beneficiary education will be critical to ease
  confusion, help transition of dual eligibles to
  Part D, and inform plan choice
• Medicare drug benefit projected to reduce
  out-of-pocket drug spending, especially for
  low-income, but many unknowns
• Will new prescription drug-only plans emerge?
• Will seniors sign up for Part D and low-income
  subsidies?
• Will dual eligibles transition from Medicaid to
  Medicare?
• Will new drug plans cover needed medications?
• Important to monitor beneficiaries access to
  needed medications and out-of-pocket prescription
  drug spending as new Medicare drug benefit is
  implemented.