Impact of the Medicare Rx Drug Legislation on Consumers

1. Rx______________________________ Willis B Helpin, M.D. 10 Betterhealth Lane Anytown, USA Impact of the Medicare Rx Drug Legislationon Consumers

2. John RotherDirectorPolicy & Strategy

3. MedicareRx Drug Coverage: The Need Today’s pharmaceuticals do far more than mitigate symptoms: • Control chronic conditions • Protect against acute episodes • Reverse course of disease, in some cases • And, significantly improve the quality of life

4. For Medicare-eligible What are people’s Rx drug costs? CBO Projected 2006 Distribution of typical costs over approximately 40 million beneficiaries

5. Impact of New Law in 2006 TOTAL Rx SPENDING Prescription cost

6. The Standard Benefit Design 95% 75% … $250 $2250 $3600 out-of-pocket Total Rx Rx Spending Spending FINAL As passed $35 monthly premium ($420 per year) Referred to as the DONUT HOLE

7. 13.4 Million Low-IncomeMedicare Beneficiaries Helped 2003 CBO Estimate

8. Other Low-Income Protections Immediate help • Offers a Medicare discount card as a “transition” benefit for low-income without other Rx coverage -- adds $600/yr • Begins in June, 2004 and ends January, 2006

9. Choices in Benefit Design • Private benefit designs will differ even though based on same actuarial value as Medicare Rx • 2 or more private insurance plans or federal fallback using the ‘standard benefit’

10. Enrollment • Voluntary, can choose either: • Stand-alone plans sponsored by PBMs • PPO/HMO plans (Medicare Advantage) • No plan, pay no premium • Annual open-season • Late sign-up penalties = 1% per month, or as HHS Sec determines

11. Medicare Structural Changes Strengthens Medicare • Adds chronic care management • Adds new prevention benefits • Requires electronic prescribing for doctors and pharmacies, which will improve quality

12. Protects Covered Retirees Employer-provided retiree health coverage • Allocates $71b in direct subsidies –now tax free – for employers who offer retirees Rx drug coverage equivalent to Medicare • Sec. 631 was dropped (permitted employers to provide retiree health coverage only until age 65)

13. Effect on Employers • Typical employer: Expected to retain benefits for present & near-retirees -- limit for future • Large employers most likely to “wrap-around” Medicare Rx, AARP surveys in 2002 indicated

14. Unfinished Agenda • Initiatives to keep pharmaceutical costs down • Initiatives to strengthen benefits

15. Unfinished Agenda Cost initiatives • Give HHS Sec negotiating power • Legalize importation • Call industry to limit price rises • Fund “effectiveness” research • Speed generic approval • Require plans disclosure prices • Reform direct-to-consumer ads • Reform detailing practices –AMA

16. Unfinished Agenda Benefit design initiatives • Close the donut hole • Eliminate asset tests • Change indexing to CPI-U • Improve coordination with State Rx aid • Strengthen ‘fallback’ provisions • Allow States to be Rx plans

17. Rx______________________________ Willis B Helpin, M.D. 10 Betterhealth Lane Anytown, USA Impact of the Medicare Rx Drug Legislationon Consumers