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MEDICARE PRESCRIPTION DRUG BENEFIT

Exhibit 1. MEDICARE PRESCRIPTION DRUG BENEFIT. Presented by Juliette Cubanski, Ph.D. Principal Policy Analyst Medicare Policy Project The Henry J. Kaiser Family Foundation June 2009. Return to tutorials. Exhibit 2. Medicare Part A, Part B, and Part C.

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MEDICARE PRESCRIPTION DRUG BENEFIT

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  1. Exhibit 1 MEDICARE PRESCRIPTION DRUG BENEFIT Presented by Juliette Cubanski, Ph.D. Principal Policy Analyst Medicare Policy Project The Henry J. Kaiser Family Foundation June 2009 Return to tutorials

  2. Exhibit 2 Medicare Part A, Part B, and Part C • Major source of coverage for seniors and younger people with permanent disabilities • Medicare beneficiaries tend to be sicker and use more health services than the general population • Entitlement program – provides coverage without regard to income or heath status • Original Medicare – fee-for-service program • Part A – Hospital Insurance Program • Inpatient hospital, skilled nursing facility, home health, and hospice care • Part B – Supplementary Medical Insurance • Physician visits, outpatient hospital, preventive services, home health • Part C – Medicare Advantage plans • An alternative to Original Medicare; beneficiaries can enroll in a private plan to receive all Medicare-covered benefits and (often) extra benefits • Private plans include HMOs, PPOs, and Private Fee-for-Service plans Return to tutorials

  3. Exhibit 3 The Need for a Medicare Drug Benefit • Prior to 2006, Medicare beneficiaries did not have access to a government-subsidized drug benefit through Medicare • Existing sources of drug coverage included: • Employer-sponsored retiree health benefits • Individually-purchased Medigap supplemental policies • State Medicaid programs for low-income Medicare beneficiaries • Medicare managed care plans • Veterans Administration, state pharmacy assistance programs, pharmaceutical company assistance programs • One-third had no drug coverage in 2004 • Those without coverage used fewer drugs but spent more out-of-pocket than those with coverage • Cost-related non-adherence (skipping/splitting doses, not filling prescriptions) was more common among those without coverage Return to tutorials

  4. Exhibit 4 Medicare Part D – Prescription Drug Benefit • Medicare Part D, enacted as part of the Medicare Modernization Act of 2003, took effect in 2006 • Part D is provided exclusively through private plans; benefits are not offered directly through the traditional fee-for-service program • Enrollment in a Part D prescription drug plan is voluntary • Beneficiaries may enroll in one of two types of private plans to get the Part D benefit • Stand-alone prescription drug plans to supplement Original Medicare • Medicare-Advantage prescription drug plans • Additional subsidies available for people with low incomes and modest assets to help pay for premiums and cost-sharing • Below 150% poverty ($16,245/individual, $21,855/couple in 2009) • Assets less than $12,510/individual, $25,010/couple in 2009 Return to tutorials

  5. Exhibit 5 Part A Part B Part A and B Part D Part D Financing and Benefit Payments Prescription Drug Benefit • Part D is funded by premiums, general revenues, and state payments • Plans are paid a fixed amount for each enrollee • “Reinsurance” payments from the government protect plans from unexpectedly high costs Hospital Inpatient Hospital Outpatient/Other Part B Benefits 11% 28% 9% 19% 5% Skilled Nursing Facilities Physicians and Other Suppliers 3% Hospice 4% 23% Home Health Medicare Advantage (Part C) Total Benefit Payments, 2009 = $484 billion NOTE: Does not include administrative expenses such as spending for implementation of the Medicare drug benefit and the Medicare Advantage program. Total is net of $9.4 billion in recoveries for 2009 . SOURCE: Congressional Budget Office, Medicare Baseline, March 2009. Return to tutorials

  6. Exhibit 6 Prescription Drug Coverage Among Medicare Beneficiaries, 2009 Total Number of Medicare Beneficiaries = 45.2 Million No Drug Coverage 4.5million10% Stand-Alone Prescription Drug Plan Other Drug Coverage1 6.2million14% 17.5million39% Total in Part D Plans: 26.7 Million (59%) 7.9 million18% Retiree Drug Coverage2 Medicare AdvantageDrug Plan 9.2 million20% NOTE: Percentages do not sum to 100% due to rounding. 1Includes Veterans Affairs, retiree coverage without RDS, Indian Health Service, state pharmacy assistance programs, employer plans for active workers, Medigap, multiple sources, and other sources. 2Includes Retiree Drug Subsidy (RDS) coverage and FEHBP and TRICARE retiree coverage. SOURCE: Centers for Medicare & Medicaid Services, 2009 Enrollment Information (as of February 1, 2009). Return to tutorials

  7. Exhibit 7 Medicare Drug Benefit Low-Income Subsidy Eligibility and Participation, 2009 Eligible but not receiving subsidy 2.3 million 19% Eligible but estimated to have other drug coverage 0.5 million (4%)1 9.6 million 77% Low-income Medicare beneficiaries receiving additional Part D subsidies Beneficiaries Eligible for Low-Income Subsidies = 12.5 million Return to tutorials NOTE: 1Includes Veterans Affairs, Indian Health Service, and Retiree Drug Subsidy (RDS) coverage.SOURCE: Centers for Medicare & Medicaid Services, 2009 Enrollment Information (as of February 1, 2009).

  8. Exhibit 8 Number of Medicare Part D Stand-Alone Prescription Drug Plans, by State, 2009 45-49 drug plans (34 states and DC) 50-53 drug plans (14 states) NOTE: Excludes Medicare Advantage Drug Plans (HMOs, PPOs, and Private Fee-for-Service plans).SOURCE: Kaiser Family Foundation analysis of Centers for Medicare & Medicaid Services 2009 PDP landscape file. 54-57 drug plans (3 states) Return to tutorials

  9. Exhibit 9 Plan Pays 15%; Medicare Pays 80% 5% $6,154 in Total Drug Costs ($4,350 out-of-pocket) $3,454 Coverage Gap (“Doughnut Hole”) $2,700 in Total Drug Costs Enrollee Pays 25% Plan Pays 75% $295 Deductible Medicare’s “Standard” Drug Benefit in 2009 … But most plans do not offer the “standard” benefit, and coverage varies across most dimensions, including: • Monthly premiums • Deductibles • The “doughnut hole” • Covered drugs and utilization management restrictions • Cost sharing for covered drugs Return to tutorials

  10. Exhibit 10 Average Monthly Premiums for Stand-Alone PDPs Weighted Monthly PDP Premiums, 2006-2009 Weighted Average Monthly PDP Premiums, by Gap Coverage, 2009 2006-2009: 35% increase No Gap Coverage Return to tutorials SOURCE: Georgetown/NORC analysis of data from CMS for the Kaiser Family Foundation.

  11. Exhibit 11 Cost Sharing in Medicare Part D Plans, 2006-2009 NOTE: Part D cost-sharing amounts are medians. Part D plan estimates weighted by enrollment in each year; analysis excludes generic/brand plans, plans with coinsurance for regular tiers, and plans with flat copayments for specialty tiers. PDP = Stand Alone Prescription Drug Plan; MA – PD = Medicare Advantage Prescription Drug PlanSOURCE: Georgetown/NORC analysis of data from CMS for MedPAC and the Kaiser Family Foundation. Return to tutorials

  12. Exhibit 12 Monthly Cost Sharing for Top Brand-Name Drugs in National Stand-Alone Drug Plans, 2009 MaximumCovered Cost Sharing MinimumCost Sharing Return to tutorials SOURCE: Georgetown/NORC analysis of data from CMS for the Kaiser Family Foundation.

  13. Exhibit 13 Share of Medicare Part D Plans in 2009, By Type of Gap Coverage Medicare Advantage Prescription Drug Plans (1,991 plans in 2009) Stand-alone Prescription Drug Plans (1,689 plans in 2009) Generics and Brands2% Mostly Generics Only 25% Mostly Generics Only 38% Little/No Gap Coverage* 75% Little/No Gap Coverage* 61% Return to tutorials NOTE: *“Little/No Gap Coverage” includes plans that cover few drugs only. SOURCE: Georgetown/NORC analysis of data from CMS for the Kaiser Family Foundation.

  14. Exhibit 14 Changes in Drug Use By Part D Enrollees Who Reached the Coverage Gap in 2007 Among Part D enrollees who reached the coverage gap, percent who: 26% 22% 23% 22% 14% Return to tutorials NOTE: Estimates based on analysis of retail pharmacy claims for 1.9 million Part D enrollees in 2007.SOURCE: Georgetown University/NORC/Kaiser Family Foundation analysis of IMS Health LRx database, 2007.

  15. Exhibit 15 Medicare Part D: Adding It Up + - 4.5 million lack drug coverage 2.3 million low-income eligible but without subsidies 41 million (90%) have drug coverage 9.6 million receiving low-income subsidies Coverage Out-of-pocket drug spending is generally lower Drug use is higher and cost-related skipping is generally lower Some enrollees may pay more – e.g., dual eligibles and those in the coverage gap Out-of-pocket drug spending, use, and access Lower for those who had no drug coverage prior to Part D Higher for dual eligibles and drugs with no competitors Drug prices Program spending Due partly to lower-than-projected Part D and low-income subsidy enrollment Lower than initially projected Choice Lots of plans means more options for beneficiaries Lots of plans could lead to confusion and difficulty choosing the best plan

  16. Exhibit 16 Future Issues and Options for Medicare Part D • Increase enrollment in Part D plans • Improve access to low-income subsidies; eliminate the asset test • Minimize variation in plan offerings by standardizing benefit designs • Reduce the number of plans that sponsors can offer • Reduce or eliminate the coverage gap • Allow the government to negotiate drug prices with pharmaceutical companies • Create a public Part D plan option Return to tutorials

  17. Exhibit 17 Medicare Policy Resources • Kaiser Family Foundation’s Medicare Policy Project: www.kff.org/medicare • Medicare Health and Prescription Drug Plan Tracker: http://www.kff.org/medicare/healthplantracker/ • State Facts on Medicare: http://www.statehealthfacts.org/cgi-bin/healthfacts.cgi • Medicare (the official government website): www.medicare.gov • Centers for Medicare & Medicaid Services (CMS): www.cms.hhs.gov • Congressional Budget Office (CBO): www.cbo.gov • Medicare Payment Advisory Commission (MedPAC): www.medpac.gov Return to tutorials

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