Standard Medicare Prescription Drug Benefit, 2007 - Grantmakers In ...

Standard Medicare Prescription Drug Benefit, 2007 - Grantmakers In ...

Progress Report on the Medicare Drug

Benefit and Outlook for the Future

Michelle Kitchman Strollo, Dr.P.H.

Kaiser Family Foundation

Grantmakers In Health

2008 Annual Meeting

Los Angeles, CA

February 28, 2008

Exhibit 1

Presentation Overview

• National Perspective on Medicare Drug Coverage

• What share are in Part D plans? What share still lack drug

coverage in 2008?

• How many Part D enrollees receive low-income subsidies?

• Successes and Challenges

Medicare Policy Debate

• What are policymakers discussing with regard to the drug benefit

and other Medicare reforms?

• Role of Philanthropic Organizations

• How can philanthropy make a difference?

Exhibit 2

A Few Basics About the Medicare Drug Benefit

• New approach to delivering a Medicare benefit

Drug benefit is offered exclusively through private

organizations, not traditional Medicare

Standard benefit available, but plans can vary

• Plans can change from year to year – add, drop,

modify covered drugs and cost-sharing


• Coverage and cost depend on plan chosen

• Take-up is voluntary, not automatic

• Additional subsidies (“extra(

help”) ) available for

people with low incomes, but subject to income

and asset test

• All dual eligibles must be enrolled in a Part D plan to

receive drug benefits; automatically qualify for low-

income subsidies

Drug Coverage in 2008 and Participation

in the Low-Income Subsidy

NOTES: 1 Includes Veterans Affairs, Indian Health Service, state pharmacy assistance programs, employer plans for active

workers, Medigap, multiple sources, and other sources. 2 Includes retiree coverage with and without Retiree Drug Subsidy

(RDS), FEHBP, and TRICARE retiree coverage.

SOURCE: HHS, January 31, 2008 (Data as of January 2008).

Exhibit 3

HHS Estimates of Prescription Drug Coverage

Among Medicare Beneficiaries, 2008

No Coverage



Other Creditable 4.0 10% 11.2

Drug million million

Coverage 1 9%


Retiree Drug

Coverage 2













Eligibles in


Medicare Advantage

Drug Plan

Total Number of Beneficiaries = 44.2 Million

Total in

Part D


25.4 Million


NOTES: MSP is Medicare Savings Program; SSI is Supplemental Security Income.

SOURCE: HHS, January 31, 2008 ( Data as of January 2008).

Exhibit 4

HHS Estimates of Low-Income Subsidy Eligibility and

Participation Under the Medicare Drug Benefit, 2008

Eligible but not

receiving subsidy

Eligible but estimated

to have other drug


Applied for and receiving


Future anticipated

facilitated enrollment

Exhibit 5

Some Good News Three Years into the

Medicare Drug Benefit

Initial implementation problems were not repeated on a

large scale in 2007 or 2008

• More people on Medicare have Rx coverage

• 90% have Rx coverage including > 25 million in Part D plans

• High reported senior satisfaction with drug plans

• Nearly 6 in 10 were “extremely or very” satisfied (AARP, 11/07)

• Financial subsidies make a difference in terms of lower


of-pocket spending and less cost-related non-


Exhibit 6

Part D Low-Income Subsidies Matter

(Among Seniors Taking 1 or More Rx)

With LIS (excluding Dual Eligibles)

Without LIS







Did Not Fill/Delayed

Filling Due to Cost in

the Last 12 Months

Spent >$100 in the

Last 30 Days

Spent >$300 in the

Last 30 Days

NOTES: * Statistically significant at p

Exhibit 7

However, There Are Still a Number of Challenges

• Some beneficiaries still lack Rx coverage

• Large number of plans vary greatly in terms of cost and coverage

which can make it hard to choose a plan

• Difficulty getting “extra help” to those with low incomes

• LIS participation lower than projected; outreach hard

• Awareness of LIS is limited among low-income seniors

• Asset test excludes many with low incomes

• Churning of LIS eligibles from plan to plan at start of each year

• Even with drug coverage, many enrollees face high costs

• No coverage in the “doughnut hole”

• High cost sharing for specialty drugs

Exhibit 8

Cost-Related Skipping is Higher for Seniors in Part D Plans than

for Seniors with Drug Benefits from Employer Plans or the VA

(Among Seniors Taking 1 or More Rx)

Part D Employer Veterans Affairs (VA) No Rx Coverage

Percent who reported cost-related skipping:









All Seniors

Seniors with 3+ Chronic


NOTES: Sample excludes institutionalized seniors. “Cost-related skipping” means not filling or delayed filling or refilling an Rx

because of cost in the past twelve months. Reference group for statistical significance is Part D coverage (*p

SOURCE: Centers for Medicare and Medicaid Services, Office of the Actuary, Medicare Trustees Report, 2007.

Exhibit 9

The Standard Medicare Part D Coverage Gap is

Expected to Grow Over Time











2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Medicare Policy Debate

Exhibit 10

A Range of Part D Policy Options Have Been Suggested

Statutory Changes:

Allow/require government negotiations

Close/buy down the doughnut hole

Have Medicare administer its own Part D plan

Standardize drug plan options, similar to Medigap

Eliminate penalty for late enrollment

Administrative Changes:

Simplify low-income income subsidy program; improve outreach

Improve consumer protections under Part D plans (e.g. exceptions process)

Strengthen information systems for timely, accurate data transfer

Level playing field between PDPs and Medicare Advantage plans

Exhibit 11

Current National Medicare Debate is Focused Less on

Fixes to the Drug Benefit

• President’s s FY2009 budget relies primarily on cuts in

Medicare spending for budget savings ($178 b over 5 yrs)

• Freezing payments to hospitals and other providers

• Beneficiary premium increases for higher income people

Medicare Funding Warning Response Act of 2008

• Implementing a national system of electronic medical records

• Amending the medical malpractice liability system

Income-relating Part D premiums (similar to Part B)

• Physician payment cut of 10% will take effect in July if

Congress fails to act

Medicare Advantage plans continue to receive

overpayments relative to traditional FFS Medicare which

has budget implications for Medicare

What can philanthropy do to help?

Exhibit 12

Education and One-on

on-One Assistance Remain

Critically Important

Exhibit 13

Improving Access to Affordable Medications and Health

Care Services for Low-Income Beneficiaries

• Targeted efforts to help low-income get the LIS

or other sources of low-cost medications

• Partnerships with Part D plan sponsors

• State pharmacy assistance programs

• Manufacturer-sponsored Rx assistance programs

• Access to other health benefits

• Low-income beneficiaries exposed to high and rising


of-pocket costs – even with the new drug benefit

Medicare Savings Programs (QMB, SLMB, QI) have

great potential, but participation has been low

• Programs to help screen for eligibility for a number of

federal, state, and local benefits

Participation Rates:



Exhibit 14

Participation Rates Are Relatively Low for Programs That

Provide Assistance to Low-Income Seniors






Part D










SOURCE: Medicaid and SSI rates from GAO, March 2005; QMB and SLMB rates from CBO, July 2004. LIS rates

calculated from HHS release, January 2008 (excludes dual eligibles, MSP recipients, and SSI recipients who are

automatically enrolled and individuals with other sources of creditable coverage).

Exhibit 15

Potential Contributions to Research on Medicare

Beneficiaries and Their Experiences with Part D

• Who still lacks drug coverage and why?

• To what extent does Part D reduce out-of


spending on prescriptions, and which subgroups are

most affected?

• What happens to beneficiaries who reach the

doughnut hole? Do their drug use patterns change?

• What are perceived barriers in applying for low-

income subsidies? Do they differ by subgroup?

Exhibit 16


Medicare Rx benefit secured drug coverage for

many who were previously without it

• Many view the Medicare drug benefit as a fait

accompli, , despite numerous challenges that

remain and questions still unanswered

• Role of foundations is more critical than ever

given decline in public/government outreach

efforts and new policy priorities

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