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Transcript of The New Medicare Prescription Drug Benefit: An Overview Prepared by: Michelle Kitchman, M.H.S....
![Page 1: The New Medicare Prescription Drug Benefit: An Overview Prepared by: Michelle Kitchman, M.H.S. Kaiser Family Foundation For the: California Senate Health.](https://reader035.fdocuments.us/reader035/viewer/2022072015/56649ebf5503460f94bc9f3c/html5/thumbnails/1.jpg)
The New Medicare Prescription Drug Benefit: An Overview
Prepared by: Michelle Kitchman, M.H.S.
Kaiser Family Foundation
For the:
California Senate Health and Human Services Committee and the
Senate Subcommittee on Aging and Long Term CareHearing on the Impact of the Medicare Prescription Drug Bill
February 18, 2004
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Agenda
• Key Rx drug provisions of the new Medicare law
- Discount cards (2004 & 2005)
- Rx benefit (2006)
• Dual eligibles, other low-income beneficiaries, and state Medicaid programs
• Implications for beneficiaries
• Future outlook
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Overview of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003
• In 2004 and 2005, beneficiaries have access to:
– Medicare-endorsed discount drug cards– $600 annual drug subsidy for some low-income seniors
• Beginning in 2006, beneficiaries have choice of:
– Traditional, fee-for-service Medicare, with access to private drug-only plans (PDPs)
– Medicare Advantage (MA), integrated plans that cover Medicare benefits and drugs
• Regional plans (PPOs)• Local area plans (HMOs)
– “Fallback” in areas without at least two options
• Subsidies to help beneficiaries with low incomes pay premiums and cost-sharing
![Page 4: The New Medicare Prescription Drug Benefit: An Overview Prepared by: Michelle Kitchman, M.H.S. Kaiser Family Foundation For the: California Senate Health.](https://reader035.fdocuments.us/reader035/viewer/2022072015/56649ebf5503460f94bc9f3c/html5/thumbnails/4.jpg)
Medicare-Endorsed Discount Drug Card
• Cards provide discounts on the purchase of drugs
• Enrollment in only one Medicare-endorsed discount card program permitted
• Individuals with Medicaid drug coverage not eligible
• Price comparisons to be posted at www.medicare.gov
• Administration estimates savings of 10-15% on total drug costs
• Pays $600 on behalf of low-income beneficiaries in each year + enrollment fee
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Medicare Beneficiaries’ Out-of-Pocket Drug Spending Under New Medicare Rx Benefit, 2006
+ ~$420 in annual premiumsNew Medicare Rx Benefit
Deductible $250
No Coverage
CatastrophicCoverage
PartialCoverage
up to Limit
$2,250
$5,100 (equivalent to $3,600 inout-of-pocket spending)
25%
5%
$2,850 Gap
Beneficiary Out-of-Pocket Spending
Note: Benefit levels are indexed to growth in per capita expenditures for covered Part D drugs. As a result, the Part D deductible is projected to increase from $250 in 2006 to $445 in 2013; the catastrophic threshold is projected to increase from $5,100 in 2006 to $9,066 in 2013.
Medicare Pays 75%
Medicare Pays 95%
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$420$564
$696
$250
$350
$445
2006 2010 2013
Estimated DeductibleEstimated Average Annual Premium
$670
$914
$1,141
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
2006 2010 2013
Initial Benefit Limit Catastrophic Threshold
The Benefit “Gap”
$2,850
$5,066
What Medicare Beneficiaries Will Pay for Their Prescriptions Over Time, 2006 - 2013
Source: Congressional Budget Office, November 2003.
Estimated Growth in Average Annual Medicare Drug Premiums and Deductibles:
Estimated Growth in Benefit “Gap”:
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Projected Sources of Prescription Drug Coverage, 2006
Note: Risk-bearing private plans include Medicare Advantage plans and stand-alone prescription drug plans.SOURCE: CBO, November 2003
Other Rx coverage
7%
"Fallback" Plans13%
Employer-Sponsored
20%
Risk-Bearing Private Plans60%
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Low-Income Subsidies and Treatment of Dual Eligibles
• $192 billion in subsidies for low-income assistance
• Could assist 14 million beneficiaries who meet income and asset requirements (including the 6.4 million with Medicaid drug benefits)
• Full dual eligibles qualify for low-income subsidy regardless of income or assets
– No premium or deductible; $1 per generic/$3 per brand name if at or below 100% poverty and $2 per generic and $5 per brand-name if >100% of poverty; no copays for institutionalized
• Beneficiaries <135% of poverty with low assets (<$6,000/individual; $9,000/couple)
– No premium or deductible; $2 per generic/$5 per brand-name up to catastrophic limit, no cost-sharing above catastrophic limit
• Beneficiaries from 135% to 150% of poverty with low assets (<$10,000/individual; $20,000/couple)
– Sliding scale premium/$50 deductible; 15% co-insurance to catastrophic limit; $2 per generic/$5 per brand-name above catastrophic limit
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Medicaid/State Issues
• Less fiscal relief than anticipated– States required to finance much of the cost of prescription drug
coverage for dual eligibles through “clawback” ($88.5 billion)
– Net fiscal relief $17.2 billion over 10 years with 91% of savings after 2008
– Significant state-by-state variation in fiscal relief and impact on Medicaid budgets
• Administrative burden/costs– States have major new responsibilities for making eligibility
determinations for Medicare’s low-income subsidy program
– New enrollment into Medicaid expected (“woodwork” effect)
• Elimination of Medicaid drug coverage for dual eligibles– As of January 1, 2006, states can only use general revenue funds to
supplement Part D coverage; Medicaid matching funds no longer available
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How Much Will It Cost?
Overall Cost:
• CBO estimates $395 over 10 years
• OMB estimates $534 over 10 years
Rx Cost Containment:
• “Noninterference” – Government is prohibited from direct involvement in Rx price negotiations
• CBO assumes private plans will achieve “substantial savings” through price negotiations with Rx manufacturers and pharmacies
• Reimportation remains illegal
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Issues and Challenges for Beneficiaries
• Understanding that Medicare discount cards (2004) are not the same as Medicare benefit (2006)
• Deciding whether to enroll in Part D in 2006- Financial penalties for delayed enrollment
• Enrolling in low-income subsidy program
- Will beneficiaries know they are eligible? Will they sign up?
• Comparing plans and deciding which to join
- Could face wide variations in premiums, benefit design, formularies and preferred drug lists each year
• Facing potential consequences of a bad decision- Annual lock-in
• Tracking their total and out-of-pocket Rx costs- Important due to benefit gap
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Limited Knowledge of the New Medicare Law
40%
36%
59% 18%
19%
19%
44%
23%
41%Total
Ages 18-64
Ages 65+
Yes, passed (correct answer) No, did not pass Don't know
Source: Kaiser Family Foundation Health Poll Report, December 2003.
You may have heard news about recent debates in Congress on a bill that would add a prescription drug benefit to Medicare. To the best of your knowledge, has this bill been passed by Congress and signed into law by President Bush, or not? (Dec. 10-14, 2003 – AFTER bill was passed and was signed by President Bush)
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Looking to the Future
• Reaction of seniors and younger beneficiaries with disabilities unclear
- Public education critically needed
• Fundamental change in beneficiary responsibilities beginning in 2006
- Annual selections of private plans to supplement Medicare
• Response of key players – key to success – but difficult to predict
- Will private plans choose to participate? Over the long term?- What will MA and PDP plans look like? Will beneficiaries have
access to needed medications?- Will employers take subsidies and retain retiree health?- Will low-income beneficiaries get subsidies?
• Uncertain effects on financing and stability of Medicare program over the long term