Medicare Part D Explained

Medicare Part D, part of Medicare (United States), is a prescription drug plan [1] for the elderly and disabled in the USA. It was enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). The plan will start in January 2006.

Program specifics:

The drug benefit will not be part of the traditional Medicare program, but rather will be offered through private insurance plans [2] that will be reimbursed by the Centers for Medicare & Medicaid Services (CMS). Medicare beneficiaries will have to affirmatively choose and enroll in a Part D plan. Benefiaries can obtain the Medicare Drug plan through two types of private plans [3], beneficiaries can join a prescription Drug Plan (PDP) for drug coverage only or they can join a Medicare Advantage (MA) plan that covers drugs and all other Medicare benefits. There will be 34 PDP regions and 26 MA regions in the U.S. The drug plans will control drug costs through a system of tiered formularies in which lower cost drugs are assigned to lower tiers and thus are easier to prescribe.

It is expected that there will be 11 Million newly covered lives, which is about the population of Ohio. There will be 6,000,000 people that will be eligible for both Medicare Part D and Medicaid (dual eligibles). There will be about 2 Million people who are currently covered by employers who will likely lose their employee benefits. This is about the population of Nevada. Therefore it is expected that 19 Million lives will be affected in 2006. This is about the population of New York. The expected per capita drug spend is [4] $2,250 making the total cost of the program $42.75 Billion. This budget compares with revenues of $54 Billion for Pfizer and $48.6 Billion for Johnson & Johnson, the two largest pharmaceutical companies. Other estimates [5] put the 2006 costs at $37.4 Billion. Total costs through 2015 are estimated to be $724 Billion. Some of these revenues will be provided by "clawback" of revenues currently provided to the states for Medicaid.

Enrollment for most beneficiaries is voluntary. The initial enrollment period takes place from November 15, 2005 till May 15, 2006. However, if a person does not enroll by the May 15 deadline, there will be a 1 percent per month penalty based on the average cost of the premium until one does enroll. On January 1, 2006, beneficiaries eligible for both Medicaid and Medicare (dual eligibles) will lose their Medicaid coverage for prescription drugs.

The MMA establishes a standard drug benefit that Part D plans may offer. The standard benefit is defined in terms of the benefit structure and not in terms of the drugs that must be covered. In 2006, this standard benefit requires payment of a $250 deductible. The beneficiary then pays 25% of the cost of a covered Part D prescription drug up to an initial coverage limit of $2250. Once the initial coverage limit is reached, the beneficiary is subject to another deductible, known as the “doughnut hole,” in which they must pay the full cost of medicine. When total out-of-pocket expenses on formulary drugs for the year, including the deductible and initial coinsurance, reach $3600 the beneficiary pays $2 for a generic or preferred drug and $5 for other drugs, or 5% coinsurance, whichever is greater. Note that the $3600 amount is calculated on a yearly basis; a beneficiary who amasses $3600 in out-of-pocket costs on December 31 of one year will have to start all over again on January 1.

Formularies

Part D plans are not required to pay for all covered Part D drugs [8]. They may establish their own formularies, or list of covered drugs for which they will make payment, as long as the formulary and benefit structure are not found by CMS to discourage enrollment by certain Medicare beneficiaries. Part D plans that follow the formulary classes and categories established by the United States Pharmacopoeia will pass the first discrimination test. Plans can change the drugs on their formulary during the course of the year with 60 days notice to affected parties.

Issues

The Medicare Part D marketplace is an evolving, dynamic environment with multiple players attempting to achieve individual goals.

Plan and Health Care Provider goals are not aligned: PDP's and MA's are rewarded for focusing on low cost drugs to all beneficiaries, while Providers are rewarded for quality of care – sometimes involving expensive technologies.

Plans are charged with conflicting goals: They must offer access to a wide variety of drugs that beneficiary doctors prescribe, but also offer restrictive formularies and hence lower prices and premiums.
More conflicting goals: Plans are required to have a tiered exemptions process for beneficiaries to get a higher-tier drug at a lower cost, but plans must grant exception when medically necessary. However, the rule denies beneficiaries the right to request a tiering exception for certain high-cost drugs.

In short, the most confusing part of Medicare Plan D is the lack of standardization. Drugs appearing on Tier 2 in one plan may be on Tier 3 in another. Furthermore, Tier 2 drugs may have a different co-pay with different plans. Also, there are plans with no deductibles and the coinsurance for the most expensive drugs varies widely. In addition, some plans may insist on step therapy, which is means that the patient must use generics first before the company will pay for higher priced drugs. There is an appeal process, however.

more resources:
• Medicare
• Medicare Part D

Also see:
Health
Pharmaceutical company
Pharmacology
Medicare Prescription Drug, Improvement, and Modernization Act
Medicaid
Biotechnology
Prescription drug prices in the United States
National pharmaceuticals policy

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This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Medicare Part D ".