Transcript Healthcare Reform and Medicare Part D

Healthcare Reform
and Medicare Part D
Dsih-lang Liu, FSA, MAAA
Centers for Medicare & Medicaid Services
Medicare Part D Benefits
• Prescription drug benefit in Medicare in
Medicare Modernization Act passed on Dec. 8,
2003
• Optional coverage with subsidized premiums
started on Jan. 1, 2006
• Eligibility: entitled to A or enrolled in B
CY 2006 Benefit Structure
• $250 deductible
• 25% coinsurance up to $2,250 initial coverage
limit (ICL)
• Coverage gap (donut hole)
• $3,600 true out-of-pocket (TrOOP) catastrophic
limit (=$5,100 incurred costs/threshold)
• Beneficiary pays greater of $2 generic/$5 brand
or 5% coinsurance above catastrophic threshold
• TrOOP excludes reimbursement by insurance,
employers etc.
Total
Spending
$250
$2,250
$5,100
75% Plan Pays
Coverage Gap
80% Reinsurance
Deductible
$+
? 95%
25%
Coinsurance
$3,600 TrOOP
Beneficiary Liability
15% Plan Pays
Direct Subsidy
Beneficiary Premium
5% Coinsurance
Medicare Pays Reinsurance
CY 2011 Benefit Structure
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$310 deductible
$2,840 ICL
$4,550 OOP catastrophic limit
Threshold varies by beneficiary
– $6,447.50 if 100% brand in gap
– $6,719.03 if 100% generic in gap
Part D Coverage
• Individual plans
– Prescription drug plans (PDPs)
– Medicare Advantage prescription drug plans
(MA-PDs)
• Employer group waiver plans (EGWPs)
• Retiree drug subsidy (RDS) plans
• Creditable coverage
Benefit Options (PDPs & PDs)
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Standard
Actuarial equivalent
Basic alternative
Enhanced alternative
Payments to Plans
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Direct subsidy: risk adjusted
Beneficiary premiums per plan bids
Reinsurance advance payments
Low-income cost sharing (LICS) advance
payments
• Low-income premium subsidy (LIPS)
• Year end reconciliation: reinsurance, LICS and
risk corridor adjustments
Employer Group Waiver Plans
• Encourage Part D participation
• Do not submit bids
• Benefits must be at least as generous as
standard Part D benefit
Retiree Drug Subsidy Plans
• 28% subsidy between $310 and $6,300 in 2011
• Updated similarly to the Part D benefit
parameters
• Tax exempt through 2012
• Plans must pass gross and net tests
• 6.6 million enrollees in 2009
Creditable Coverage
• Other qualifying prescription drug coverage
– Working aged
– VA/DOD
– Indian Health Services (IHS)
• Not subject to late enrollment penalty
Healthcare Reform:
Patient Protection and Affordable
Care Act (ACA)
• Enacted Mar. 2010
ACA Effects on Part D
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Closing the coverage gap
Income related premiums (IRP)
Eliminate tax exemption for RDS in 2013
LIS benchmark calculation methodology
De minimis
Protected drug classes
Waste reduction in long term care (LTC) facilities
TrOOP for IHS and AIDS Drug Assistance Program
(ADAP)
• Pathway for follow-on biologics (FOBs)
• Independent Payment Advisory Board (IPAB)
Closing the Coverage Gap
• $250 rebate in 2010 if exceeds ICL
• 50% brand discount starting Jan. 2011
– Not applied to dispensing fee
– Discount is considered TrOOP
• Slower growth in catastrophic threshold
• Transitioning in 2020 to
– Brand: plan 25%, bene 25%, PhRma 50%
– Generic: plan 75%, bene 25%
Closing the Coverage Gap (cont.)
Calendar Year
2011
Generic Coverage
7%
Brand Coverage
Brand Discount
0.0%
50%
2012
14
0.0
50
2013
21
2.5
50
2014
28
2.5
50
2015
35
5.0
50
2016
42
5.0
50
2017
49
10.0
50
2018
56
15.0
50
2019
63
20.0
50
2020
75
25.0
50
Closing the Coverage Gap (cont.)
• No 50% brand discount for
– RDS beneficiaries
– LIS beneficiaries
Income Related Premiums
• Same income threshold as Part B IRP
• Beneficiaries will pay higher premiums; i.e.
lower direct subsidies
• Expect some portion of beneficiaries to drop
coverage
• Threshold is frozen through 2019
• EGWPs subject to IRP
Income Related Monthly Adjustment
Amount (IRMAA)
Individual Income
Joint Income
Premium
Rate
IRMAA
<= $85,000
<= $170,000
25.5%
0
85,000 – 107,000
170,000 – 214,000
35%
107,000 – 160,000
214,000 – 320,000
50%
160,000 – 214,000
320,000 – 428,000
65%
> 214,000
> 428,000
80%
RDS Greatly Disadvantaged
• No tax exemption for subsidy
• No brand discount
• Expenses eligible for 28% subsidy do not
increase as donut hole disappears
LIS Benchmark Methodology
• 2006-2009: calculated after MA rebate reallocation
• 2010 Demonstration calculated before MA
rebate re-allocation
• ACA: calculates before MA rebate re-allocation
for 2011 and later
• Increase the LIPS for most regions
De Minimis
• Plans can waive the de minimis premiums to
keep LIS beneficiaries
• Cannot get new LIS auto-assignees
• For 2011, the de minimis amount is $2
• A minor cost for Part D by not re-assigning LIS
beneficiaries to lower premium plans
• Re-assignments reduced from 1.1 to 0.5
million
Protected Drug Classes
• Include all covered Part D drugs in 6 classes:
– Anticonvulsants
– Antidepressants
– Antineoplastics
– Antipsychotics
– Antiretrovirals
– Immunosuppressants for transplant rejection
Protected Drug Classes (cont.)
• All drugs in the protected classes must be in
formulary
• ACA
– Codifies the authority for protected classes
– Allows for new considerations
Wasteful Reduction in LTC Facilities
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7-day or less dispensing
Applied to brand drugs only
Expect savings on brand drugs
More dispensing fees
TrOOP for ADAP/IHS
• Currently, ADAP/IHS not considered TrOOP
• ACA: ADAP/IHS will be TrOOP
• Beneficiaries will reach catastrophic coverage
sooner
Follow-on Biologics
• “Generic” version of biologics
• Currently there is no approval pathway for
FOBs
• ACA provides an approval pathway for
biologics
Follow-on Biologics (cont.)
• Insulin is among the top categories in
spending
• No impact expected on insulin because it is
governed by a different pathway
IPAB to Control Growth
• Independent Payment Advisory Board
• Starting in 2014
• Recommend spending reduction measures
affecting providers and suppliers, including
Part D plans
– If projected Medicare per capita spending growth
exceeds target rate
Questions?
[email protected]