Transcript Document 215961

John Rother
Director
Policy & Strategy
Medicare
Rx Drug Coverage: The Need
Today’s pharmaceuticals do far more than
mitigate symptoms:
 Control chronic conditions
 Protect against acute episodes
 Reverse course of disease, in some cases
 And, significantly improve the quality of life
For Medicare-eligible
What are people’s Rx drug costs?
$0
<$1K
10%
25%
$1-3K $3-5K
30%
16%
$5-8K
$8-10K
$10K+
11%
3%
5%
CBO Projected 2006
Distribution of typical costs
over approximately 40 million
beneficiaries
Impact of New Law in 2006
$12,000
TOTAL Rx SPENDING
$10,000
$8,000
Medicare pays
Person's Co-pay
Person's Premiums
$6,155
$6,000
$1,500
$4,000
$1,500
$2,000
$1,313
$188
$563
$0
$500
$1,000
$2,000
$3,000
Prescription cost
$5,000 $10,000
The Standard Benefit Design
95%
75%
…
$250
$2250
Total Rx
Spending
$3600 out-of-pocket
Rx Spending
FINAL
As passed
$35 monthly premium
($420 per year)
Referred to as the DONUT HOLE
13.4 Million Low-Income
Medicare Beneficiaries Helped
Below 135% FPL
Assets Below $6,000**
• No Premium
• No Premium
• No Deductible
• No Coverage
Gap
• $1 Copay for
Generic
• $3 Copay for
Brand-name
• No Copay if in
nursing home
• No Copay over
the $3,600 limit*
• No Deductible
• No Coverage
Gap
• $2 Copay for
Generic
• $5 Copay for
Brand-name
4.4 million
• No Copay over
the $3,600 limit*
6.9 million
Below 135% FPL
Assets Below $10,000**
135% & 150% FPL
Assets Below $10,000
• No Premium
• Sliding Scale
Premium
• $50 Deductible
• $50 Deductible
• No Coverage
• No Coverage
Gap
Gap
• 15% Coinsurance • 15% Coinsurance
• $2 Generic or $5
Brand-name
Copay over the
$3,600 limit*
• $2 Generic or $5
Brand-name
Copay over the
$3600 limit*
0.7 million
1.4 million
2003 CBO Estimate
Dual Eligibles
Below 100% FPL
Other Low-Income Protections
Immediate help
 Offers a Medicare discount card as a
“transition” benefit for low-income
without other Rx coverage -- adds $600/yr
 Begins in June, 2004
and ends January, 2006
Choices in Benefit Design
 Private benefit designs will differ
even though based on same
actuarial value as Medicare Rx
 2 or more private insurance plans or
federal fallback using the
‘standard benefit’
Enrollment
• Voluntary, can choose either:
– Stand-alone plans sponsored by PBMs
– PPO/HMO plans (Medicare Advantage)
– No plan, pay no premium
• Annual open-season
• Late sign-up penalties = 1% per
month, or as HHS Sec determines
Medicare Structural Changes
Strengthens Medicare
 Adds chronic care
management
 Adds new prevention benefits
 Requires electronic prescribing
for doctors and pharmacies,
which will improve quality
Protects Covered Retirees
Employer-provided retiree health coverage
 Allocates $71b in direct subsidies
–now tax free – for employers
who offer retirees Rx drug
coverage equivalent to Medicare
 Sec. 631 was dropped (permitted
employers to provide retiree
health coverage only until age 65)
Effect on Employers
 Typical employer: Expected to
retain benefits for present &
near-retirees -- limit for future
 Large employers most likely to
“wrap-around” Medicare Rx,
AARP surveys in 2002 indicated
Unfinished Agenda
 Initiatives to keep
pharmaceutical costs down
 Initiatives to
strengthen benefits
Unfinished Agenda
Cost initiatives
 Give HHS Sec negotiating power
 Legalize importation
 Call industry to limit price rises
 Fund “effectiveness” research
 Speed generic approval
 Require plans disclosure prices
 Reform direct-to-consumer ads
 Reform detailing practices –AMA
Unfinished Agenda
Benefit design initiatives
 Close the donut hole
 Eliminate asset tests
 Change indexing to CPI-U
 Improve coordination with State
Rx aid
 Strengthen ‘fallback’ provisions
 Allow States to be Rx plans