The Medicare Prescription Drug Benefit: The Best Example of Why We Need a Public Option in a Reformed Health Care System

Written by: Vicki G on May 26, 2009 10:29 AM EDT

The Medicare Prescription Drug Benefit: The Best Example of Why We Need a Public Option in a Reformed Health Care System By Vicky Gottlich Opponents of a public plan option in any health care reform exchange system cite to the Medicare prescription drug benefit, known as Medicare Part D, as an example of a successful insurance program offered exclusively through private insurance companies. Unlike the hospital and doctor portions of Medicare, where services are available through the traditional public program or through private managed care plans, Medicare drug benefits are available only through private insurance companies. Older people and people with disabilities who want Medicare drug coverage must choose and then enroll in one of the private options, either a stand -alone insurance plan that covers only prescriptions or a managed care plan that includes drug coverage. Public plan opponents claim that Part D works well and is a model to be followed.

My experience as an advocate who helps Medicare beneficiaries navigate the Part D program has convinced me - and others who do similar work - that the opposite is true. Rather than being the example of how the private market works well without a public insurance option, the Medicare Part D program is the best argument for including a public health plan option in health care reform. A public option is needed to help control costs, to keep coverage affordable, and to ensure that the needs of high-cost consumers are met. None of that happens in Medicare Part D.

Without a public drug benefit option, the Medicare Part D costs to Medicare beneficiaries have risen substantially since the program went into effect in 2006. Premiums for plans offered by two of the sponsoring organizations with the largest enrollment, Humana and UnitedHealth Group, have risen 210% and 143%, respectively, since 2006. About half of beneficiaries who remain in the same stand-alone prescription drug plan since 2006 will have experienced a 50% increase in their premiums since the program began. Thus, the prescription drug benefit is becoming less affordable for many beneficiaries.

The premium increase is in addition to other increases in cost-sharing amounts and in the cost of drugs. AARP reports that the cost of brand name and the highest cost drugs placed in specialty cost-sharing tiers (a Part D phenomenon) continues to increase at a rate faster than inflation. Although the overall price of generic drugs has declined, the increased cost for brand and specialty drugs offsets the savings in cost for generic drugs. When drugs cost more, beneficiaries who are charged a coinsurance amount pay more out-of-pocket. And all beneficiaries pay more when they reach the “donut hole” or coverage gap, where, by Congressional design, they pay the full cost of their drugs and the insurance premium until they have spent enough on drugs for the year for catastrophic coverage to kick in.

In addition, the Part D benefit packages are not friendly to people who need drug coverage the most. Like the few private insurance plans that were available to older people before Medicare was enacted in 1965, the private Part D plans are designed to discourage enrollment by high health care users. In 2009, no stand-alone drug plan offers coverage of brand name drugs in the coverage gap or donut hole, (there are no generics for some drugs older people need) and plans continue to reduce the gap coverage that they do offer. The number of plans that have specialty tiers for high cost drugs has increased, as has the cost sharing charged for drugs on the specialty tiers. Although beneficiaries who require specialty tier drugs will reach catastrophic coverage sooner, many cannot afford the 35% cost –sharing on drugs that, by definition, cost $600 or more per fill. Even for drugs that are on lower cost-sharing tiers, plans have increased the utilization management requirements in their formularies, making it harder for people to get the drugs that were prescribed for them.

The most vulnerable of all enrollees, those eligible for the low-income subsidy (LIS) that defrays premiums, most cost sharing, and provides coverage in the donut hole, have experienced the greatest upheaval as a result of reliance only on private plans. Because of business decisions made by the plan sponsors, the plans that qualify as zero premium or benchmark plans change each year. Less than one-quarter of the plans that qualified as benchmark plans in 2006 so qualify today, and the total number of benchmark plans available have declined substantially. This yearly churning in benchmark plans necessitates millions of beneficiaries (2.2 million sin 2008) to either change to a different plan for which they will pay no premium or to remain in their previous plan and pay a portion of the premium. Most of these people are reassigned to a new play by CMS, but reassignments cause disruption in care, as beneficiaries must contend with new formularies, new utilization management requirements, and new plan procedures. Those who remain in their previous plan often cannot afford even the minimal premium amounts, and some are being disenrolled for non-payment.

Congress anticipated that beneficiaries would change drug plans each year in response to increases in drug plan premiums and cost sharing. Data show, however, that most beneficiaries have not changed plans, citing the complexity of the Part D program. After all, there are over 50 different stand-alone drug plan choices in most communities, and often as many managed care options, each with its own premium, drug formulary, cost-sharing schemes, and hoops that must be gone through to get some drugs that were prescribed by a treating physician.

To recap: Premiums for the Medicare Part D prescription benefit have increased exponentially and at a greater rate than premiums in the private employer-sponsored market. Cost sharing on covered drugs has gone up at the same time the plans have increased restrictions on access to some drugs and reduced the extra coverage they offer for people whose high drug costs put them in the “donut hole.” These changes have the greatest impact on individuals who need prescription drugs the most. The Part D plans have not been successful in keeping the overall cost of drugs down. Nor have they done a good job in protecting and providing continuous care to the lowest income older people and people with disabilities. That’s what we get in a system that relies on the private market to provide health care. Isn’t that proof enough that we need a public plan option if we really want to provide affordable, quality health care while reducing health care costs?


1. The Leadership Council on Aging Organizations recommends that a public drug plan option be offered through the traditional Medicare program.
http://www.lcao.org/docs/health/LCAO-HCReformDoc-FINAL.pdf
2. Source: Presentation by Avalere Health of their analysis using DataFrame®, a proprietary database of Medicare Part D plan features and 2009 MA-PD plan data released September 25, 2008 by CMS.
3. Kaiser Family Foundation, Medicare Part D Data Spotlight: Premiums (November 2008), http://www.kff.org/medicare/upload/7835.pdf
4. AARP, Rx Watchdog Report: Trends in Manufacturer Prices of Prescription Drugs used by Medicare Beneficiaries – 2008 Year End Update (April 2009), http://www.aarp.org/research/medicare/drugs/rx_watchdog.html
5. Kaiser Family Foundation, Medicare Part D Data Spotlight: The Coverage Gap (November 2008), http://www.kff.org/medicare/upload/7834.pdf
6. Kaiser Family Foundation, Medicare Prescription Drug Plans in 2008 and Key Changes Since 2006: Summary of Findings (April 2008), http://www.kff.org/medicare/upload/7762.pdf
7. Medicare Part D Data Spotlight: Low-Income Subsidy Plan Availability (November 2008), http://www.kff.org/medicare/upload/7836.pdf.
8. Kaiser Family Foundation, Choosing a Medicare Part D Plan: Are Beneficiaries Choosing Low-Cost Plans? (March 2009) http://www.kff.org/medicare/7864.cfm

Tags: