The New Medicare Prescription Drug Plans Availability Costs and Benefits

							A First Look at the New Medicare
     Prescription Drug Plans




       Austin B. Frakt and Steven D. Pizer
                  June 26, 2006




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                   Overview
• Use CMS data to examine availability, costs, and
  benefits of Medicare drug plans.
• Additional focus on PDPs because they are new.
• PDPs also the only type of plan available in large
  numbers to all beneficiaries.
• Variations in cost-sharing and formulary provide
  meaningful choices and potential confusion.


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                    Significance
• Part D is the most significant expansion of the
  Medicare program since HMOs entered in the mid-
  1980s.
• Stand-alone prescription drug plans (PDPs) will be
  central to the viability of the new Medicare drug
  benefit.
   – Regional PPOs are likely to be very costly and
     temporary (Pizer, Frakt, and Feldman, 2005)
   – HMOs with Rx benefits will gain but past experience
     suggests they will appeal to a minority of beneficiaries

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                    Outline

•   Study data and methods.
•   Average characteristics of drug plans.
•   Focus on PDPs.
•   Discussion and questions for future.



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          Data and Methods
• Data on 2006 local MA and regional MA
  PPO drug plan and all stand-alone PDP
  offers were downloaded from CMS.
• “National” PDPs are those that (1) are
  offered by large insurers everywhere (or
  nearly so) in the country, and (2) have
  constant copays across service areas.

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Average Characteristics: Offers and
            Regions
Plan Type    Num.            Num.      Offers Per
             Offers         Regions     Region
Regional      62                  26      2.4
 PPOs
Local MA     11,646           3,274       3.6
Drug Plans
  PDPs       1,429                34      42


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 Average Characteristics: Premium
         and Deductible
Plan Type    Monthly         % $0         % $250
              Prem.        Deductible    Deductible
Regional      $22                  66%     34%
 PPOs
Local MA      $19                  75%     25%
Drug Plans
  PDPs        $37                  58%     34%


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    Average Characteristics: Gap
             Coverage
     Plan Type           Percent Offering Gap
                              Coverage
  Regional PPOs                  13%
Local MA Drug Plans              14%
       PDPs                      15%




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  Focus on PDPs: Ave. Premium by
        Plan Characteristics
PDP Plan Characteristics                Monthly
                                        Premium
High ($250) deductible                    $31
Low (<$250) deductible                    $41

Low deductible & generic gap coverage     $50
Low deductible & brand gap coverage       $61


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           National PDPs
AARP MedicareRx (United Healthcare); Medicare
Rx Essentials, Medicare Rx Plus, Medicare Rx
Premier (Aetna Medicare); CIGNATURE Rx
Value, CIGNATURE Rx Plus, CIGNATURE Rx
Complete (Cigna); Medicare Rx Rewards,
Medicare Rx Rewards Plus, Medicare Rx Rewards
Premier (Unicare); Wellcare Complete, Wellcare
Premier (Wellcare); PDP Standard, PDP
Enhanced, PDP Complete (Humana Inc.)

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               National PDPs
• One-third of national plans offer gap coverage.
• Only one (Humana’s PDP Complete) offers brand
  name gap coverage.
• Mean premium varies between $10 and $61
  (largely according to variations in cost sharing and
  benefits).
• Number of top 100 drugs with <$20 copay varies
  between 54 and 86.

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         Most Popular Drugs
• Want to illustrate coverage patterns in
  national PDPs.
• Selected 12 drugs based on high popularity
  among elderly and high sales volume.
• Included drugs for depression, high blood
  pressure, high cholesterol, acid reflux, and
  osteoporosis.

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                                                           Number
      Drug         Therapeutic     Monthly       Mean
                                                          Covering
 (Common Dose)          Use         Price     Copayment
                                                          (Max 15)
Celexa (20mg)     Depression         $76.32      $51         8
Diovan (80mg)     Hypertension       $51.44      $33         13
Fosamax (70mg)    Osteoporosis     $526.28       $32         15
Lipitor (10mg)    Cholesterol        $72.80      $33         15
Nexium (40mg)     Acid reflux      $134.96       $41         9
Norvasc (10mg)    Hypertension       $64.12      $36         15
Plavix (75mg)     Blood clots      $124.20       $35         12
Prevacid (30mg)   Acid reflux      $136.00       $43         11
Protonix (40mg)   Acid reflux      $108.68       $33         15
Toprol XL         Blood              $26.52
                                                 $32         15
   (50mg)            pressure
Zocor (20mg)      Cholesterol      $137.00       $36         15
Zoloft (100mg)    Depression         $80.76      $34         15



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                 Discussion
• Within regions, Medicare drug plan characteristics
  vary widely, a source of meaningful choice and
  potential confusion.
• These remain even when restricting attention to a
  small number of national PDPs.
• With brand gap coverage, Humana has adopted a
  strategy unique among national plans: potential for
  adverse selection and large market share.

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         Questions for Future
• In general, what will happen with respect to
  selection?
• Will the program remain stable even
  if/when congress cuts subsidies?
• How will insurers’ strategy change when
  the moratorium on new local PPO entry is
  lifted in 2008?

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