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 mid1980s. • 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. Offers Num. Regions Offers Per Region
Regional PPOs Local MA Drug Plans
PDPs
62 11,646
1,429
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26 3,274
34
2.4 3.6
42
Average Characteristics: Premium and Deductible
Plan Type Monthly Prem. % $0 Deductible % $250 Deductible
Regional PPOs Local MA Drug Plans
PDPs
$22 $19
$37
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66% 75%
58%
34% 25%
34%
Average Characteristics: Gap Coverage
Plan Type Percent Offering Gap Coverage
Regional PPOs
Local MA Drug Plans
13%
14%
PDPs
15%
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Focus on PDPs: Ave. Premium by Plan Characteristics
PDP Plan Characteristics Monthly Premium
High ($250) deductible
Low (<$250) deductible
$31
$41
Low deductible & generic gap coverage Low deductible & brand gap coverage
$50 $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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Drug (Common Dose)
Therapeutic Use
Monthly Price
Mean Copayment
Number Covering (Max 15)
Celexa (20mg) Diovan (80mg) Fosamax (70mg) Lipitor (10mg)
Nexium (40mg) Norvasc (10mg) Plavix (75mg)
Depression Hypertension Osteoporosis Cholesterol
Acid reflux Hypertension Blood clots
$76.32 $51.44 $526.28 $72.80
$134.96 $64.12 $124.20
$51
$33 $32
8
13 15
$33 $41 $36 $35
$43 $33
15 9 15 12
11 15
Prevacid (30mg)
Protonix (40mg) Toprol XL (50mg)
Acid reflux
Acid reflux Blood pressure
$136.00
$108.68 $26.52
$32 $36 $34
15 15 15
Zocor (20mg)
Zoloft (100mg)
Cholesterol
Depression
$137.00
$80.76
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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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