For immediate release
Tuesday, May 23, 2006
12:01 a.m. EDT
Researchers Find That Premiums And Coverage Vary Widely Among Medicare Drug Plans
Bethesda, MD -- The average premium charged by Medicare Part D stand-alone prescription drug plans (PDPs) is $37, according to an analysis published today on the Health Affairs Web site.
That’s well above the $19 average drug premium charged by local Medicare Advantage (MA) HMOs, the successors to Medicare+Choice plans, say Austin Frakt and Steven Pizer of the Veterans Affairs Boston Healthcare System. It’s also well above the $22 drug premium charged by the regional preferred provider organizations (PPOs). which, like PDPs, were introduced into Medicare by the Medicare Modernization Act of 2003. About half of the PDPs have no drug deductibles, as compared with three-quarters of HMO plans.
Frakt and Pizer say that PDPs are the only drug coverage plans available in large numbers to all beneficiaries. Each PDP operates in one or more of 34 regions across the country, and there are 1,429 PDPs overall, an average of 42 per region. Six insurers offer fifteen different PDPs nationwide. In contrast, there are only sixty-two PPOs across the country, each one operating in one of twenty-six regions. Local MA HMOs, which operate county by county, far outnumber both PDPs and PPOs, but the 11,646 HMO plans operate primarily in urban areas.
All PDP regions offer at least twenty-seven PDP options, and a few regions have more than fifty options. There is a great deal of premium variation within regions. In one extreme example, region 25, the maximum premium for low-deductible PDPs -- those with deductibles below $250 -- is $100 per month, or twenty times that of the $5 minimum premium for such plans in that region. In a more typical example, the maximum premium for a high-deductible PDP in region 17 is $38 per month, while the minimum is $13.
Despite this broad variation within regions, there is relatively little variation across regions in terms of average premiums and other PDP characteristics. For instance, the mean percentage of the 100 drugs most commonly used by Medicare beneficiaries that are covered is constant across regions at about 93 percent for both high- and low-deductible plans. And in every region and nationwide, low-deductible PDPs outnumber high-deductible PDPs by more than about two to one.
Like the PDPs in each region, the nationwide PDPs vary greatly from each other as well. For instance, “some plans, like those offered by WellCare, have both restrictive formularies and high premiums relative to other plans like UnitedHealthcare’s AARP MedicareRx,” Frakt and Pizer point out. One-third of the national PDPs, versus only 15 percent of all PDPs and 14 percent of local MA plans, offer coverage in the infamous “doughnut hole,” the gap in coverage that occurs in the standard Part D drug benefit -- which plans must meet but also may exceed -- between $2,250 and $5,100 in total drug spending.
However, only one national PDP, offered by Humana, offers coverage for brand-name drugs, as opposed to generics, in the doughnut hole. “Humana has adopted a strategy unique among national plans, one that exposes it to risk of adverse selection but that also holds the potential to capture substantial market share,” Frakt and Pizer observe. “More generally, whether the PDP sector receives either favorable or adverse selection will be key to the stability of this component of the Medicare prescription drug program. Recent work suggests that stand-alone PDPs will experience substantial adverse selection but will nevertheless remain stable, as long as subsidies are not cut too deeply.”
You can read the article by Frakt and Pizer at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.25.w252
Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org.
©2006 Project HOPEThe People-to-People Health Foundation, Inc.