Bethesda, MD -- The existing plethora of Medicare Part D plans will expand further in 2007. However, as in 2006, most of the stand-alone prescription drug plans (PDPs) and Medicare Advantage prescription drug (MA-PD) plans offered next year will not provide full prescription drug coverage in the infamous “doughnut hole,” the coverage gap in the standard Part D benefit that occurs between $2,250 and $5,100 of total drug spending in 2006.
So report researchers from the Henry J. Kaiser Family Foundation in a comprehensive Medicare Part D status update, published today as a Health Affairs Web Exclusive. The authors detail organization- and plan-level market share, as well as enrollment by plan type, benefit design, and gap coverage.
This year, only 4 percent of the 22.5 million Part D enrollees are in plans offering doughnut-hole coverage for both brand-name and generic drugs, say lead author Juliette Cubanski, a principal policy analyst at the Kaiser Family Foundation, and Patricia Neuman, a foundation vice president. Another 8 percent of enrollees have coverage in the doughnut hole for generic drugs only.
Subtracting out the 9.3 million low-income beneficiaries who qualify for subsidized coverage in the doughnut hole “leaves 48 percent of all Part D enrollees -- 10.9 million Medicare beneficiaries . . . liable for 100 percent of their drug costs if their total spending exceeds $2,250 in 2006,” according to Cubanski and Neuman. This figure rises to 55 percent of all Part D enrollees (12.4 million beneficiaries) if those with generic-only gap coverage are included.
“Beneficiaries’ choices in the first year of the drug benefit seem to have been influenced by name recognition and low premiums,” Cubanski said. “That helps explain why so few beneficiaries have gap coverage in 2006. Going forward, it will be important for beneficiaries to evaluate their choices carefully, since some beneficiaries might be better off in plans that charge higher premiums but provide full-year coverage with no doughnut hole.”
But beneficiaries who make this determination might not have the easiest time acting on it. The Part D market is expanding in 2007: The number of national plan sponsors will increase to seventeen, up from nine this year, and there will be 31 percent more stand-alone prescription drug plans across the country in 2007. But Cubanski and Neuman report that the number of plans offering full coverage in the doughnut hole remains limited.
“Beneficiaries will have greater access to plans with gap coverage in 2007, but this is primarily because more plans will offer generic-only coverage,” say Cubanski and Neuman. In fact, “Humana PDP Complete, which had the highest enrollment among plans offering full gap coverage in 2006, will cover only generics in the gap in 2007.” An important question is whether the additional cost for plans with generic-only gap coverage will be a good investment to help alleviate financial burden for those who reach the gap, say the authors.
The Part D Marketplace: Many Plans Are Called, But Few Are Chosen
While 266 firms are participating in the 2006 Medicare Part D market, enrollment is concentrated in a small number, Cubanski and Neuman write. “Ten companies account for 72 percent of Part D enrollment,” and “two organizations -- UHC-Pacificare (United) and Humana -- dominate the Part D marketplace,” with 25 percent and 19 percent of total enrollment, respectively. Seven of the top ten plan sponsors offer both stand-alone PDPs and MA-PD plans.
Part D enrollment is also concentrated at the plan level as well. Stand-alone PDPs account for 11 of the top 15 Part D plans by enrollment in 2006, and two stand-alone PDPs -- United’s AARP Medicare Rx and Humana’s Standard Plan -- account for 23 percent of Part D enrollment nationwide. “With these two products, United and Humana adopted different but evidently highly effective strategies to attract enrollees,” the authors note. “United’s AARP product leverages beneficiaries’ recognition of the AARP ‘brand’,” while “Humana attracted high enrollment in its Standard PDP with an aggressive low-premium strategy.”
Overall, almost three-quarters (72 percent) of Part D enrollees are in stand-alone prescription drug plans in 2006, versus the slightly over a quarter (28 percent) in MA-PD plans. However, Cubanski and Neuman point out that MA has gained ground in recent years, and that “some insurers might have established a presence in both the PDP and MA-PD markets to attract new enrollees through PDP products, with a longer-term goal of shifting them into more-profitable MA products over time -- the ‘enroll and migrate’ strategy.”
Only about 500,000 beneficiaries, or 2 percent of Part D enrollees, elected private fee-for-service (PFFS) plans offering the Part D benefit in 2006. However, including the 264,000 enrollees in PFFS plans without drug coverage, PFFS enrollment increased fivefold between September 2005 and July 2006, with Humana accounting for 60 percent of this growth.
Part D Prognosis: So Far So Good, But Changes On The Horizon
The Medicare Modernization Act “provided a major opportunity for private organizations to establish and expand their presence in the Medicare market by offering new Part D products. The final enrollment figures for 2006 suggest that overall, these organizations were relatively successful at signing up large numbers of beneficiaries, which bodes well for assuring access to drug coverage through Part D plans in the future,” Cubanski and Neuman say.
But the authors also point to potential future concerns. The robust response of insurers to Part D is at least partly attributable to “payment policies that encourage plan participation and mitigate risk, including reinsurance and risk corridors,” they point out. In addition, the Centers for Medicare and Medicaid Services “elected to phase in enrollment-weighted premiums for 2007 to stabilize coverage for low-income beneficiaries, which effectively increases payments to plans (and federal spending).” Whether these payment levels will be sustained over time is an open question.
“It is not yet clear how the Medicare Part D marketplace will evolve over the next several years, in terms of plan participation and benefits offered,” Cubanski said. “But with many new plans available next year and some notable changes to plans between 2006 and 2007, beneficiaries would be well advised to evaluate their drug plan options during the open enrollment period.”
The Cubanski article can be read at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.26.1.w1