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Rx
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___ in, M.D.
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10 B nytown
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John Rother
Director
Policy & Strategy
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Medicare
Rx Drug Coverage: The Need
Today’s pharmaceuticals do far more
than mitigate symptoms:
ƒ Control chronic conditions
ƒ Protect against acute episodes
ƒ Reverse course of disease, in some cases
ƒ And, significantly improve the quality of life
For Medicare-eligible
What are people’s Rx drug costs?
$0
<$1K $1
- 3K $3
- 5K $5
- 8K $8
- 10K $10K+
10%
25%
TOTAL Rx SPENDING
Medicare pays
Person's Co-pay
Person's Premiums
11%
3%
5%
Distribution of typical costs
over approximately 40 million
beneficiaries
Impact of New Law in 2006
$8,000
16%
CBO Projected 2006
The Standard Benefit Design
$12,000
$10,000
30%
95%
75%
$6,155
…
$6,000
$250
$1,500
$4,000
$1,500
$2,000
$563
$0
$500
$1,000
$2,000 $3,000
Prescription cost
$3600 out-of-pocket
Rx Spending
FINAL
As passed
$35 monthly premium
($420 per year)
$1,313
$188
$2250
Total Rx
Spending
$5,000 $10,000
Referred to as the DONUT HOLE
1
13.4 Million Low-Income
Medicare Beneficiaries Helped
Below 135% FPL
Assets Below $6,000**
• No Premium
• No Premium
• No Deductible
• No Coverage
Gap
• $1 Copay for
Generic
• $3 Copay for
Brand-name
• No Copay if in
nursing home
• No Copay over
the $3,600 limit*
• No Deductible
• No Coverage
Gap
• $2 Copay for
Generic
• $5 Copay for
Brand-name
4.4 million
• No Copay over
the $3,600 limit*
6.9 million
Below 135% FPL
Assets Below $10,000**
135% & 150% FPL
Assets Below $10,000
Immediate help
• No Premium
• Sliding Scale
Premium
• $50 Deductible
• $50 Deductible
• No Coverage
• No Coverage
Gap
Gap
• 15% Coinsurance • 15% Coinsurance
• $2 Generic or $5
Brand-name
Copay over the
$3,600 limit*
• $2 Generic or $5
Brand-name
Copay over the
$3600 limit*
0.7 million
1.4 million
ƒ Offers a Medicare discount card as a
“transition” benefit for low
- income
without other Rx coverage- - adds $600/yr
2003 CBO Estimate
Dual Eligibles
Below 100% FPL
Other Low-Income Protections
Choices in Benefit Design
ƒ Private benefit designs will differ
even though based on same
actuarial value as Medicare Rx
ƒ 2 or more private insurance plans or
federal fallback using the
‘standard benefit’
Medicare Structural Changes
ƒ Begins in June, 2004
and ends January, 2006
Enrollment
• Voluntary, can choose either:
– Stand
- alone plans sponsored by PBMs
– PPO/HMO plans (Medicare Advantage)
– No plan, pay no premium
• Annual open-season
• Late sign-up penalties = 1% per
month, or as HHS Sec determines
Protects Covered Retirees
Strengthens Medicare
Employer-provided retiree health coverage
ƒ Adds chronic care
management
ƒ Adds new prevention benefits
ƒ Allocates $71b in direct subsidies
–now tax free – for employers
who offer retirees Rx drug
coverage equivalent to Medicare
ƒ Requires electronic prescribing
for doctors and pharmacies,
which will improve quality
ƒ Sec. 631 was dropped (permitted
employers to provide retiree
health coverage only until age 65)
2
Effect on Employers
ƒ Typical employer: Expected to
retain benefits for present &
near-retirees -- limit for future
ƒ Initiatives to keep
pharmaceutical costs down
ƒ Large employers most likely to
“wrap-around” Medicare Rx,
AARP surveys in 2002 indicated
ƒ Initiatives to
strengthen benefits
Unfinished Agenda
Cost initiatives
ƒ Give HHS Sec negotiating power
ƒ Legalize importation
ƒ Call industry to limit price rises
ƒ Fund “effectiveness” research
ƒ Speed generic approval
ƒ Require plans disclosure prices
ƒ Reform direct-to-consumer ads
ƒ Reform detailing practices –AMA
Rx
Unfinished Agenda
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Unfinished Agenda
Benefit design initiatives
ƒ Close the donut hole
ƒ Eliminate asset tests
ƒ Change indexing to CPI-U
ƒ Improve coordination with State
Rx aid
ƒ Strengthen ‘fallback’ provisions
ƒ Allow States to be Rx plans
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Impa are Rx D
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