Translating “Legislative Sausage”
into Understandable Choices of
Beneficiaries
Presented by
Tricia Neuman, Sc.D.
Vice President and Director, Medicare Policy Project
The Henry J. Kaiser Family Foundation
for
AcademyHealth
June 27, 2005
Exhibit 1
Four Key Policy Decisions that Set the
Legislative Sausage Machine in Motion
1. Beneficiaries would have access to drug coverage offered by
competing, private at-risk plans
– Strong philosophical tilt toward private, market-based approach, rather
than big government program
– Prescription drug benefit would be integral to Medicare, unlike other
benefits
2. The new Medicare drug benefit would be voluntary
– Unlike Part B, however, people would “opt-in”, rather than opt out
3. The total federal cost over budget window would be $400 billion
– Even if it resulted in less than-typical-benefit with doughnut hole
4. Additional help would be provided to those with low incomes and/or
catastrophic costs
– Introducing means-testing to Medicare, including new asset test
– Requiring administrative roles for SSA and states/Medicaid
Exhibit 1
Four Key Policy Decisions that Set the
Legislative Sausage Machine in Motion
1. Beneficiaries would have access to drug coverage offered by
competing, private at-risk plans
– Strong philosophical tilt toward private, market-based approach, rather
than big government program
– Prescription drug benefit would be integral to Medicare, unlike other
benefits
2. The new Medicare drug benefit would be voluntary
– Unlike Part B, however, people would “opt-in”, rather than opt out
3. The total federal cost over budget window would be $400 billion
– Even if it resulted in less than-typical-benefit with doughnut hole
4. Additional help would be provided to those with low incomes and/or
catastrophic costs
– Introducing means-testing to Medicare, including new asset test
– Requiring administrative roles for SSA and states/Medicaid
•
Benefit should be user-friendly; relatively easy for beneficiaries to
understand and manage
– Especially for large number with special needs
Exhibit 2
Characteristics of the Medicare Population
Percent of total Medicare population:
Lacks Drug Coverage
Part Year
27%
Full Year
18%
Low-Income <150% FPL
($14,355 in 2005)
39%
3+ Chronic Conditions
35%
Fair/Poor Health
29%
Cognitive/Mental
Impairment
27%
Enrolled in Medicaid
(“Dual Eligibles”)
17%
14%
Under-65 Disabled
Nursing Home Resident
45%
6%
SOURCE: All data from Medicare Current Beneficiary Survey 2002 Cost and Use File 2002 except income data from March 2004
Current Population Survey.
Exhibit 3
Decisions for Medicare Beneficiaries
To D or
Not to D?
Exhibit 3
Decisions for Medicare Beneficiaries
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
Enroll in Part D Plan
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription
Drug Coverage
(penalty for
late enrollment)
“Creditable”
Employer Plan
(no low-income
subsidies)
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription
Drug Coverage
(penalty for
late enrollment)
“Creditable”
Employer Plan
(no low-income
subsidies)
Medigap (but not
“creditable” so
penalty for late
enrollment)
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
“Creditable”
Employer Plan
(no low-income
subsidies)
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
Enroll in Part D Plan
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
“Creditable”
Employer Plan
(no low-income
subsidies)
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
Enroll in Part D Plan
Medicare
Advantage
Traditional
Medicare
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
“Creditable”
Employer Plan
(no low-income
subsidies)
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
Enroll in Part D Plan
Medicare
Advantage
Traditional
Medicare
• Prescription
Drug-Only Plan
(PDP)
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
Enroll in Part D Plan
Medicare
Advantage
• HMO
• PPO (regional)
“Creditable”
Employer Plan
(no low-income
subsidies)
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
• Private
Fee-for-Service
Traditional
Medicare
• Prescription
Drug-Only Plan
(PDP)
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
Enroll in Part D Plan
Medicare
Advantage
• HMO
• PPO (regional)
“Creditable”
Employer Plan
(no low-income
subsidies)
• Prescription
Drug-Only Plan
(PDP)
• Private
Fee-for-Service
Decisions to be Made:
• Premiums
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
Traditional
Medicare
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
Enroll in Part D Plan
Medicare
Advantage
• HMO
• PPO (regional)
“Creditable”
Employer Plan
(no low-income
subsidies)
• Prescription
Drug-Only Plan
(PDP)
• Private
Fee-for-Service
Decisions to be Made:
• Premiums
• Covered Drugs
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
Traditional
Medicare
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
Enroll in Part D Plan
Medicare
Advantage
• HMO
• PPO (regional)
“Creditable”
Employer Plan
(no low-income
subsidies)
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
Traditional
Medicare
• Prescription
Drug-Only Plan
(PDP)
• Private
Fee-for-Service
Decisions to be Made:
• Premiums
• Covered Drugs
• Cost-Sharing
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
Enroll in Part D Plan
Apply for LowIncome Subsidy?
Medicare
Advantage
• HMO
• PPO (regional)
“Creditable”
Employer Plan
(no low-income
subsidies)
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
Traditional
Medicare
• Prescription
Drug-Only Plan
(PDP)
• Private
Fee-for-Service
Decisions to be Made:
• Premiums
• Covered Drugs
• Cost-Sharing
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
Enroll in Part D Plan
Apply for LowIncome Subsidy
If Dual Eligible
Auto-enrolled
“Creditable”
Employer Plan
(no low-income
subsidies)
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
Medicare
Advantage
• HMO
• PPO (regional)
Traditional
Medicare
• Prescription
Drug-Only Plan
(PDP)
• Private
Fee-for-Service
Decisions to be Made:
• Premiums
• Covered Drugs
• Cost-Sharing
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
Enroll in Part D Plan
Apply for LowIncome Subsidy
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
Social
Security
• HMO
• PPO (regional)
If Dual Eligible
Auto-enrolled
“Creditable”
Employer Plan
(no low-income
subsidies)
Medicare
Advantage
Traditional
Medicare
• Prescription
Drug-Only Plan
(PDP)
• Private
Fee-for-Service
Medicaid
Decisions to be Made:
• Premiums
• Covered Drugs
• Cost-Sharing
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
Enroll in Part D Plan
Apply for LowIncome Subsidy
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
Social
Security
• HMO
• PPO (regional)
If Dual Eligible
Auto-enrolled
“Creditable”
Employer Plan
(no low-income
subsidies)
Medicare
Advantage
Traditional
Medicare
• Prescription
Drug-Only Plan
(PDP)
• Private
Fee-for-Service
Medicaid
If meet income and asset
test, qualify for subsidy:
Decisions to be Made:
• Premiums
• Covered Drugs
• Cost-Sharing
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
Enroll in Part D Plan
Medicare
Advantage
Apply for LowIncome Subsidy
• HMO
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
Social
Security
• Prescription
Drug-Only Plan
(PDP)
• PPO (regional)
If Dual Eligible
Auto-enrolled
“Creditable”
Employer Plan
(no low-income
subsidies)
Traditional
Medicare
• Private
Fee-for-Service
Medicaid
If meet income and asset
test, qualify for subsidy:
Decisions to be Made:
• Premiums
• Covered Drugs
• Cost-Sharing
Below 135% FPL
Below 150% FPL
Below 100% FPL
($12,920 in 2005)
($14,355 in 2005)
($9,570 in 2005)
Assets $6,000/single;
$9,000/couple
Assets $10,000/single;
$20,000/couple
Exhibit 3
Decisions for Medicare Beneficiaries
Do Not Enroll
in Part D Plan
No Prescription Drug
Coverage
(penalty for
late enrollment)
Enroll in Part D Plan
Medicare
Advantage
Apply for LowIncome Subsidy
• HMO
Medigap Coverage
(but not “creditable”
= penalty for
late enrollment)
Social
Security
• Prescription
Drug-Only Plan
(PDP)
• PPO (regional)
If Dual Eligible
Auto-enrolled
“Creditable”
Employer Plan
(no low-income
subsidies)
Traditional
Medicare
• Private
Fee-for-Service
Medicaid
If meet income and asset
test, qualify for subsidy:
Decisions to be Made:
• Premiums
• Covered Drugs
• Cost-Sharing
Below 135% FPL
Below 150% FPL
Below 100% FPL
($12,920 in 2005)
($14,355 in 2005)
($9,570 in 2005)
Assets $6,000/single;
$9,000/couple
Assets $10,000/single;
$20,000/couple
Exhibit 4
The “Right” Choice Will Depend on Many
Factors, Including Current Source of Coverage
Medicare
Savings
Programs
Medigap
Medicaid
Veterans Admin.
CHAMPUS
TRICARE
EmployerSponsored
Coverage
MedicareApproved
Drug
Discount
Card Holder
Indian
Health
Service
Medicare
Advantage
No Drug
Coverage
State Pharmacy
Assistance
Program
Exhibit 5
Special Challenges: Dual Eligibles
(6.3 million)
Dual Eligible Medicare Beneficiaries
Other Medicare Beneficiaries
Fair/Poor
Health Status
52%
26%
Mental
Disorder
Less than HS
Education
–
Medicaid stops paying for Rx
December 31, 2005
–
“Duals” auto-enrolled in Medicare
Rx plans by HHS - Fall 2005
34%
• Assigned to plans at or below
average premium
17%
Functional
Limitation
Reside in
LTC Facility
Under the MMA and final rules:
71%
–
45%
Key Issues
19%
3%
61%
25%
SOURCE: MCBS 2002 Access to Care File.
Coverage under Medicare Rx plans
begins January 1, 2006
–
–
–
–
–
Gaps in coverage?
Will their drugs be covered?
What plans will be available?
Will states wrap?
Education and outreach to duals?
Exhibit 6
Seniors’ Understanding of the Medicare
Prescription Drug Benefit
Very Well
11%
68% of seniors
say they do not
understand the
drug benefit
Not Well At
All
38%
Somewhat
Well
18%
Not Too
Well
30%
* Don’t know responses not shown.
SOURCE: Kaiser Family Foundation Health Poll Report survey (conducted March 31 – April 3, 2005).
Exhibit 7
Seniors’ Understanding of New Medicare Law - Trend
AMONG SENIORS: As you may know, beginning in 2006 there will be a new prescription
drug benefit that will give all people on Medicare the option of enrolling in a Medicare
drug plan. How well would you say you understand this new benefit?*
68%
70%
60%
60%
59%
53%
55%
55%
Not too well /
Not at all
50%
40%
30%
45%
43%
39%
40%
Very /
Somewhat well
43%
29%
20%
10%
0%
Feb-04
Apr-04
Jun-04
Oct-04
Dec-04
Apr-05
*Note: Question wording before April 2005 referred to the “new Medicare law.” Don’t know responses not shown.
Source: Kaiser Family Foundation surveys.
Exhibit 8
Seniors’ Impression of the Medicare Drug Benefit
AMONG SENIORS: Given what you know about it, in general, do you have a
favorable or unfavorable impression of the new Medicare prescription drug
benefit?
Favorable
21%
Unfavorable
34%
Neutral/
Don’t Know
45%
SOURCE: Kaiser Family Foundation Health Poll Report survey (conducted March 31 – April 3, 2005).
Exhibit 9
Seniors’ Impressions of New Medicare Law - Trend
AMONG SENIORS: Given what you know about it, in general, do you have a favorable
or unfavorable impression of the new Medicare drug benefit?*
60%
55%
47%
50%
48%
44%
40%
42%
33%
28%
29%
30%
27%
45%
34%
29%
Unfavorable
Neutral/Don't
know
Favorable
20%
10%
24%
25%
27%
25%
21%
17%
0%
Feb-04
Apr-04
Jun-04
Oct-04
*Note: Question wording before April 2005 referred to the “new Medicare law.”
Source: Kaiser Family Foundation surveys.
Dec-04
Apr-05
Exhibit 10
Seniors’ Plans to Enroll in a Medicare
Drug Plan in 2006
Yes, will
enroll
9%
No, will
not enroll
47%
37%
7%
Don’t Know/
Refused
SOURCE: Kaiser Family Foundation Health Poll Report survey (conducted March 31 – April 3, 2005).
Have not heard
enough to
decide
Exhibit 11
Challenges for Beneficiaries and CMS;
Opportunities for Researchers
• Examine costs/savings attributable to general approach
• Monitor quality of pharmacological care
• Assess impact on beneficiaries’ out-of-pocket costs
• Track role of private plans
• Assess variations in benefits, premiums, cost-sharing
and formularies
• Examine how well beneficiaries respond to choices