Variation in Medicare Part D Prescription
Drug Plan Benefits, 2006
RTI co-authors for this work
„
Leslie M. Greenwald, Ph.D.
Principal Scientist
z
John Kautter
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Nathan West
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Gregory Pope
RTI, International
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Methods
Purpose
„
To understand how the multitude of Medicare Part D
benefits and premiums differ on key elements.
„
Compare Part D options available through stand
alone prescription drug plans (PDPs) and Medicare
Advantage plans (MA-PDs).
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Compared premiums and selected benefits of stand
alone prescription drug plans (PDPs) and Medicare
Advantage plans (MA-PDs)
„
Used data available on the CMS Website and Health
Plan Management System (HPMS) for 2006
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Methods
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„
Distribution of Plans by Plan Type, 2006
Part D plan types examined:
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Basic Plans (Defined Standard, Actuarial Equivalent and Basic
Alternative)
Enhanced Plans (Non-Demonstration Enhanced, Flexible Capitation
Demonstration Enhanced, and Fixed Captiation Demonstration
Enhanced)
‹ Demonstration = plans offered under the Medicare Part D
Reinsurance Demonstration which capitated reinsurance
payments to participating plans offering enhanced benefits.
Basic benefit plans
Counts of plans
MA-PD plan types examined:
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„
HMOs and HMO/POS
Local PPOs
Regional PPOs
Private FFS
Defined
standard
Actuarially
equivalent
Enhanced alternative plans
Demonstration
Flexible
Fixed
capitation
capitation
Basic
alternative
Nondemonstration
PDP
134
314
386
435
177
0
MA-PD
255
150
349
587
312
34
All plans
389
464
735
1,022
489
34
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Average Monthly Part D Premiums, 2006
Average Monthly Part D Premiums, 2006
Basic benefit plans
Enhanced alternative plans
„
Monthly premiums are a key benefit element used by
beneficiaries to choose among plan options.
„
Obtaining coverage through a Medicare Advantage plan, on
average, is the least expensive option for obtaining Part D
coverage.
„
MA-PD enrollees are often able to obtain enhanced Part D
coverage for about the same (or lower) monthly premiums than
basic coverage offered by stand alone PDPs.
„
But this choice comes only with enrollment in an MA plan, a
decision that has implications beyond Part D.
„
Use of Medicare Part C “rebates” are commonly used by MA
plans to reduce monthly premiums, an option not available to
stand alone PDPs.
Demonstration
Monthly
premium
Defined Actuarially
Basic
standard equivalent alternative
NonFlexible
demonstration capitation
Fixed
capitation
Mean
PDPs
$25.74
$33.14
$35.52
$42.31
$45.53
NA
MA-PDPs
23.09
20.88
21.28
14.44
22.66
$38.63
All plans
24.01
29.17
28.77
26.31
30.94
38.63
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Average Monthly Part D Premiums
by MA Plan Type, 2006
Average Monthly Part D Premiums
by MA Plan Type, 2006
Basic benefit plans
„
Regional PPOs offered the lowest Part D premiums for Basic
Alternative plans ($16.79), followed closely by HMO plans
($17.74). Premiums for basic alternative options offered by
PFFS plans were much more costly (at $29.56).
„
Among non-demonstration enhanced plans, HMOs ($12.44) and
Regional PPOs ($13.69) offered the lowest premiums.
Premiums for PFFS plans ($26.51) were again the highest.
„
Among demonstration enhanced plans, Local PPO Part D
premiums were the highest.
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There is wide variation among MA plans geographically for Part
C and D premiums. This variation is dependent on the level of
market competition among plans and Medicare county payment
rates.
Enhanced alternative plans
Demonstration
Monthly
premium
Defined
standard
Actuarially
equivalent
Basic
alternative
Nondemonstration
Flexible
capitation
Fixed
capitation
Mean
Regional PPO
NA
$15.85
$36.14
$16.79
$13.69
$28.75
Local PPO
31.18
30.78
26.38
19.93
32.81
57.89
HMO/POS
22.97
17.13
17.74
12.44
18.97
29.95
PFFS
17.45
14.01
29.56
26.51
15.20
NA
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Percentage of Plans Applying Co-Payments
Through Drug Tiers, 2006
Percentage of Plans Applying Co-payments
Through Drug Tiers, 2006
„
Tiers are used by plans to define categories of drugs with
different cost sharing amounts. Plans apply different out-ofpocket costs to different tiers of drugs to encourage the use of
either generic or other preferred products.
„
Use of of only co-payments (as opposed to co-insurance)
generally translates to lower costs for beneficiaries.
„
All plan types favored co-payments over coinsurance in applying
cost sharing to their drug tiers. No clear pattern of difference
between PDPs and MA-PDs.
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Among most prevalent plan type (basic alternative and nondemonstration enhanced plans) MA-PD plans were more likely
than PDPs to apply co-payments rather than co-insurance.
Benefit plan type
Demonstration
Flexible
Fixed
capitation
capitation
Actuarially
equivalent
Basic
alternative
Nondemonstration
72.9%
70.2%
81.1%
82.4%
n/a
65.3%
85.1%
78.1%
84.1%
97.1%
PDP
Co-payment
MA-PDP
Co-payment
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Coverage of Drugs in the “Donut Hole”
Gap, 2006
Coverage of Drugs in the “Donut Hole”
Gap, 2006
Counts of Plans and Percent of Plans by Plan Type
„
Availability of coverage in the “donut hole” gap is a key source of
difference among Part D plan benefit options.
„
By definition, only enhanced plan offer coverage in the gap.
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Among non-demonstration enhanced plans, MA-PDs are more
likely to offer either generic, or generic and brand, coverage in
the coverage gap. MA-PDs may use Part C rebate funds to
support gap coverage.
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Among the flexible capitation demonstration plans, PDPs are
more likely to offer gap coverage.
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The percentage of demonstration plans offering gap coverage is
generally higher compared to non-demonstration plans. The
capitated reinsurance dollars available under the demonstration
may be a factor in supporting gap coverage.
Demonstration
Non
Demonstration
Flexible capitation
Fixed capitation
76 (17.47%)
111 (62.71%)
N/A
1 (0.23%)
33 (18.64%)
N/A
141 (24.02%)
166 (53.21%)
8 (23.53%)
52 (8.86%)
17 (5.45%)
16 (47.06%)
PDP
Generic Only
Generic and Brand
MA-PDP
Generic Only
Generic and Brand
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Other Benefit Comparisons, 2006
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For both basic and enhanced products, MA-PDs divided their
covered drugs into a larger number of drug tiers than PDPs.
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PDPs tend to have slightly large pharmacy networks, though
network size is generally very large among all plans and is
therefore not a likely source of meaningful differences among
plans.
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Regarding formularies, MA-PDs report more extensive coverage
of drugs compared to PDPs.
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MA-PDs were less likely than PDPs to apply common formulary
management techniques (such as prior authorization, step
therapy and quantity limits).
Discussion and Conclusions
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MA-PDs often subsidize Part D benefits using Part C rebates –
an option not available to PDPs. As a result, Medicare
Advantage drug benefits can be less costly for somewhat better
benefits.
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But there are significant variations geographically. Benefits
available to beneficiaries through MA-PDs are highly sensitive to
the competitiveness of the market and Part C payment rates.
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Medicare Advantage plans have the ability to influence and
manage all health care services for beneficiaries, including
physician prescribing patterns – an option not available to PDPs.
This may also influence the richness of benefits offered.
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MA-PDs on average are more likely to offer enhanced benefits
than PDPs, and often at a lower price. But enrollment in an MAPD, even open network options such as Private Fee For Service
plans, is a major decision for beneficiaries.
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