Milliman – Coaching Actuaries Case Competition Prompt
Medicare Part D Pricing
Background Information: “Medicare drug coverage (Part D) helps pay for prescription drugs
you need” (Medicare.gov). Medicare Parts A and B are usually known as “traditional Medicare”,
have a combined premium of $164.90 or higher, and are offered directly through the federal
government (all physicians offer them). Parts A and B cover hospital inpatient stays, skilled
nursing facilities, outpatient services, and physician visits. Medicare Part C is offered through
private insurers and covers both A and B benefits in addition to a number of supplemental
benefits (such as dental, vision, and hearing). Medicare Part D can be purchased by individuals
in addition to traditional Medicare (where it is known as Prescription Drug Plan “PDP”) or
through a private insurer (where it is known as a Medicare Advantage Part D plan “MAPD”).
Prompt: You are an actuary for the company Salem Rhodes. Salem Rhodes is a large,
nationwide insurer that provides coverage for many different individuals in many lines of work
across the United States. Salem Rhodes just began offering Medicare Part D coverage to
seniors starting on 1/1/2023 and is trying to project its costs for the upcoming Medicare bid year
(2025).
Salem Rhodes’ Medicare Part D leadership team has asked you to prepare a presentation on
several elements of their 2025 pricing. They would like you to develop and review:
A pricing model to project the number of scripts and total cost incurred by Salem
Rhodes in 2025 given the expected membership changes noted in the Excel
[MemChanges] tab.
Recommendations on whether implementing Value-Based Insurance Design (VBID)
plans would bring value to Salem Rhodes. Feel free to comment on any other Medicare
programs that could lower Salem Rhodes Part D costs.
Analysis on how the Inflation Reduction Act will impact Salem Rhodes’ Medicare Part D
costs as well as other potential effects of the legislation.
o Assume that all 2023 drugs were ‘Non-Applicable’. The schedules for 2024 (preIRA) and 2025 (with IRA) cost-sharing are included in the Appendix at the end of
this document.
o Assume the defined standard (DS) benefit design as indicated in the appendix: a
deductible of $500, Maximum out of pocket (MOOP) cost of $2000, and a
member coinsurance of 25% (for Non-Low Income members).
Be sure to indicate any assumptions in this task and future tasks that weren’t provided (such as
trend or administrative costs).
Requested deliverables:
10-minute presentation to Salem Rhodes’ Medicare Part D leadership team covering
above topics
Underlying modeling for visibility into soundness of approach. Please send to
lacey.griffin@milliman.com and vince.birch@milliman.com prior to your presentation
Appendix:
2025 Inflation Reduction Act Redesign for Non-Low Income Beneficiaries
2025 Inflation Reduction Act Redesign for Low Income Beneficiaries.
2024 Cost Sharing for Non-Low Income Beneficiaries
2024 Cost Sharing for Low Income Beneficiaries
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