MEDICARE PART D:
PAST AND PRESENT
Juliette Cubanski, Ph.D.
Associate Director, Program on Medicare Policy
The Henry J. Kaiser Family Foundation
MAPRx Congressional Briefing
Washington, D.C.
October 10, 2012
Exhibit 1
Medicare Part A, Part B, and Part C
• Part A – Hospital Insurance Program
– Inpatient hospital, skilled nursing facility, home health, and hospice
care
• Part B – Supplementary Medical Insurance
– Physician visits, outpatient hospital, preventive services, home
health
• Part C – Medicare Advantage plans
– An alternative to Original Medicare; beneficiaries can enroll in a
private plan to receive all Medicare-covered benefits and (often)
extra benefits
Exhibit 2
History of Medicare and Prescription Drugs, 1965-2006
1965: Medicare enacted — no prescription drug coverage
1969: HEW Task Force on
Prescription Drugs
1988: Passage of Medicare Catastrophic Coverage Act
(MCCA) - includes a drug benefit
1989: MCCA repealed
1993: Clinton proposed a Medicare Drug
benefit as part of the Health Security Act
1965
1970
1975
1980
1985
1990
1995
2000
2005
2000: Clinton releases plan to provide drug coverage under a new Medicare Part D
2000: Bill to create a Medicare drug benefit (H.R. 4680) passes the House, 217-214
2002: Bill to create a Medicare drug benefit (H.R. 4954) passes the House, 221-208;
Several competing proposals for a Medicare drug benefit fail to pass the Senate
2003: Medicare Prescription Drug, Improvement, and
Modernization Act (MMA) signed into law by President Bush
2006: Medicare prescription drug coverage begins
Exhibit 3
The Need for a Medicare Drug Benefit
•
Because of their age and health conditions, Medicare beneficiaries tend to be
sicker and use more health care services than others
•
Prior to 2006, Medicare beneficiaries did not have access to a governmentsubsidized drug benefit through Medicare
•
Existing sources of drug coverage included:
– Employer-sponsored retiree health benefits
– Individually-purchased Medigap supplemental policies
– State Medicaid programs for low-income Medicare beneficiaries
– Medicare managed care plans
– Veterans Administration, state pharmacy assistance programs, pharmaceutical
company assistance programs
•
One-third had no drug coverage in 2004
– Those without coverage used fewer drugs but spent more out-of-pocket than those
with coverage
– Cost-related non-adherence (skipping/splitting doses, not filling prescriptions) was
more common among those without coverage
Exhibit 4
Medicare Part D – Prescription Drug Benefit
• Medicare Part D, enacted as part of the Medicare Modernization Act of
2003, took effect in 2006
– Part D is provided exclusively through private plans; benefits are not offered
directly through the traditional fee-for-service program
– Enrollment in a Part D prescription drug plan is voluntary
• Beneficiaries may enroll in one of two types of private plans to get the
Part D benefit
– Stand-alone prescription drug plans (PDPs) to supplement traditional
Medicare
– Medicare Advantage prescription drug plans
• Additional subsidies available for people with low incomes and modest
assets to help pay for premiums and cost-sharing
– Below 150% poverty ($16,755/individual, $22,695/couple in 2012)
– Assets less than $11,570/individual, $23,120/couple in 2012
Exhibit 5
The Role of CMS in Regulating Part D
• CMS exercises a great deal of authority over Part D and
plays a critical role in regulating and overseeing the program
and market operations, including:
– Reviewing and approving plan bids annually
– Establishing the rules for coverage, subject to law
– Regulating plan marketing materials
– Monitoring plan behavior and sanctioning plans for violations of
rules and regulations
– Implementing legislative changes (e.g., closing the “doughnut hole”
– Reacting to marketplace, legislative, and political conditions with
new rules, guidance, and regulations
– Providing consumer information (e.g., the Medicare Plan Finder)
Exhibit 6
Prescription Drug Coverage Among
Medicare Beneficiaries in 2012
Part D non-LIS
enrollees
21.7 million
All other
13.5 million
43%
26%
9%
Employer
subsidy
4.5 million
22%
Part D LIS
enrollees
11.0 million
Total Medicare Enrollment in 2012 = 50.7 million
Total Part D Enrollment (excluding employer subsidy) = 32.7 million
NOTE: LIS is low-income subsidy. Total Part D and Medicare enrollment based on 2012 intermediate estimates.
SOURCE: Kaiser Family Foundation Analysis of data from the 2012 Medicare Trustees report.
Exhibit 7
Medicare Part D Enrollment, 2006-2012
PDP enrollees
MA-PD enrollees
In millions:
23.2
24.6
25.8
27.0
27.9
9.5
10.1
29.5
10.8
30.9
11.4
6.6
7.5
8.4
16.6
17.1
17.4
17.5
17.8
18.7
19.5
2006
2007
2008
2009
2010
2011
2012
NOTE: LIS is low-income subsidy. Total Part D and Medicare enrollment based on 2012 intermediate estimates.
SOURCE: Kaiser Family Foundation analysis of data from the CMS Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan
Contract Report - Monthly Summary Report, 2006-2012.
Exhibit 8
Number of Medicare Part D Stand-Alone
Prescription Drug Plans, by Region, 2013
National Average: 31 drug plans
28
ME, NH
30
30
OR, WA
32
32
28
31
IA, MN, MT, NE,
ND, SD, WY
34
ID, UT
29
34
31
32
29
31
31
30
31
23
33
32
NJ
38
PA, WV
31
31
33
32
AL, TN
30
32
29
IN, KY
31
30
30
35
23
23-29 drug plans (10 states and DC)
NOTE: Excludes Medicare Advantage Drug Plans.
SOURCE: Kaiser Family Foundation analysis of Centers for Medicare & Medicaid
Services (CMS) PDP landscape source file, 2013.
CT, MA,
RI, VT
30-31 drug plans (18 states)
32 drug plans (14 states)
33-38 drug plans (8 states)
29
DE, DC, MD
EXHIBIT 99
Exhibit
Number of Medicare Part D Stand-Alone PDPs,
by Benchmark Status, 2006-2013
LIS benchmark plans
1,875
Non-benchmark plans
1,824
1,689
1,576
1,429
1,235
1,329
1,381
1,020
409
2006
640
2007
495
2008
1,109
1,041
1,045
777
714
713
1,269
308
307
332
327
332
2009
2010
2011
2012
2013
NOTE: Excludes Part D plans in the territories.
SOURCE: Georgetown/NORC analysis of CMS PDP landscape source files, 2006-2012, for the Kaiser Family Foundation.
Exhibit 10
Number of Low-Income Subsidy “Benchmark” Plans Offered
by Two Major Part D Sponsors, 2006-2013
Number of PDP
regions
(out of 34):
33
2006
2007
2008
2009
2010
34
2011
2012
34
30
25
27
2013
34
34
31
25
23
10
4
3
0
UnitedHealth
Humana
~ 2 million LIS enrollees in 2011
< 1 million LIS enrollees in 2011
NOTES: Counts include combined offerings of merged organizations.
SOURCE: Georgetown/NORC analysis of CMS PDP landscape files, 2006-2012, for the Kaiser Family Foundation.
34
Exhibit 11
Standard Medicare Prescription Drug Benefit, 2013
CATASTROPHIC
COVERAGE
Catastrophic
Coverage Limit =
$6,955* in Estimated
Total Drug Costs
COVERAGE
GAP
Enrollee
Plan pays 15%;
pays 5% Medicare pays 80%
Brand-name drugs
Enrollee pays 47.5%;
Plan pays 2.5%
50% manufacturer discount
Generic drugs
Enrollee pays 79%;
Plan pays 21%
Initial Coverage
Limit = $2,970 in
Total Drug Costs
INITIAL
COVERAGE
PERIOD
Enrollee
pays
25%
… But most plans do not offer
the “standard” benefit, and
coverage varies across most
dimensions, including:

Monthly premiums

Deductibles

The “doughnut hole”

Covered drugs and
utilization management
restrictions

Cost sharing for covered
drugs
Plan pays 75%
$325 Deductible
NOTE: *Amount corresponds to the estimated catastrophic coverage limit for non-low-income subsidy enrollees ($6,734 for LIS
enrollees), which corresponds to True Out-of-Pocket (TrOOP) spending of $4,750 (the amount used to determine when an enrollee
reaches the catastrophic coverage threshold.
SOURCE: Kaiser Family Foundation illustration of standard Medicare drug benefit for 2013 (standard benefit parameter update from
Centers for Medicare & Medicaid Services, 2012). Amounts rounded to nearest dollar.
Exhibit 12
Cost Sharing for Brand-Name Drugs in the
Medicare Part D Coverage Gap, 2010-2020
Paid by Enrollee
50%
50%
100%
minus
$250
rebate
50%
2010
2011
50%
2012
Paid by Plan
Manufacturer Discount
50%
50%
50%
50%
50%
50%
50%
50%
2.5%
2.5%
5%
5%
10%
15%
20%
25%
35%
30%
25%
2018
2019
2020
47.5% 47.5%
2013
2014
45%
2015
45%
2016
40%
2017
SOURCE: Kaiser Family Foundation analysis of the standard Medicare drug benefit under the Patient Protection and Affordable Care
Act, as amended by the Health Care and Education Reconciliation Act of 2010.
Exhibit 13
Cost Sharing for Generic Drugs in the
Medicare Part D Coverage Gap, 2010-2020
Paid by Enrollee
7%
14%
21.0%
28.0%
Paid by Plan
35%
42%
49%
56%
63%
75%
100%
93%
86%
79%
72%
65%
58%
51%
44%
37%
25%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
SOURCE: Kaiser Family Foundation analysis of the standard Medicare drug benefit under the Patient Protection and Affordable Care
Act, as amended by the Health Care and Education Reconciliation Act of 2010.
Exhibit 14
Weighted Average Premium for Medicare Part D
Stand-Alone PDPs, by Region, 2013
National
Weighted
Average:
$40.18
$37.14
ME, NH
$40.53
$37.63
OR, WA
$39.00
IA, MN, MT, NE,
ND, SD, WY
$45.90
$42.52
$40.59
$37.13
$35.22
$37.98
$42.46
$40.25
$32.71
$43.47
$41.44
ID, UT
$29.25
$43.39
$40.72
$39.40
$39.73
$39.40
DE, DC, MD
$41.01
$41.08
AL, TN
$42.71
$39.90
$41.43
$35.99
$29 to <$38 (8 regions)
NOTE: Excludes Medicare Advantage Drug Plans.
SOURCE: Kaiser Family Foundation analysis of Centers for Medicare & Medicaid
Services (CMS) PDP landscape source file, 2013.
NJ
$43.54
IN, KY
$40.71
$38.07
$41.49
PA, WV
$43.68
$41.01
CT, MA,
RI, VT
$38 to <$40 (7 regions)
$40 to <$42 (11 regions)
$42 to <$46 (8 regions)
$38.01
Exhibit 15
Weighted Average Monthly Premiums for
Medicare Part D Stand-Alone PDPs, 2006-2013
$40
$35.09
$37.25
$38.29
$40.18
$37.57
$35
$29.89
$30
$25.93
2012-2013: 7% increase
$27.39
$25
2006-2013: 55% increase
$20
$15
$10
$5
$0
2006
2007
2008
2009
2010
2011
NOTES: Average premiums are weighted by enrollment in each year. Excludes plans in the territories.
SOURCE: Georgetown/NORC analysis of data from CMS for the Kaiser Family Foundation.
2012
2013
Exhibit 16
Premiums in Medicare Part D Stand-Alone PDPs with
Highest 2012 Enrollment, 2006-2013
PDP Rank
in 2012
2012 Enrollment
(of 17.7 million)
Weighted Average
Monthly Premium1
% Change
Number
(in millions)
% of
Total
2006
2012
2013
20122013
20062013
AARP MedicareRx
Preferred
4,011,357
22.6%
$26.31
$39.85
$40.42
+1%
+54%
CCRx Basic
1,768,148
10.0%
$30.94
$30.75
$33.33
+8%
+8%
Humana WalmartPreferred
1,511,850
8.5%
--
$15.10
$18.50
+23%
--
Humana PDP
Enhanced
1,374,479
7.8%
$14.73
$39.58
$43.77
+11%
+197%
Silverscript Basic
1,322,856
7.5%
$28.32
$30.24
$32.55
+8%
+15%
NOTES: 1Average premiums are weighted by enrollment in each region for each year.
SOURCE: Georgetown/NORC analysis of CMS 2006-2012 PDP Landscape Source Files for the Kaiser Family Foundation.
Exhibit 17
Costs for Top Brands in Stand-Alone PDPs with
Highest 2012 Enrollment in DC Zip Code (20037)
AARP MedicareRx Preferred
Advair Diskus
Celebrex
Crestor
Cymbalta
Lantus
Lyrica
Namenda
Nexium
Spiriva
Zetia
$43
$60
$43
$74
$346
(not covered)
$127
$127
$71
$43
$58
$114
$86
$43
$49
$227
$43
$43
Humana Walmart Preferred
$89
$43
$57
$36
$43
$47
$69
$43
$43
CCRx Basic
$186
$139
$139
SOURCE: Kaiser Family Foundation analysis of data from Medicare Plan Finder.
$275
(not covered)
Exhibit 18
Median Cost Sharing for Medicare Part D Plans,
2006 and 2012
2006
2012
$92
$84
$55
$41
$28
$5 $5
$5 $6
PDP
MA-PD
Generics
PDP
$55
$42
$27
MA-PD
Preferred brands
PDP
MA-PD
Non-preferred brands
29%
25%
33%
25%
PDP
MA-PD
Specialty
NOTES: Part D cost-sharing amounts are medians. Analysis excludes generic/brand plans, plans with coinsurance for regular tiers, and
plans with flat copayments for specialty tiers.
SOURCE: Georgetown/NORC analysis of data from CMS for MedPAC and the Kaiser Family Foundation.
Exhibit 19
Medicare Part D Spending and Financing
Part A



Part D is funded by
premiums, general
revenues, and state
payments
Plans are paid a fixed
amount for each
enrollee
“Reinsurance”
payments from the
government protect
plans from
unexpectedly high costs
Outpatient
Prescription
Drugs (Part D)
Hospital
Outpatient
Services
Physician
Payments
Part A and B
Part B
Part D
12%
26%
Hospital
Inpatient
Services
5%
12%
5%
Skilled Nursing
Facilities
12%
Other Services
4%
Home Health
23%
Medicare
Advantage
(Part C)
Total Benefit Payments, 2011 = $551 billion
NOTE: Numbers do not sum to 100% due to rounding. Total does not include administrative expenses and is net of recoveries.
SOURCE: CBO Medicare Baseline, March 2011.
Exhibit 20
Comparison of Projected and Actual Medicare Part D
Benefit Spending, 2006-2013
CBO (2003) and Medicare Trustees (2012)
(Billions of Dollars)
$105
2003 CBO projections
$64
$53
$39
$48
$116
$72
$49
$79
$52
$86
$56
$95
$60
$61
$68
2012 Medicare Trustees
actual estimates (2006-2011)
and projections (2012-2013)
Difference,
estimate
less actual
$
%
2006
2007
2008
2009
2010
2011
2012
2013
$13.8
$16.3
$22.8
$26.6
$30.6
$35.1
$43.9
$48.2
74%
75%
68%
66%
65%
63%
58%
58%
NOTE: CBO projections are adjusted from fiscal years to calendar years. Medicare Trustees actual spending amounts are adjusted for
reconciliation payments. Amounts exclude offsetting receipts from beneficiary premium payments and state “clawback” payments
for dual eligibles. All totals include administrative costs.
SOURCE: J. Hoadley analysis of data from Congressional Budget Office (July 2004) and 2012 Medicare Trustees Report for the Kaiser
Family Foundation.
Exhibit 21
Factors Affecting Medicare Part D Drug Spending Trends
 Slower overall drug spending growth compared to projections
 Slow pipeline for new drugs since the start of Part D
 More use of generic drugs since the start of Part D
•
Generic penetration in Part D: 61% in 2007; 75% in 2010
 Slow growth in retail drug prices
•
Lower prices due to generic substitution balanced out higher prices for
brand drugs
 Larger manufacturer rebates and other discounts
•
Trustees say rebates have exceeded expectations
 Lower-than-expected Part D enrollment
•
~90% projected, ~70% actual
Exhibit 22
Medicare Part D: Adding It Up
Coverage
Out-of-pocket
drug spending,
use, and access
90% have drug coverage; 65%
through Part D plans
~10% lack drug coverage
11 million receiving
low-income subsidies
A few million low-income eligible
but without subsidies
Out-of-pocket drug spending is
generally lower
Some enrollees may pay more –
e.g., dual eligibles and those in the
coverage gap
Drug use is higher and costrelated skipping is generally
lower
Drug prices
Lower for those who had no
drug coverage prior to Part D
Higher for dual eligibles and
drugs with no competitors
Program
spending
Lower than initially
projected
Due partly to lower-thanprojected Part D and low-income
subsidy enrollment
Choice
Lots of plans means more
options for beneficiaries
Lots of plans could lead to
confusion and difficulty
choosing the best plan