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Healthcare Reform and Medicare Part D. Dsih-lang Liu, FSA, MAAA Centers for Medicare & Medicaid Services. Medicare Part D Benefits. Prescription drug benefit in Medicare in Medicare Modernization Act passed on Dec. 8, 2003

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healthcare reform and medicare part d

Healthcare Reform and Medicare Part D

Dsih-lang Liu, FSA, MAAA

Centers for Medicare & Medicaid Services

medicare part d benefits
Medicare Part D Benefits
  • Prescription drug benefit in Medicare in Medicare Modernization Act passed on Dec. 8, 2003
  • Optional coverage with subsidized premiums started on Jan. 1, 2006
  • Eligibility: entitled to A or enrolled in B
cy 2006 benefit structure
CY 2006 Benefit Structure
  • $250 deductible
  • 25% coinsurance up to $2,250 initial coverage limit (ICL)
  • Coverage gap (donut hole)
  • $3,600 true out-of-pocket (TrOOP) catastrophic limit (=$5,100 incurred costs/threshold)
  • Beneficiary pays greater of $2 generic/$5 brand or 5% coinsurance above catastrophic threshold
  • TrOOP excludes reimbursement by insurance, employers etc.
slide4

Out

-

of

Initial Coverage

-

Threshold

Limit

Total

Catastrophic

Pocket

Coverage

Spending

$250

$

2,250

$

5,100

75% Plan Pays

Coverage Gap

80% Reinsurance

$ +

Deductible

95%

?

25%

Coinsurance

$3,600 TrOOP

15% Plan Pays

5% Coinsurance

Medicare Pays Reinsurance

Beneficiary Liability

Direct Subsidy

Beneficiary Premium

cy 2011 benefit structure
CY 2011 Benefit Structure
  • $310 deductible
  • $2,840 ICL
  • $4,550 OOP catastrophic limit
  • Threshold varies by beneficiary
    • $6,447.50 if 100% brand in gap
    • $6,719.03 if 100% generic in gap
part d coverage
Part D Coverage
  • Individual plans
    • Prescription drug plans (PDPs)
    • Medicare Advantage prescription drug plans (MA-PDs)
  • Employer group waiver plans (EGWPs)
  • Retiree drug subsidy (RDS) plans
  • Creditable coverage
benefit options pdps pds
Benefit Options (PDPs & PDs)
  • Standard
  • Actuarial equivalent
  • Basic alternative
  • Enhanced alternative
payments to plans
Payments to Plans
  • Direct subsidy: risk adjusted
  • Beneficiary premiums per plan bids
  • Reinsurance advance payments
  • Low-income cost sharing (LICS) advance payments
  • Low-income premium subsidy (LIPS)
  • Year end reconciliation: reinsurance, LICS and risk corridor adjustments
employer group waiver plans
Employer Group Waiver Plans
  • Encourage Part D participation
  • Do not submit bids
  • Benefits must be at least as generous as standard Part D benefit
retiree drug subsidy plans
Retiree Drug Subsidy Plans
  • 28% subsidy between $310 and $6,300 in 2011
  • Updated similarly to the Part D benefit parameters
  • Tax exempt through 2012
  • Plans must pass gross and net tests
  • 6.6 million enrollees in 2009
creditable coverage
Creditable Coverage
  • Other qualifying prescription drug coverage
    • Working aged
    • VA/DOD
    • Indian Health Services (IHS)
  • Not subject to late enrollment penalty
aca effects on part d
ACA Effects on Part D
  • Closing the coverage gap
  • Income related premiums (IRP)
  • Eliminate tax exemption for RDS in 2013
  • LIS benchmark calculation methodology
  • De minimis
  • Protected drug classes
  • Waste reduction in long term care (LTC) facilities
  • TrOOP for IHS and AIDS Drug Assistance Program (ADAP)
  • Pathway for follow-on biologics (FOBs)
  • Independent Payment Advisory Board (IPAB)
closing the coverage gap
Closing the Coverage Gap
  • $250 rebate in 2010 if exceeds ICL
  • 50% brand discount starting Jan. 2011
    • Not applied to dispensing fee
    • Discount is considered TrOOP
  • Slower growth in catastrophic threshold
  • Transitioning in 2020 to
    • Brand: plan 25%, bene 25%, PhRma 50%
    • Generic: plan 75%, bene 25%
closing the coverage gap cont1
Closing the Coverage Gap (cont.)
  • No 50% brand discount for
    • RDS beneficiaries
    • LIS beneficiaries
income related premiums
Income Related Premiums
  • Same income threshold as Part B IRP
  • Beneficiaries will pay higher premiums; i.e. lower direct subsidies
  • Expect some portion of beneficiaries to drop coverage
  • Threshold is frozen through 2019
  • EGWPs subject to IRP
rds greatly disadvantaged
RDS Greatly Disadvantaged
  • No tax exemption for subsidy
  • No brand discount
  • Expenses eligible for 28% subsidy do not increase as donut hole disappears
lis benchmark methodology
LIS Benchmark Methodology
  • 2006-2009: calculated after MA rebate re-allocation
  • 2010 Demonstration calculated before MA rebate re-allocation
  • ACA: calculates before MA rebate re-allocation for 2011 and later
  • Increase the LIPS for most regions
de minimis
De Minimis
  • Plans can waive the de minimis premiums to keep LIS beneficiaries
  • Cannot get new LIS auto-assignees
  • For 2011, the de minimis amount is $2
  • A minor cost for Part D by not re-assigning LIS beneficiaries to lower premium plans
  • Re-assignments reduced from 1.1 to 0.5 million
protected drug classes
Protected Drug Classes
  • Include all covered Part D drugs in 6 classes:
    • Anticonvulsants
    • Antidepressants
    • Antineoplastics
    • Antipsychotics
    • Antiretrovirals
    • Immunosuppressants for transplant rejection
protected drug classes cont
Protected Drug Classes (cont.)
  • All drugs in the protected classes must be in formulary
  • ACA
    • Codifies the authority for protected classes
    • Allows for new considerations
wasteful reduction in ltc facilities
Wasteful Reduction in LTC Facilities
  • 7-day or less dispensing
  • Applied to brand drugs only
  • Expect savings on brand drugs
  • More dispensing fees
troop for adap ihs
TrOOP for ADAP/IHS
  • Currently, ADAP/IHS not considered TrOOP
  • ACA: ADAP/IHS will be TrOOP
  • Beneficiaries will reach catastrophic coverage sooner
follow on biologics
Follow-on Biologics
  • “Generic” version of biologics
  • Currently there is no approval pathway for FOBs
  • ACA provides an approval pathway for biologics
follow on biologics cont
Follow-on Biologics (cont.)
  • Insulin is among the top categories in spending
  • No impact expected on insulin because it is governed by a different pathway
ipab to control growth
IPAB to Control Growth
  • Independent Payment Advisory Board
  • Starting in 2014
  • Recommend spending reduction measures affecting providers and suppliers, including Part D plans
    • If projected Medicare per capita spending growth exceeds target rate
questions
Questions?

dsihlang.liu@cms.hhs.gov