The Medicare Modernization Act (MMA) set minimum federal standards for prescription drug coverage. Plans wanting to participate in the program could offer the standard benefit or a variation that was approved as actuarially equivalent by CMS. Most plans elected to modify the standard design with their own formularies and combination of enhanced benefits. Each plan sought the right combination of premium level, benefit package, formulary structure, and tiered co-pays that they believed would attract and keep an acceptable share of the market while generating a profit to the plan.
CMS establishes the timeline for plans to submit competitive bids, holds numerous industry conferences and training forums, reviews proposed formularies, and negotiates the details of benefit packages. The first round produced considerable variation across plans on virtually every characteristic, including the composition of the formularies—the lists of preferred or nonpreferred covered drugs, the co-pay amounts, and the choice of cost-containment tools. Although there were more than 1,400 different plan offerings, the top 10 Part D plans captured 71.6% of the enrollees by the end of the initial enrollment. The next 10 health plans together accounted for another 13.2% of all enrollees.
The first wave of adjustments to the plans arose from problems and complaints identified during the first year of Part D operations. CMS actively monitored the number and type of complaints made by beneficiaries, providers, and caregivers to 1-(800) MEDICARE and to local CMS offices. Most disputes were about plan enrollment, followed by difficulty in getting needed drugs, and the cost of the drugs or incorrect co-pays.
CMS expects plans to work directly with beneficiaries to resolve complaints, but it will take compliance action against firms with a large number or a pattern of protracted or unresolved issues. Medicare first contacts the plan directly, which usually resolves the matter. If inquiries do not lead to timely resolutions, Medicare sends the plan a formal written notice. Since January, there have been 651 warning letters to plans, 152 notices of noncompliance, and 318 requests for specific business plans detailing corrective action to address problems such as call center performance or the accuracy of information submitted to the Medicare Personal Plan Finder.
Should compliance actions not resolve the problem, Medicare can temporarily restrict plan marketing by removing it from the Personal Plan Finder. Medicare took that action on 75 occasions, including times when a plan continued to provide incorrect information about drug prices and formularies. In only one case has Medicare initiated proceedings to terminate an organization for a persistent pattern of failure to comply with program requirements.
The first open enrollment period coming in November provides the opportunity to see adjustments to plans based on experience with the program. However, the significant changes may not occur because plans bidding for 2007 were required to submit their documents by April 30. At this early date, they had relatively little information about the performance of their initial offering.
Based on the bids that were submitted, we can expect that strong competition will prevail in 2007 and that the cost of Part D will continue to drop below initial estimates. The bids from the PDPs are 10% lower, on average, in 2007 than 2006. Although the premiums for specific plans may be higher or lower than they were in 2006, the average Part D premium will increase by only 0.1% for 2007 based on current enrollment patterns. These premiums are 40% lower than the premium of about $40 that was predicted for 2007 when the MMA was passed.
CMS required plans to limit the benefit options they offer in 2007 and to justify the options as having meaningful differences in benefit design that reflect the features selected most often by beneficiaries in 2006. Generally, plans were allowed to offer only three options, including one option that provides some coverage in the donut hole.
Any Part D plan that intends to drop out of the market in 2007 will be notifying its enrollees, the general public, and CMS by Oct. 1. This notification must include a written description of the alternatives for qualified prescription drug coverage available within the enrollees' region. At this time it does not appear that Medicare enrollees need to be concerned about disruption of their current coverage or limited options.
THE AUTHOR is associate professor, Department of Pharmacy Health Care Administration, University of Florida College of Pharmacy.