Unraveling Medicare: The learning curve under Part D

May 8, 2006

Everyone has learned a lot since Medicare Part D was started on Jan. 1. Pharmacists learned new processes, people on Medicare learned new terms and options. Insurers and the Centers for Medicaid & Medicare Services learned to respond quickly to misunderstandings, technical glitches, and personnel shortages.

Experience with these early hurdles should give everyone an incentive to anticipate any new challenges that may be looming in the inaugural year of the program. Here are some dates and predictable events you should be aware of:

The same appeal process can be used to ask for an exception to dose restriction, step therapy, prior authorization, or tiered cost-sharing. Plans must issue a coverage determination within 72 hours of receiving the request and required documentation. If the request is rejected, the patient has 60 days to initiate an appeal. Exception requests can be expected to peak following the initial and annual open enrollment periods and when formularies change.

There is the potential for an enrollment rush as May 15, 2006, is the final day to enroll in Part D without incurring a penalty. Pharmacists, PDPs, and new plan members have the benefit of their earlier experience to buffer the enrollment wave.

Ongoing vigilance will be needed as there are at least two more significant Medicare Part D shifts in store for 2006. The first is ongoing but will occur with increasing frequency. PDP members with prescription expenditures over $2,250 can encounter coverage gaps or changes in out-of-pocket payments that vary according to their plan options. The plan members will pay 100% of their prescription cost until their expenditures reach $5,200 and they are eligible for the catastrophic benefit.

Estimates vary but 40% to 50% of beneficiaries are expected to reach the coverage gap. Up to 20% are likely to exceed $5,200 when they pay only 5% of the drug costs. Although Part D will be helpful to those with the highest expenses, individuals may be distressed by some dramatic fluctuations in out-of-pocket costs over the course of the year.

CMS has already announced some program changes for 2007. New plans and options will be in place for the annual open enrollment period that extends from Nov. 15 through Dec. 31, 2007. CMS will limit each PDP insurer to just two plan options in each Medicare region in 2007. This should reduce the number of plan choices, which caused confusion; but it also means that some members will be asked to choose an alternative to options that are no longer available.

Of course market forces will play a role in attracting new firms, while the less successful entries leave the program. The MMA provided some risk-reduction features at the outset to attract the private`sector firms to the program. The value of the incentives decreases in 2007, as firms gain experience with Medicare Part D-and the incentives completely disappear in 2008. Medicare Advantage (MA) options are forecast to provide a more attractive business opportunity for health insurers over time. If so, we can expect the promotion of MA plans and an ongoing evolution of the benefit structure that will require ongoing learning for providers and Medicare beneficiaries well beyond this initial year.

THE AUTHOR is associate professor, Department of Pharmacy Health Care Administration, University of Florida College of Pharmacy.