Fwd: Issue 5, March 4, 2008

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Welcome to MEDICARE WATCH, a biweekly electronic newsletter of the

Medicare Rights Center

Vol. 11, No. 5: March 4, 2008

Contents:

FAST FACT ADVOCATES SUGGEST ALTERNATIVES TO CMS RULE GAO: PLAN OVERPAYMENTS CONTRIBUTE TO PROFITS, NOT BENEFITS STATES INITIATE PRESCRIPTION DRUG “UNSALES†CAMPAIGNS CASE FLASH: WEIGHING SUPPLEMENTAL COVERAGE

1. FAST FACT

Health spending in the United States will double by 2017, growing by 6.7

percent annually, three times the projected inflation rate over the next

decade, according to a study released by the Centers for Medicare &

Medicaid Services

(“

Health Spending Projections Through 2017: The Baby-Boom Generation Is

Coming to Medicare,†Health Affairs, February 26, 2008).

2. ADVOCATES SUGGEST ALTERNATIVES TO CMS RULE

Advocacy groups released comments urging the Centers for Medicare &

Medicaid Services (CMS) to consider alternative policies that would

minimize the number of low-income people with Medicare who are switched

to a new Part D drug plan each year and help prevent disruptions in their

drug regimens.

Low-income people with Medicare enrolled in the low-income subsidy, also

known as Extra Help, are not required to pay plan premiums if their Part

D plan offers premiums below a regionally set benchmark. Since the

benchmark and plan premiums change from year to year, CMS automatically

reassigns low-income enrollees in plans that move above benchmark to

plans below the regional benchmark to ensure zero-premium coverage. As a

result, over one million low-income Americans were randomly reassigned to

a new prescription drug plan in 2008.

CMS acknowledges the instability created by this practice and is

proposing a rule that would allow more plans to offer zero-premium

coverage. The rule, proposed in February, would allow at least five

regional plans offering the lowest premiums to provide zero-premium

coverage to low-income enrollees, regardless of whether or not the plans

offer premiums below the regional benchmark.

Advocacy groups, however, are skeptical of the benefits of the proposed

change. According to comments released this week by the Medicare Rights

Center, the rule would not ensure increased stability or fewer coverage

disruptions, as there is wide variation in which plans have

below-benchmark premiums from year to year.

Instead, the Medicare Rights Center and other consumer advocates support

creating greater flexibility around regional benchmarks, allowing plans

with premiums just above the benchmark to continue to provide

zero-premium plans to low-income enrollees. Additionally, the Medicare

Rights Center supports modifying the method by which regional benchmarks

are calculated, so that they better reflect the true cost of providing

drug coverage. To the extent low-income Part D enrollees are reassigned,

CMS should ensure their new plan covers the drugs they take and meets

minimum quality standards.

3. GAO: PLAN OVERPAYMENTS CONTRIBUTE TO PROFITS, NOT BENEFITS

A recent report by the Government Accountability Office (GAO) concludes

that Medicare private health plans allocate on average 87 percent of

revenue toward paying medical claims, with 9 percent going to

administration and marketing and sales, and 4 percent to profit margins.

In contrast, 98 percent of Original Medicare’s expenses goes to medical

coverage, with just 2 percent spent on overhead.

Additionally, auditors found that in 2007, nearly one-fifth of private

plan enrollees encountered higher cost-sharing for home health services

than under Original Medicare, while 16 percent were in plans that

required higher cost-sharing for a hospital stay. Currently, less than

half of private plan enrollees are in plans that contain cost-sharing

through out-of-pocket maximums, which can exceed $4,600 a year and often

exclude cancer drugs and mental health services.

Insurance company representatives countered that the plans were still

helpful to low-income enrollees, who could benefit from additional

services and slimmer cost-sharing without having to purchase supplemental

coverage. However, the GAO maintained that it is inefficient to provide

overpayments to private plans in order to improve Medicare coverage for

low-income people, stating that “…t mayy be more efficient to

directly target subsidies to a defined low-income population than to

subsidize premiums and cost-sharing for all Medicare Advantage

beneficiaries.â€

4. STATES INITIATE PRESCRIPTION DRUG “UNSALES†CAMPAIGNS

States have decided to counter drug company advertisements and marketing

campaigns with state-financed “unsales†agents, who provide unbiased

cost and benefit information on prescription drugs to health care

providers.

The “unsales†strategy, called academic detailing and championed by

experts at Harvard University, funds state representatives to go

office-to-office to provide impartial information on available drugs in

an engaging manner with attractive materials, akin to the practices of

traditional drug company sales representatives.

Pennsylvania, the nation’s largest supporter of the practice, has spent

nearly $1 million over the past three years for 11 representatives to

canvass providers in 28 counties throughout the state. As a result,

Pennsylvania’s state prescription assistance program has saved

significant funds through increased usage of generics and cheaper

alternatives to popular brand-name drugs. According to an analysis

provided to the Associated Press, academic detailers saved the state

$572,000 through promoting alternatives to expensive heartburn drugs

alone.

However, the “unsales†programs, which have also been initiated in

West Virginia, South Carolina and Vermont, still have a long road ahead

of them. The pharmaceutical industry maintains a sales representative

force of 90,000 and spends nearly $7 billion on direct marketing each

year. States do not have the funding to compete with such a sales force.

Vermont’s program, for example, includes two staffers on a $50,000

budget, while West Virginia had to close down its program in 2007 for

financial reasons.

Providers interviewed by the Associated Press remained positive about the

programs’ direction. After a visit by an academic detailer, Dr. Ernest

f of Pennsylvania admitted he was skeptical, but eventually grasped

the program’s benefit. According to Dr. f, the detailers “save me

time from having to do a lot of the research†on generic alternatives

to brand-name drugs.

5. CASE FLASH: WEIGHING SUPPLEMENTAL COVERAGE

Mrs. H has Original Medicare Part A (hospital insurance) and Part B

(medical insurance). Since she retired in 2005, Mrs. H has also had

retiree insurance that fills gaps in Original Medicare and provides

creditable prescription drug coverage. With that coverage combination,

Mrs. H was fully covered for radiation treatments last year.

However, at the end of last year, Mrs. H’s retiree plan changed to

become a retiree HMO plan. When she went to her radiologist this January,

her retiree plan did not pay for the costs left over after Medicare paid.

Instead, Mrs. H had to pay the coinsurance herself. Mrs. H later called

her retiree plan and asked why she was not covered for the same service

that had been covered before and was told that the radiologist was not in

the plan’s network.

Mrs. H called the Medicare Rights Center. The counselor explained that

retiree plans can work in a number of ways. Mrs. H’s retiree plan used

to pay if she went to any doctor who accepted Medicare assignment (agreed

to the Medicare payment amount). However, other plans will pick up costs

that Medicare doesn’t only if you see a doctor who is in the plan’s

network and follow the plan’s other rules for getting care. HMOs

generally have such requirements. In most cases, if you see an

out-of-network doctor, Original Medicare will still pay 80 percent of the

cost, but the HMO might not pay the remainder of the cost.

Mrs. H then asked if she should drop her retiree plan. The counselor

suggested that Mrs. H first try to find a solution with her plan. He

suggested that she call the plan to ask for a list of radiologists who

are in the plan’s network. If no in-network radiologist could provide

the same level of care she was getting previously, the counselor

suggested that Mrs. H ask her radiologist to speak with the plan to see

if he would be able to become a member of the network. Mrs. H could also

have her primary care physician write a referral to the radiologist,

specifying that there are no adequate in-network radiologists.

The counselor told Mrs. H that if, after trying to find a solution with

the plan, she still felt the retiree plan was not providing adequate

coverage, she could drop it and buy a Medicare Part D plan and

supplemental insurance (a Medigap). However, the counselor advised Mrs. H

that she should weigh her overall health care and prescription drug costs

and coverage very carefully before deciding to cancel the plan

permanently; in most cases, once you drop your retiree plan, you cannot

get it back.

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Medicare Watch is MRC’s fortnightly newsletter,

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