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MEDICARE DRUG BENEFIT

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Volume 353:2735-2739

December 29, 2005

Number 26

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Promise and Perils for Patients and Physicians

L. Kravitz, M.D., M.S.P.H., and Sophia Chang, M.D., M.P.H.

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On January 1, 2006, the Medicare Prescription Drug Improvement and Modernization Act (MMA) will become a fact of life for 42 million Medicare beneficiaries and their physicians. For the past three months, America's older citizens have been barraged with educational and marketing initiatives for various drug plans, though it has been an uphill battle: an October poll indicated that 61 percent did not understand the program "somewhat well" and 54 percent did not intend to sign up for coverage.1

The task of sorting through the myriad alternatives will fall squarely on patients and their physicians. The federal government has posted comprehensive information on the Internet, and states are scrambling to offer consumer help lines and counseling. Physicians, however, will be on the front lines. All physicians who write prescriptions for Medicare beneficiaries should familiarize themselves with the major components of the program and know where to get answers and advice.

Those who follow the federal legislative process know that political compromise often begets convoluted policy, but the Medicare drug benefit is particularly complex. Between November 15, 2005, and May 15, 2006, patients eligible for Medicare will have the opportunity to sign up for one of several prescription-drug plans (PDPs) offered in their states. These PDPs come in two varieties: stand-alone plans for those in fee-for-service Medicare and plans associated with a Medicare Advantage health maintenance or preferred-provider organization. Most states will have roughly 15 plans offered by private companies, all with different premiums, deductibles, copayments, coverage gaps, formularies, pharmacy networks, and geographic coverage. The plethora of choices will be a mixed blessing, because even when features are compared side by side, it will be difficult for beneficiaries to discern which plan (if any) best meets their needs.

Premiums are expected to average $33 per month nationwide, but most states will have at least one plan that charges less than $20 per month. (Premiums are expected to cover about 25 percent of the standard drug benefit, with the government contributing the rest.) The model plan entails a $250 deductible, followed by 75 percent coverage for the next $2,000 in total drug costs ($750 in total out-of-pocket costs), followed by the "doughnut hole" in which patients pay the next $2,850 in drug costs. Once a patient has spent $3,600 during a calendar year, the model plan, as outlined by Bach and McClellan in this issue of the Journal (pages 27332735), covers 95 percent of any further prescription-drug costs. Most of the plans differ somewhat from this model but offer benefits deemed to be "actuarially equivalent." For example, 28 of 47 stand-alone plans in California will have no deductible, whereas others will plug the doughnut hole in exchange for a higher premium.

Adding to the confusion are several special cases. Beneficiaries who are eligible for both Medicare and Medicaid and who do not choose a drug plan will automatically be assigned to one on January 1, 2006. Other beneficiaries with few assets and low annual incomes can apply for extra financial assistance, including cost sharing and reductions in premiums and deductibles. This subsidy program is administered by the Social Security Administration. Patients who already have prescription-drug coverage (through a Medicare Advantage plan, a union, or an employer) may keep it if the benefits meet the government's benchmark. If the coverage does not pass this test (most "Medigap" supplemental policies are expected to fail), subscribers are supposed to be notified and urged to choose a PDP. The potential for bureaucratic snafus seems endless.

To add a sense of urgency, there are penalties for late enrollment. Medicare beneficiaries who do not sign up for a drug plan by May 15, 2006, will have their future premiums increased by 1 percent for each month of delay. The rationale is to discourage seniors from enrolling in a PDP just as they begin to incur large drug costs behavior that would distort the program's insurance function and be fiscally unsound. So, for instance, a healthy 66-year-old man who currently takes no prescription drugs would have to pay up to 50 percent more in premiums if he waited until his diet-controlled diabetes suddenly required a multiple-drug regimen when he was 70. In most states, patients with current out-of-pocket expenses for prescription drugs of $50 per month will save only $100 to $200 annually by enrolling in a PDP (see table). The savings mount steeply as monthly outlays increase but could be offset by the "procrastination penalty." In California, if our hypothetical 66-year-old man delayed enrolling in a PDP until his monthly drug costs rose to $100 in 2010, the anticipated savings of $458 in out-of-pocket expenses would be partially offset by a $198 annual increase in premiums (without inflation).

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Prescription-Drug Expenses and Projected Savings for Consumers in Five States.

All plans will have a formulary a list of covered drugs that may be tiered according to cost (usually generic, preferred brand-name, and nonpreferred brand-name drugs) and special requirements (e.g., prior authorization, step therapy, or limits on the number of pills prescribed). All formularies must include at least two agents per therapeutic category, but the categories are defined quite broadly (e.g., antiarrhythmic agents, inhibitors of the reninangiotensinaldosterone system, and oral hypoglycemic agents). Thus, many patients will find that some of their medications are not covered. Most will probably switch to an alternative agent, but some may abandon therapy altogether, with potentially serious clinical consequences.2 Seniors who find a plan that covers their entire regimen, minimizes out-of-pocket costs, and permits a continuing relationship with their corner pharmacy will have cause to celebrate. However, plans can change their formularies monthly, whereas most beneficiaries will be locked into their drug plan for the year. As a result, some patients will be forced to switch to alternative agents midyear or else pay more for the privilege of maintaining a stable regimen.

Whether physicians are ready to meet the challenge is uncertain, since surveys suggest that most are principally concerned with the clinical aspects of prescribing and have little interest in helping their patients navigate formularies and deal with drug costs.3,4 Pharmacists are arguably better positioned to help, but patients may inadvertently choose a plan that does not permit them to use their local pharmacy.

Physicians should consider the following advice as they help patients weigh their choices (see diagram). First, many elders will be confused to the point of panic, but they should avoid a rush to judgment. The initial enrollment period for the Medicare prescription-drug program extends through May 15, 2006. There is no time to waste but plenty of time to gather information and review options. Seniors who already have prescription-drug coverage under a Medicare Advantage, Medigap, employer, or union policy may be able to stay with their current plan, but they should get in touch with their plans to find out whether they pass the government's equivalency test and will maintain drug coverage. Beneficiaries who remain with their current, approved plan will not be penalized if they move to a Medicare PDP later.

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Algorithm for Selecting a Prescription-Drug Program.

HMO denotes health maintenance organization, and PPO preferred-provider organization.

Second, most seniors will save money by enrolling in a PDP. However, the greatest benefit of the program is insurance against catastrophic drug costs. For seniors with monthly prescription-drug expenses of less than $250, the net savings will not be dramatic. The major benefits will accrue to those with drug expenses of $1,000 per month or more (see table).

Third, in selecting a PDP, patients should consider the three Cs: cost, coverage, and continuity. Plans will vary in terms of the monthly premium, the deductible and copayment structure, the drug formulary, and contractual relationships with pharmacies. Patients who are inclined to resist a switch from atorvastatin to simvastatin or from their local pharmacy to a chain pharmacy may have to pay a bit more to keep taking the same drug dispensed by the same pharmacist. In selecting a Medicare Advantage plan with prescription-drug coverage, patients should also pay attention to hospitalization copayments, since these may go unnoticed when comparing drug coverage alone.

Physicians should be prepared to advocate for their patients. Requests for coverage of medications other than those in the formulary can be initiated by the patient or the physician, and plans are supposed to respond within 72 hours (or 24 hours for expedited requests). Appeals are permitted but may be time-consuming. Physicians may also request exceptions to the tiered cost-sharing structure if, for example, their patient cannot tolerate a generic drug. The capacity of many frontline physicians to deliver on these new responsibilities is uncertain, especially given the harried pace and poor reimbursement that are associated with primary care practice. The MMA has no provision for compensating physicians or their office staff for undertaking these activities.

Although there is turbulence ahead, physicians and patients should remember that they are not alone. At last count, the Medicare Web site listed 280 frequently asked questions, and help is available through regional senior health insurance assistance programs and area agencies on aging (www.aoa.gov/eldfam/how_to_find/agencies/agencies.asp).

The new prescription-drug benefit represents the biggest change in Medicare since its inception in 1965. In the short term, the success of the benefit will hinge on whether patients can successfully negotiate its convoluted options and rules. Over the long haul, the program's viability will depend on whether expenses for prescription drugs can be brought under control. New drug discoveries during the next 10 years promise to deliver remarkable benefits at startlingly high prices. No doubt the Medicare drug benefit will change over time, and physicians will continue to be called on to help patients traverse the shifting policy landscape safely and successfully.

Source Information

Dr. Kravitz is a professor of internal medicine and director of the Center for Health Services Research in Primary Care, University of California, ; Dr. Chang is the director of the Chronic Care Disease Program, California HealthCare Foundation, Oakland, Calif.

References

Wolf R. Medicare prescription drug plan stumps seniors. USA Today. October 4, 2005:A3. Huskamp HA, Deverka PA, Epstein AM, Epstein RS, McGuigan KA, RG. The effect of incentive-based formularies on prescription-drug utilization and spending. N Engl J Med 2003;349:2224-2232. [Abstract/Full Text] GC, Casalino LP, Meltzer DO. Physician strategies to reduce patients' out-of-pocket prescription costs. Arch Intern Med 2005;165:633-636. [Abstract/Full Text] Shrank WH, Young HN, Ettner SL, Glassman P, Asch SM, Kravitz RL. Do the incentives in 3-tier pharmaceutical benefit plans operate as intended? Results from a physician leadership survey. Am J Manag Care 2005;11:16-22. [Erratum, Am J Manag Care 2005;11:180.] [iSI][Medline]

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