Comment letter to CMS addressing observations and recommendations for the operation and implementation

Phawying - American Academy Of Actuaries' Part D Lessons Learned Work Group

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Publié par	Phawying
Nombre de lectures	46
Langue	English

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March 21, 2007 Ms. Abby Block Director, Center for Beneficiary Choices Centers for Medicare and Medicaid Services 7500 Security Boulevard Baltimore, MD 21244-1850 Subject: Medicare Part D – Lessons Learned Dear Ms. Block - In December 2003, the passage of the Medicare Modernization Act (MMA) resulted in the addition of a new “Part D” to the Medicare program to provide pharmacy benefits. The MMA reflected many compromises and new ideas for managing Part D, including extensive involvement of the private market. The year 2006 was the first year of operation for Medicare Part D, and the program was successful in attracting health plans and other entities to participate and individuals to enroll. About 90 percent of Medicare beneficiaries had some type of drug coverage 1in 2006. The program also included many new administrative requirements and features. While some aspects of the program operated smoothly, others did not, leaving areas for improvement and fine-tuning. 2On behalf of the American Academy of Actuaries’ Part D Lessons Learned Work Group, I would like to offer the following observations of what has worked well and what has not. Based on those observations, this letter also offers recommendations to improve the overall operation and administration of the Part D program. Specifically, some of the areas needing additional refinement include the bidding process, management of eligibility, and coordination with Medicaid and with the Social Security Administration. PART D PROGRAM RESULTS Plan Choices Medicare Part D has been an overall success in terms of the number of sponsors and level of beneficiary choice. Initial concerns that only a few sponsors would submit bids or that beneficiaries would only be able to select from a limited number of plans have proven to be unfounded. More than 1,400 prescription drug plans were offered in 2006 and most beneficiaries had more than 40 different plans to choose from. For 2007, the total number of plans increased to near 1,900, with most beneficiaries having 50 or more plan choices. The number of Part D sponsors 3offering nationwide plans increased from 10 in 2006 to 17 in 2007. A potential drawback to the vast number of beneficiary plan options was that seniors could have been overwhelmed and opted not to enroll in Part D at all. However, the CMS enrollment figures for 2007 show that: 1 The Kaiser Family Foundation. “Medicare: Prescription Drug Coverage Among Medicare Beneficiaries,” June 2006. 2 The American Academy of Actuaries is a national organization formed in 1965 to bring together, in a single entity, actuaries of all specializations within the United States. A major purpose of the Academy is to act as a public information organization for the profession. Academy committees, task forces and work groups regularly prepare testimony and provide information to Congress and senior federal policy-makers, comment on proposed federal and state regulations, and work closely with the National Association of Insurance Commissioners and state officials on issues related to insurance, pensions and other forms of risk financing. The Academy establishes qualification standards for the actuarial profession in the United States and supports two independent boards. The Actuarial Standards Board promulgates standards of practice for the profession, and the Actuarial Board for Counseling and Discipline helps to ensure high standards of professional conduct are met. The Academy also supports the Joint Committee for the Code of Professional Conduct, which develops standards of conduct for the U.S. actuarial profession. 3 The Kaiser Family Foundation. “The Medicare Prescription Drug Benefit – An Updated Fact Sheet,” November 2006. 24 million Medicare eligible beneficiaries either elected Part D coverage, were auto-enrolled in a 4Prescription Drug Plan (PDP), or receive Part D coverage through Medicare Advantage (MA-PD) plans; 7 million beneficiaries have creditable drug coverage through employer plans, which receive the retiree drug subsidy mandated in the MMA; and 8 million beneficiaries have creditable drug coverage through various other sources such as federal employee and military plans. In total, CMS announced that more than 39 million or 90 percent of all Medicare beneficiaries had some type of 5prescription drug coverage in 2007. During the 2006 bidding process, CMS was concerned with the abundance of plans being submitted and limited each PDP sponsor to no more than three plan options in each region. During the 2007 bid process, CMS initially indicated that it might reduce this to only two plan options for 2007. However, the final requirement for 2007 was that a third plan could be offered, but only if it contained an enhanced benefit with coverage in the gap. Despite this requirement, few sponsors offer full benefits in the coverage gap in 2007. These plans require significantly higher premiums for several reasons: The government catastrophic reinsurance does not become available until a higher level of total drug spending, since the member’s true out-of-pocket maximum (TrOOP) is reached later (i.e., the supplemental 6coverage reduces the government reinsurance cost burden). The cost of the additional coverage includes the impact of induced utilization on costs below the coverage gap. Adverse selection is likely because drug costs are easier to predict than medical costs, coupled with the fact that beneficiaries may change their plan choice each year. The risk-adjusted payment mechanism does not apply to the supplemental premium and likely does not adequately address the impact of adverse selection. According to widely reported accounts, given this competitive environment, some seniors have been confused or frustrated with their options. To address this, CMS might consider imposing additional structure around the program. Options may include further limits on the number of plan options a sponsor may offer or restricting plan designs. Also, with many regions not having any plan options with full coverage in the gap, CMS may consider adopting regulations that would encourage such coverage. Another potential concern is that the program may have been too successful in attracting bidders. Some PDP sponsors may not be adequately prepared to administer the Part D benefit. This could lead to inadequate member services. In a worst-case scenario, ill-prepared sponsors may not enroll adequate membership, which may cause adverse financial results or possible insolvency. Some of the areas being discussed for potential program modifications include: Government price negotiations with pharmaceutical companies and/or pharmacy benefit managers Elimination or narrowing of the coverage gap Creation of a government-sponsored nationwide PDP to compete with private PDPs 4 The term “PDP” will be used throughout this paper if the comment applies only to PDPs. If the comment applies to both PDPs and MA-PDs, the terms “Part D

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