Translating Legislative Sausage into Understandable Choices of Beneficiaries Presented by Tricia Neuman, Sc.D. Vice President and Director, Medicare Policy.

Translating “Legislative Sausage” into Understandable Choices of

Beneficiaries

Presented byTricia Neuman, Sc.D.

Vice President and Director, Medicare Policy ProjectThe Henry J. Kaiser Family Foundation

for

AcademyHealth

June 27, 2005

Four Key Policy Decisions that Set the Legislative Sausage Machine in Motion

1. Beneficiaries would have access to drug coverage offered by competing, private at-risk plans

– Strong philosophical tilt toward private, market-based approach, rather than big government program

– Prescription drug benefit would be integral to Medicare, unlike other benefits

2. The new Medicare drug benefit would be voluntary– Unlike Part B, however, people would “opt-in”, rather than opt out

3. The total federal cost over budget window would be $400 billion– Even if it resulted in less than-typical-benefit with doughnut hole

4. Additional help would be provided to those with low incomes and/or catastrophic costs

– Introducing means-testing to Medicare, including new asset test– Requiring administrative roles for SSA and states/Medicaid

Exhibit 1

Four Key Policy Decisions that Set the Legislative Sausage Machine in Motion

1. Beneficiaries would have access to drug coverage offered by competing, private at-risk plans

– Strong philosophical tilt toward private, market-based approach, rather than big government program

– Prescription drug benefit would be integral to Medicare, unlike other benefits

2. The new Medicare drug benefit would be voluntary– Unlike Part B, however, people would “opt-in”, rather than opt out

3. The total federal cost over budget window would be $400 billion– Even if it resulted in less than-typical-benefit with doughnut hole

4. Additional help would be provided to those with low incomes and/or catastrophic costs

– Introducing means-testing to Medicare, including new asset test– Requiring administrative roles for SSA and states/Medicaid

• Benefit should be user-friendly; relatively easy for beneficiaries to understand and manage

– Especially for large number with special needs

Exhibit 1

18%

29%

6%

14%

17%

27%

35%

39%

27%

Percent of total Medicare population:

SOURCE: All data from Medicare Current Beneficiary Survey 2002 Cost and Use File 2002 except income data from March 2004 Current Population Survey.

Exhibit 2

Lacks Drug Coverage

Low-Income <150% FPL ($14,355 in 2005)

Enrolled in Medicaid (“Dual Eligibles”)

Cognitive/Mental Impairment

Nursing Home Resident

45%Full Year

3+ Chronic Conditions

Under-65 Disabled

Characteristics of the Medicare Population

Part Year

Fair/Poor Health

Decisions for Medicare BeneficiariesExhibit 3

To D or Not to D?

Decisions for Medicare BeneficiariesExhibit 3

Decisions for Medicare Beneficiaries

Enroll in Part D PlanDo Not Enroll in Part D Plan

Exhibit 3


No Prescription Drug Coverage

(penalty for late enrollment)

Do Not Enroll in Part D Plan

Exhibit 3


“Creditable” Employer Plan (no low-income

subsidies)




Exhibit 3


Medigap (but not “creditable” so penalty for late

enrollment)


subsidies)




Exhibit 3


Medigap Coverage (but not “creditable”

= penalty for late enrollment)


subsidies)




Enroll in Part D Plan

Exhibit 3





subsidies)





Traditional Medicare

MedicareAdvantage

Exhibit 3





subsidies)






• Prescription Drug-Only Plan (PDP)

MedicareAdvantage

Exhibit 3





subsidies)







MedicareAdvantage

• HMO

• PPO (regional)

• Private Fee-for-Service

Exhibit 3





subsidies)







MedicareAdvantage

• HMO

• PPO (regional)


Exhibit 3

Decisions to be Made:• Premiums





subsidies)







MedicareAdvantage

• HMO

• PPO (regional)


Exhibit 3

Decisions to be Made:• Premiums• Covered Drugs





subsidies)







MedicareAdvantage

• HMO

• PPO (regional)


Exhibit 3

Decisions to be Made:• Premiums• Covered Drugs• Cost-Sharing





subsidies)







MedicareAdvantage

• HMO

• PPO (regional)


Apply for Low-Income Subsidy?

Exhibit 3






subsidies)







MedicareAdvantage

• HMO

• PPO (regional)


If Dual Eligible Auto-enrolled

Apply for Low-Income Subsidy

Exhibit 3






subsidies)







MedicareAdvantage

• HMO

• PPO (regional)


MedicaidSocial

Security



Exhibit 3






subsidies)







MedicareAdvantage

• HMO

• PPO (regional)


MedicaidSocial

Security



If meet income and asset test, qualify for subsidy:

Exhibit 3






subsidies)







MedicareAdvantage

• HMO

• PPO (regional)


MedicaidSocial

Security



Below 100% FPL ($9,570 in 2005)

Below 135% FPL ($12,920 in 2005)

Assets $6,000/single; $9,000/couple

Below 150% FPL ($14,355 in 2005)



Exhibit 3






subsidies)







MedicareAdvantage

• HMO

• PPO (regional)


MedicaidSocial

Security



Below 100% FPL ($9,570 in 2005)

Below 135% FPL ($12,920 in 2005)


Below 150% FPL ($14,355 in 2005)



Exhibit 3


Employer-Sponsored Coverage

Indian Health Service

MedigapMedicaid

Veterans Admin.CHAMPUSTRICARE

State Pharmacy Assistance

ProgramNo Drug Coverage

Medicare Advantage

Medicare-Approved

Drug Discount

Card Holder

Medicare Savings

Programs

The “Right” Choice Will Depend on Many Factors, Including Current Source of Coverage

Exhibit 4

Under the MMA and final rules:

– Medicaid stops paying for Rx December 31, 2005

– “Duals” auto-enrolled in Medicare Rx plans by HHS - Fall 2005

• Assigned to plans at or below average premium

– Coverage under Medicare Rx plans begins January 1, 2006

Key Issues

– Gaps in coverage?– Will their drugs be covered? – What plans will be available?– Will states wrap?– Education and outreach to duals?

Exhibit 5

Special Challenges: Dual Eligibles (6.3 million)

3%

45%

17%

26%

61%

19%

71%

34%

25%

52%

Less than HSEducation

Reside inLTC Facility

FunctionalLimitation

MentalDisorder

Fair/PoorHealth Status

Dual Eligible Medicare BeneficiariesOther Medicare Beneficiaries

SOURCE: MCBS 2002 Access to Care File.

Not Well At All38%

Not Too Well30%

Somewhat Well18%

Very Well11%

Seniors’ Understanding of the Medicare Prescription Drug Benefit

* Don’t know responses not shown. SOURCE: Kaiser Family Foundation Health Poll Report survey (conducted March 31 – April 3, 2005).

68% of seniors say they do not understand the

drug benefit

Exhibit 6

53% 55%59%

55%

68%

29%

60%

43%40%

43%45%

39%

0%

10%

20%

30%

40%

50%

60%

70%

Feb-04 Apr-04 Jun-04 Oct-04 Dec-04 Apr-05

Not too well /Not at all

Very /Somewhat well

Seniors’ Understanding of New Medicare Law - Trend

AMONG SENIORS: As you may know, beginning in 2006 there will be a new prescription drug benefit that will give all people on Medicare the option of enrolling in a Medicare drug plan. How well would you say you understand this new benefit?*

*Note: Question wording before April 2005 referred to the “new Medicare law.” Don’t know responses not shown.Source: Kaiser Family Foundation surveys.

Exhibit 7

45%

34%21%

Seniors’ Impression of the Medicare Drug Benefit

AMONG SENIORS: Given what you know about it, in general, do you have a favorable or unfavorable impression of the new Medicare prescription drug

benefit?

SOURCE: Kaiser Family Foundation Health Poll Report survey (conducted March 31 – April 3, 2005).

Unfavorable

Neutral/Don’t Know

Favorable

Exhibit 8

34%

28% 29% 29%33%

45%

21%

42%44%48%47%

55%

25% 25%27%

27%

24%

17%

0%

10%

20%

30%

40%

50%

60%

Feb-04 Apr-04 Jun-04 Oct-04 Dec-04 Apr-05

Unfavorable

Neutral/Don'tknow

Favorable

Seniors’ Impressions of New Medicare Law - Trend

AMONG SENIORS: Given what you know about it, in general, do you have a favorable or unfavorable impression of the new Medicare drug benefit?*

*Note: Question wording before April 2005 referred to the “new Medicare law.”Source: Kaiser Family Foundation surveys.

Exhibit 9

7%

9%

37% 47%

Yes, will enroll

Have not heard enough to

decide

No, will not enroll

Don’t Know/Refused

Seniors’ Plans to Enroll in a MedicareDrug Plan in 2006

SOURCE: Kaiser Family Foundation Health Poll Report survey (conducted March 31 – April 3, 2005).

Exhibit 10

Challenges for Beneficiaries and CMS; Opportunities for Researchers

• Examine costs/savings attributable to general approach

• Monitor quality of pharmacological care

• Assess impact on beneficiaries’ out-of-pocket costs

• Track role of private plans

• Assess variations in benefits, premiums, cost-sharing and formularies

• Examine how well beneficiaries respond to choices

Exhibit 11

Translating Legislative Sausage into Understandable Choices of Beneficiaries Presented by Tricia Neuman, Sc.D. Vice President and Director, Medicare Policy.

Documents

new medicare drug benefit

statesmedicaid benefit

medicare policy project

lacks drug coverage

new asset test

legislative sausage

total federal cost

statesmedicaid exhibit