CMS Announces Creation of Regions for Drug Benefit Offerings Under Medicare
In a major step toward implementing the new Medicare law, HHS Secretary Tommy Thompson on Monday announced that CMS has established 26 separate regions of the nation in which Medicare Advantage Preferred Provider Organizations will be offered and 34 separate regions in which the private drug coverage, or Prescription Drug Plans, will be offered, the New York Times reports. Under the new Medicare law, beginning in 2006, private prescription drug coverage -- subsidized by the federal government -- will be available through PDPs for beneficiaries who remain in traditional, fee-for-service Medicare, as well as through Medicare Advantage plans, and through PPOs for other beneficiaries.
The law calls for the establishment of regions under which the plans would compete with each other to offer coverage (Pear, New York Times, 12/7). Each PPO and PDP would offer uniform benefits and premiums within a region, although benefits and premiums likely will vary from region to region, the AP/Las Vegas Sun reports. The Medicare law will allow state licensing regulations to be waived for up to three years for insurers looking to obtain a license to operate in additional states, according to the AP/Sun (Sherman, AP/Las Vegas Sun, 12/6). Beneficiaries with employer-sponsored prescription drug coverage will be allowed to retain their existing coverage (HHS release, 12/6).
According to the Times, the Bush administration originally had hoped to establish larger, multistate regions, which officials said would prompt health plans to provide coverage in rural areas that traditionally have been underserved. However, many health plans said it would be too expensive to serve large, multi-state areas. In designating the regions, CMS drew the boundaries to maximize the number of participating insurers, according to Leslie Norwalk, acting deputy CMS administrator (New York Times, 12/7).
CMS officials considered input -- such as from beneficiary and consumer groups, pharmacy benefit managers, providers and pharmacists -- to determine the regions. CMS also conducted public meetings and phone calls and reviewed written comments. In addition, the agency considered the eligible population within a given region, the insurers that were most likely to offer coverage, cost variations among states and the preservation of existing Medicare beneficiary flows, in which beneficiaries cross state lines to obtain care.
According to CMS, many of the same factors were considered in the definition of the PDP regions (HHS release, 12/6). The regions designated for the PDPs vary in size and number of beneficiaries. Geographically, the largest region consists of seven states in the upper Midwest and northern Plains, comprising 1.9 million Medicare beneficiaries. Other regions are composed of single states, including California, with 4.3 million beneficiaries, and Florida, with three million beneficiaries (New York Times, 12/7).
CMS on Monday also announced that in its final rules governing the Medicare law, to be released in January, the agency will announce how it will adjust payments to plans providing coverage in higher-cost regions (HHS release, 12/6).
According to the Times, the "configuration of the regions will be a significant factor in the success or failure" of the new Medicare law because the "regional boundaries will ... determine how many insurers participate in the new program" (New York Times, 12/7). In deciding whether to participate, health plans will consider factors such as their existing presence in a region, existing provider networks and rules governing prescription drug formularies. Applications for companies to participate in the prescription drug benefit will be due in summer 2005.
Some analysts expressed doubt that many insurers would choose to offer PPOs under the new regional designations and said that it remains unclear how many health plans will choose to offer PDPs, CQ HealthBeat News reports. In general, insurers with existing national networks applauded regional designations, while those with local or state-based networks were "dismayed" by CMS' decision, according to CQ HealthBeat News.
Karen Ignagni, president and CEO of America's Health Insurance Plans, said health plans' reaction to the announcement Monday was mixed. She added, "Clearly, CMS is trying to develop a program that is aimed at making it viable. They've really worked hard to group similar types of states together" while also "maintain[ing] strong local markets" and trying "to respond to concerns." Alissa Fox, policy director for the Blue Cross Blue Shield Association, said, "Obviously, we wish there were more regions," adding, "This makes it more difficult for the Blues plans." Blue Cross Blue Shield companies had lobbied CMS for a greater number of small regions that would be similar to their existing coverage areas. However, several BCBSA plans have expressed interest in offering PDPs, Fox said (CQ HealthBeat News, 12/6). Michael Unhjem, president of the Blue Cross Blue Shield of North Dakota, said he is working with other Blue Cross companies in the Midwest region to form a joint venture that would allow them to offer both the PPOs and PDPs. A spokesperson for Blue Cross Blue Shield of Arizona said the insurer will consider offering the Medicare plans.
Mark Lindsay, a spokesperson for UnitedHealth Group, said, "We are more likely to want to participate" with the new regional designations (New York Times, 12/7). Humana in a statement Monday said that it plans to offer PPOs and is considering whether to offer PDPs. Aetna CEO Jack Rowe said CMS' decision on PPO regions would "increase the number of health plans" that participate in Medicare Advantage, adding, "I think the likelihood that we will be in more regions is greater today than yesterday" (Lueck, Wall Street Journal, 12/7). Alan Raymond, a spokesperson for Massachusetts-based Harvard Pilgrim Health Care, said the company will not offer a PPO or PDP, adding, "This is not the configuration we expected or would have preferred" (New York Times, 12/7).
"Seniors and people with disabilities are now one step closer to the prescription drug coverage created by President Bush and Congress," Thompson said.
CMS Administrator Mark McClellan said, "Our decisions about regions reflect our goal of making sure that all 42 million Medicare beneficiaries will have access to high-quality, affordable drug coverage and health plan choices. These regions provide us with the strongest foundation possible to get affordable and comprehensive new coverage in place quickly, so seniors and people with disabilities can get the most from Medicare's new, up-to-date benefits" (HHS release, 12/6).
Norwalk said she is "more confident now than a month ago" that private health plans will want to offer PPOs and PDPs and that the federal government will not have to step in to provide prescription drug coverage in underserved areas (Lueck, Wall Street Journal, 12/7).
The Wall Street Journal on Tuesday examined how Medicare beneficiaries enrolled in the discount card program have until Dec. 31 to "sho[p] around" for "deeper discounts" on their medications and change card providers if they find a better deal with a different card. Beneficiaries whose card has changed discounts or whose prescription drug regimen has changed since they enrolled in the program are most likely to switch to a different card.
"There's nothing that locks the discount amount into place," Tricia Neuman, a Kaiser Family Foundation vice president and director of its Medicare Policy Project, said. She added that so far, discounts have remained fairly stable, according to the Journal. The Journal reports that switching cards might not be possible for some beneficiaries, particularly those who were enrolled in the program automatically through their Medicare Advantage plan (Rubenstein, Wall Street Journal, 12/7).