For some Medicare beneficiaries, the prospect of choosing a prescription drug plan is puzzling at best and seemingly impenetrable at worst. In California, there are 47 stand-alone prescription drug plans and 85 offered through managed care companies, primarily Medicare Advantage plans, according to a compilation by the California HealthCare Foundation.
Why so many?
“This is a huge market, the biggest in the country,” Bonnie Burns — training specialist for California Health Care Advocates, the umbrella group for the network of local counseling agencies that help educate Medicare beneficiaries — said.
California is simply “a very important market where a number of (insurance) carriers want to be involved,” according to Gina Stassi, Blue Shield of California‘s senior director of individual and family plans and Medicare product management.
A state-by-state report for 2003 by the Kaiser Family Foundation gives a total of 40.2 million Americans enrolled in Medicare, or 14% of the U.S. population. California has the largest enrollment with 4.1 million persons, or 11% of the state population. The other states with the biggest totals included:
- Florida, with 2.9 million residents enrolled in Medicare, or 17% of the state’s population;
- New York, with 2.8 million beneficiaries, or 14% of the population;
- Texas, with 2.4 million or 11%; and
- Pennsylvania, with 2.1 million beneficiaries or 17% of state residents.
Medicare officials have specified basic minimum requirements for all Medicare drug plans, including a monthly premium, an annual deductible and a “doughnut hole,” or gap in coverage between $2,251 and $3,600 in drug spending.
For example, Blue Cross of California offers three varieties of Medicare stand-alone drug plans. The lowest-cost plan, for which monthly premiums are $20.04, has a $250 deductible and provides no coverage in the doughnut hole. The costliest plan, with monthly premiums of $35.29 eliminates the $250 deductible and helps with the doughnut hole by offering coverage for generic drugs for a $10 copay within the doughnut hole range, according to Blue Cross. This gives the beneficiaries some protection within the coverage gap.
The doughnut hole is an area of high costs for most people in most plans: 13% of the stand-alone plans and 34% of Medicare HMO-type plans provide some assistance in paying for drugs within the doughnut hole, according to the CHCF fact sheet.
However, there is much more help in coping with the $250 annual deductible, with 66% of the stand-alone plans and 79% of the managed care HMO plans offering a reduced or a zero deductible, the fact sheet says.
In addition, Medicare regulations say companies offering Part D plans must have a standard formulary that includes the majority of commonly used drugs. The formulary was developed using information from beneficiaries who used an interim drug discount card, a transition step to the coverage that begins January 1.
The top 100 drugs are the most commonly used medications, derived from the prescriptions filled by people who enrolled for the Medicare discount card.
The plans charging a monthly premium include an average of 90% of the top drugs on their formularies. However, paying for the 10% of medications excluded from the formularies could cause financial hardship for some individuals who depend on these prescriptions to maintain their health.
Burns of California Health Advocates cautioned that a Part D stand-alone plan or an HMO with drug coverage might have a particular drug in the formulary, but she said that insurers might “limit quantities so you can only get a certain number of pills for a certain number of months.” She added, “Or they may restrict usage of some drugs and say you can only get it if you seek prior approval from a doctor.”
The place where drugs are purchased also could affect what the beneficiary pays. Each plan will have its own network of participating pharmacies that have agreed to fill particular prescriptions at particular prices, Burns said. If someone takes a prescription to a pharmacy outside the plan network, the copay might be significantly higher.
Beyond the government’s requirements for prescription drug plans, the California marketplace also is affected by the high penetration of managed care plans in the state. Nationally, 13% of Medicare beneficiaries are enrolled in HMOs, compared with more than a third of California’s Medicare population.
This means a bigger variety of products for competitors to offer. Because there are so many people in HMOs in California, companies feel they have to offer a range of products to meet all the needs of the marketplace. To be competitive, a company must be able to woo different kinds of customers — including those who grew up with HMOs and want to stay within a network when they reach Medicare age, and those who want the freedom of fee-for-service Medicare, which gives beneficiaries access to any doctor or any hospital that accepts Medicare customers.
If an insurer wants to make a splash in the California market, it will offer a Medicare HMO with the new drug coverage, a stand-alone prescription drug plan and perhaps also a Medigap supplemental plan that includes drug coverage.
Although HMO penetration is very high in California, Stassi noted that it is important for any firm that wants to be a strong competitor to be sure it has products for people outside the ranks of the HMO membership.
The prescription drug plans also include variations to appeal to people with different spending patterns and different views of insurance. For example, someone in good health with few, if any, prescriptions might opt for a plan with the lowest possible monthly premiums, not worrying about copayments and deductibles. This customer doesn’t expect to have many prescriptions filled.
On the other hand, someone with a chronic illness who takes lots of medications will want a plan that saves as much as possible from the deductibles and copays. This individual would be willing to pay a high premium each month to save money on the other end.
For individual consumers, the decision on whether to focus on the lowest possible monthly premium or on the elimination of the deductible might be just the start of an arduous selection process.
“There will be new choices, but new sources of confusion for people, as they try to sort out what is best for themselves,” Tricia Neuman, a vice president of the Kaiser Family Foundation and director of its Medicare Policy Project, said. “So many people have so many different experiences.”