1. Translating Legislative Sausage into Understandable Choices of Beneficiaries Presented by Tricia Neuman, Sc.D. Vice President and Director, Medicare Policy Project The Henry J. Kaiser Family Foundation for AcademyHealth June 27, 2005

2. 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

3. 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

4. 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

5. Decisions for Medicare Beneficiaries Exhibit 3 To D or Not to D?

6. Decisions for Medicare Beneficiaries Exhibit 3

7. Decisions for Medicare Beneficiaries Enroll in Part D Plan Do Not Enroll in Part D Plan Exhibit 3

8. Decisions for Medicare Beneficiaries No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Exhibit 3

9. Decisions for Medicare Beneficiaries Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Exhibit 3

10. Decisions for Medicare Beneficiaries Medigap ( but not creditable so penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Exhibit 3

11. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Exhibit 3

12. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Traditional Medicare Medicare Advantage Exhibit 3

13. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Traditional Medicare Prescription Drug-Only Plan (PDP) Medicare Advantage Exhibit 3

14. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Traditional Medicare Prescription Drug-Only Plan (PDP) Medicare Advantage HMO PPO (regional) Private Fee-for-Service Exhibit 3

15. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Traditional Medicare Prescription Drug-Only Plan (PDP) Medicare Advantage HMO PPO (regional) Private Fee-for-Service Exhibit 3 Decisions to be Made: Premiums

16. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Traditional Medicare Prescription Drug-Only Plan (PDP) Medicare Advantage HMO PPO (regional) Private Fee-for-Service Exhibit 3 Decisions to be Made: Premiums Covered Drugs

17. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Traditional Medicare Prescription Drug-Only Plan (PDP) Medicare Advantage HMO PPO (regional) Private Fee-for-Service Exhibit 3 Decisions to be Made: Premiums Covered Drugs Cost-Sharing

18. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Traditional Medicare Prescription Drug-Only Plan (PDP) Medicare Advantage HMO PPO (regional) Private Fee-for-Service Apply for Low- Income Subsidy? Exhibit 3 Decisions to be Made: Premiums Covered Drugs Cost-Sharing

19. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Traditional Medicare Prescription Drug-Only Plan (PDP) Medicare Advantage HMO PPO (regional) Private Fee-for-Service If Dual Eligible Auto-enrolled Apply for Low- Income Subsidy Exhibit 3 Decisions to be Made: Premiums Covered Drugs Cost-Sharing

20. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Traditional Medicare Prescription Drug-Only Plan (PDP) Medicare Advantage HMO PPO (regional) Private Fee-for-Service Medicaid Social Security If Dual Eligible Auto-enrolled Apply for Low- Income Subsidy Exhibit 3 Decisions to be Made: Premiums Covered Drugs Cost-Sharing

21. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Traditional Medicare Prescription Drug-Only Plan (PDP) Medicare Advantage HMO PPO (regional) Private Fee-for-Service Medicaid Social Security If Dual Eligible Auto-enrolled Apply for Low- Income Subsidy If meet income and asset test, qualify for subsidy: Exhibit 3 Decisions to be Made: Premiums Covered Drugs Cost-Sharing

22. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Traditional Medicare Prescription Drug-Only Plan (PDP) Medicare Advantage HMO PPO (regional) Private Fee-for-Service Medicaid Social Security If Dual Eligible Auto-enrolled Apply for Low- Income Subsidy 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) Assets $10,000/single; $20,000/couple If meet income and asset test, qualify for subsidy: Exhibit 3 Decisions to be Made: Premiums Covered Drugs Cost-Sharing

23. Decisions for Medicare Beneficiaries Medigap Coverage (but not creditable = penalty for late enrollment) Creditable Employer Plan (no low-income subsidies) No Prescription Drug Coverage (penalty for late enrollment) Do Not Enroll in Part D Plan Enroll in Part D Plan Traditional Medicare Prescription Drug-Only Plan (PDP) Medicare Advantage HMO PPO (regional) Private Fee-for-Service Medicaid Social Security If Dual Eligible Auto-enrolled Apply for Low- Income Subsidy 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) Assets $10,000/single; $20,000/couple If meet income and asset test, qualify for subsidy: Exhibit 3 Decisions to be Made: Premiums Covered Drugs Cost-Sharing

24. Employer- Sponsored Coverage Indian Health Service Medigap Medicaid Veterans Admin. CHAMPUS TRICARE State Pharmacy Assistance Program No 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

25. 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) SOURCE: MCBS 2002 Access to Care File.

26. Seniors Understanding of the Medicare Prescription Drug Benefit * Dont 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

27. 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. Dont know responses not shown. Source: Kaiser Family Foundation surveys. Exhibit 7

28. 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/ Dont Know Favorable Exhibit 8

29. 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

30. Yes, will enroll Have not heard enough to decide No, will not enroll Dont Know/ Refused Seniors Plans to Enroll in a Medicare Drug Plan in 2006 SOURCE: Kaiser Family Foundation Health Poll Report survey (conducted March 31 – April 3, 2005). Exhibit 10

31. 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