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Avalere Health LLC | The intersection of business strategy and public policy The Potential Impact of the New Prescription Drug Benefit on Medicare Beneficiaries.

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Presentation on theme: "Avalere Health LLC | The intersection of business strategy and public policy The Potential Impact of the New Prescription Drug Benefit on Medicare Beneficiaries."— Presentation transcript:

1 Avalere Health LLC | The intersection of business strategy and public policy The Potential Impact of the New Prescription Drug Benefit on Medicare Beneficiaries A Snapshot of the Medicare Part D Market June 27, 2006 AcademyHealth Annual Research Meeting Tanisha Carino, Ph.D. Avalere Health LLC

2 © Avalere Health LLC Page 2 Medicare Part D: Market-Driven, Plus Oversight 1. Voluntary enrollment  Stand-alone drug plans (PDPs)  Medicare Advantage drug plans (MA-PDs) 2. Federal government does not set prices, premiums, or formularies 3. Federal government and plans share financial risk 4. Plans compete for enrollees, within regions, based on premiums, OOP, benefit design, reputation 5. Beneficiary protections  Low-income subsidy  Formulary protections

3 © Avalere Health LLC Page 3 25% coinsurance Catastrophic Coverage No Coverage (“donut hole”) Partial Coverage Deductible 5% coinsurance 100% cost-sharing 1 Equivalent to $3,850 in out-of-pocket spending: $3,850 = $265 (deductible) + $534 (25% cost- sharing on $2,135) + $3,051 (100% cost-sharing in the “gap”). Source: Office of the Actuary, Centers for Medicare and Medicaid Services. Beneficiary Cost-Share Plan’s Coverage Reminder: Medicare Part D Standard Benefit Design 20062007 $5,100$5,451 1 $2,250$2,400 $250$265

4 © Avalere Health LLC Page 4 As of June 2006, Nearly 23 Million Medicare Beneficiaries Have Enrolled in Part D Note: Totals do not sum due to rounding. Source: Avalere Health Analysis of Data from Department of Health and Human Services, June 14, 2006 Total Medicare Beneficiaries: 42.8 Million Part DNon-Part D 15.0 Million 12.0 Million 15.8 Million Active Workers (Medicare as Secondary Payer) Retiree Coverage (Non-Subsidy) Retiree Subsidy VA TRICARE SPAP Coverage Indian Health Service Dual Eligibles in PDPs Previous MA Enrollees LIS Facilitated Enrollment PDP Enrollees New MA-PD Enrollees Unenrolled (Non- LIS Eligible) FEHBP Dual Eligibles in MA-PDs Unenrolled (LIS-Eligible)

5 © Avalere Health LLC Page 5 Key Policy Question in 2006 How much variation in benefit package design will Medicare beneficiaries face in the Medicare Part D market in 2006?

6 © Avalere Health LLC Page 6 Avalere Health’s DataFrame™  Proprietary database on 3,000 Medicare PDPs and MA-PD plans nationwide »Integrates CMS publicly available data with commercial data  Data elements include: »Premiums and cost-sharing »Drug level detail on formulary positioning – On or off formulary – Tier placement »Use of utilization management tools – Prior authorization, dosing limits, step therapy »Pharmacy networks  Data current as of February 2006, except where noted

7 © Avalere Health LLC Page 7 National Market: MA-PD Plans Commonly Charge Lower Part D Premiums Than Stand-Alone PDPs Premium Range Number of Plans Source: Avalere Health analysis of Medicare Part D plan data.

8 © Avalere Health LLC Page 8 National Market: Most Beneficiaries Enrolled in PDPs Chose Plans with Premiums Below 2006 Average Premium Source: Centers for Medicare and Medicaid Services. 2007 CMS Annual Bidding Conference. April 5, 2006

9 © Avalere Health LLC Page 9 National Market: Most Beneficiaries Enrolled in MA-PD Plans Chose Plans with $0 Premiums Source: Centers for Medicare and Medicaid Services. 2007 CMS Annual Bidding Conference. April 5, 2006 $32.20 or higher $0.01 or $32.19 $0

10 © Avalere Health LLC Page 10 National Market: In General, MA-PD Plans Charge Lower Deductibles Than PDPs PDP DeductibleMA-PD Plan Deductible Source: Avalere Health analysis of Medicare Part D plan data.

11 © Avalere Health LLC Page 11 National Market: More MA-PD Plans Provide Coverage in the Coverage Gap Than PDPs PDP Coverage Gap MA-PD Plan Coverage Gap Source: Avalere Health analysis of Medicare Part D plan data.

12 © Avalere Health LLC Page 12 National Market: 4-Tier Structures Are Most Common Among Part D Plans PDPs MA-PD Plans Number of Tiers in Plan Number of Plans Percentage of Plans Number of Plans Percentage of Plans 1 Tier 12<1%211% 2 Tiers 1118%25017% 3 Tiers 53337%22315% 4 Tiers 49635%77952% 5 Tiers 27619%18612% 6 Tiers 1<1%11<1% 7 Tiers 00%5<1% 8 Tiers 00%4<1% Four tier structures most common among Part D plans PDPs have between 1 and 6 tiers Average 3.6 tiers MA-PD plans have up to 8 tiers Average 3.6 tiers Source: Avalere Health analysis of Medicare Part D plan data.

13 © Avalere Health LLC Page 13 National Market: Plans Switch from Copays to Coinsurance in the 4 th Tier Most Common Cost-Sharing for Each Tier for 4-Tier Plans (copay or coinsurance) PDPsMA-PD Plans Most Common Cost- Sharing Tier 1$10$5 Tier 2$22$28 Tier 3$60$58 Tier 425% Large jump from tier 1 to tier 2 to encourage use of generics Copays used on lower tiers; coinsurance usually used on highest tier In general, higher cost- sharing in Part D than commercial Source: Avalere Health analysis of Medicare Part D plan data.

14 © Avalere Health LLC Page 14 20 Most Common Drugs Found on the 4 th Tier of 4-Tier Plans Cancer Lupron Depot* Zoladex* Neupogen* Neulasta* Multiple Sclerosis Rebif Avonex* Copaxone Betaseron Rheumatoid Arthritis Humira Remicade* Enbrel Anemia Procrit* Aranesp* Other Fabrazyme Fuzeon Cerezyme Peg-Intron* Saizen Actimmune* Raptiva These drugs are on the 4 th tier on over 70% of 4-tier plans Many drugs found on the 4 th tier of 4 tier plans are eligible for Part B coverage in certain situations A very small number of drugs found on the 4 th tier are generics *In some (or most) cases, covered under Medicare Part B Analysis uses October 2005 data. Source: Avalere Health analysis of Medicare Part D plan data.

15 © Avalere Health LLC Page 15 Four States: Variation in Use of Drug Utilization Tools Within States  On average beneficiaries in NY, CA, TX, FL will see PDPs with 11% of drugs subject to prior authorization »This percentage does not vary by premium level  However within these states, plans offer tremendous variation in the percentage of drugs subject to PA Source: Avalere analysis of October 2005 DataFrame. CaliforniaFloridaNew YorkTexasOverall Average Number of Drugs 192173205153 181 Percent of Total Drugs (Range) 2%-39%.3%-39% Average Percent of Total Drugs (%) 11.210.711.810.010.9 Number of Drugs on Formulary Requiring Prior Authorization

16 © Avalere Health LLC Page 16 Future Questions  Over time will we see greater consolidation in the Medicare Part D market?  Will increased consolidation lead to more or less generous benefit package designs and greater cost savings to the Medicare program?  How will CMS and others evaluate the impact of commercial benefit designs on the Medicare beneficiaries?

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