Impact of the

Medicare Rx

Drug

Legislation

on Consumers

Rx______________________________

Willis B Helpin, M.D.

10 Betterhealth Lane

Anytown, USA

John RotherDirector

Policy & Strategy

MedicareRx Drug Coverage: The

Need

Today’s pharmaceuticals do far more than mitigate symptoms:

Control chronic conditions

Protect against acute episodes

Reverse course of disease, in some cases

And, significantly improve the quality of life

What are people’s Rx drug costs?

Distribution of typical costs over approximately 40 million

beneficiaries

CBO Projected 2006

For Medicare-eligible

$0 <$1K $1-3K $3-5K $5-8K $8-10K $10K+

10% 25% 30% 16% 11% 3% 5%

Impact of New Law in 2006

$188$563

$1,313

$1,500

$1,500

$6,155

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$500 $1,000 $2,000 $3,000 $5,000 $10,000

Medicare paysPerson's Co-payPerson's Premiums

Prescription cost

TO

TA

L R

x S

PE

ND

ING

The Standard Benefit Design

75%

$35 monthly premium($420 per year)

$250 $2250 $3600 out-of-pocket Total Rx Rx Spending Spending FINAL

As passed

…

95%

Referred to as the DONUT HOLE

13.4 Million Low-IncomeMedicare Beneficiaries Helped

Dual EligiblesBelow 100% FPL

Below 135% FPLAssets Below

$6,000**

Below 135% FPLAssets Below

$10,000**

135% & 150% FPLAssets Below

$10,000

•No Premium

•No Deductible•No Coverage Gap

•$1 Copay for Generic

•$3 Copay for Brand-name

•No Copay if in nursing home

•No Copay over the $3,600 limit*

•No Premium

•No Deductible•No Coverage Gap

•$2 Copay for Generic

•$5 Copay for Brand-name

•No Copay over the $3,600 limit*

•No Premium

•$50 Deductible•No Coverage Gap

•15% Coinsurance

•$2 Generic or $5 Brand-name Copay over the $3,600 limit*

•Sliding Scale Premium

•$50 Deductible•No Coverage Gap

•15% Coinsurance

•$2 Generic or $5 Brand-name Copay over the $3600 limit*

4.4 million 6.9 million 0.7 million 1.4 million

2003

CB

O E

stim

ate

Other Low-Income Protections

Offers a Medicare discount card as a “transition” benefit for low-income without other Rx coverage -- adds

$600/yr

Begins in June, 2004 and ends January, 2006

Immediate help

Choices in Benefit Design

Private benefit designs will differ even though based on same actuarial value as Medicare Rx

2 or more private insurance plans or federal fallback using the ‘standard benefit’

Enrollment

• Voluntary, can choose either:

– Stand-alone plans sponsored by PBMs– PPO/HMO plans (Medicare Advantage)– No plan, pay no premium

• Annual open-season

• Late sign-up penalties = 1% per month, or as HHS Sec determines

Medicare Structural Changes

Adds chronic care management

Adds new prevention benefits

Requires electronic prescribing for doctors and pharmacies, which will improve quality

Strengthens Medicare

Allocates $71b in direct subsidies –now tax free – for employers who offer retirees Rx drug coverage equivalent to Medicare

Sec. 631 was dropped (permitted employers to provide retiree health coverage only until age 65)

Employer-provided retiree health coverage

Protects Covered RetireesProtects Covered Retirees

Effect on Employers

Typical employer: Expected to retain benefits for present & near-retirees -- limit for future

Large employers most likely to “wrap-around” Medicare Rx, AARP surveys in 2002 indicated

Unfinished Agenda

Initiatives to keep pharmaceutical costs down

Initiatives to strengthen benefits

Unfinished AgendaCost initiatives Give HHS Sec negotiating power Legalize importation Call industry to limit price rises Fund “effectiveness” research Speed generic approval Require plans disclosure prices Reform direct-to-consumer ads Reform detailing practices –AMA

Unfinished AgendaBenefit design initiatives

Close the donut hole Eliminate asset tests Change indexing to CPI-U Improve coordination with State

Rx aid Strengthen ‘fallback’ provisions Allow States to be Rx plans

Impact of the

Medicare Rx

Drug

Legislation

on Consumers

Rx______________________________

Willis B Helpin, M.D.

10 Betterhealth Lane

Anytown, USA