BCNEPA/FPH 2006 Seminar

Medicare Before and After Part D

April 26, 2006

Randy GrabiakHighmark Senior Products

Medicare Part D Product Director

Agenda

• Trends in the Senior Market

• Part D Benefits & Guidelines

• Plan Participation

• Provider Challenges

• Questions

Seniors’ Sources of InformationAMONG SENIORS: Percent who say they would be very likely to turn to each of the following for help in deciding whether to enroll in a Medicare drug plan…

Source: *Kaiser Family Foundation Health Poll Report Survey (conducted Mar. 31-April 3, 2005)

**Kaiser Family Foundation/Harvard School of Public Health (conducted October 13-31, 2005)

49%33%

27%

27%23%

21%

18%

8%

Trends in the Senior Market

Your doctor

Your pharmacist

A Social Security office, website or phone number

Friends or family members

A Medicare mailing, website or phone number

A health insurance company

A local seniors’ group or community organization

An employer or union

Survey March 31 – April 3, 2005

Medicare

Your doctor

Your pharmacist

Social Security

Friends or family members

A local seniors’ group or community organization

Medicaid

An employer or union

Survey October 13 – 31, 2005

9%14%

16%

20%24%

25%

32%

33%

Health Insurance Trends Prior to Part D

Medicare Advantage

7%

Employer-Sponsored

28%

Medigap10%Medicaid

15%

Other6%

Self-Pay28%

Part A Only6%

Private45%

No Coverage34%

Government21%

To offset the growing out-of-pocket expense, many beneficiaries have turned to various forms of private or public supplemental coverage to help defray the cost of prescription drugs

However, more than a third still have no prescription drug coverage

Lack of drug coverage can have adverse affects

Sources of Prescription Drug Coverage

Trends in the Senior Market

Health Care Delivery and Expenditure Trends

Trends in the Senior Market

Seniors are particularly vulnerable to the increased cost of prescription drugs because:

– Drug usage increases with age

– Prior to Part D Medicare did not cover most prescription drugs

Source: Ageworks, a division of the Ethel Percy Andrus Gerontology Center, USC

Medicare Beneficiaries’ Out-of-Pocket Prescription Drug Spending, 2000-2013$2,763*

$1,457*

$999

$644

2000 2003 2006 2013

* Without Medicare drug benefit.SOURCE: Actuarial Research Corporation analysis for The Kaiser Family Foundation, June 2003 and November 2004.

Average annual out-of-pocket drug costs among the Medicare population:

Projected:

The Need for Drug Coverage

Trends in the Senior Market

- 83%

- 28%

Part D is Projected to Reduce Average Out-of-Pocket Spending but the Extent of the Reduction is Likely to Vary

SOURCE: Actuarial Research Corporation analysis for the Kaiser Family Foundation, November 2004.

Average Change:

- 37%

All Other Part D Participants(20.3 million)

Part D Participants Who Receive Low-Income Subsidies

(8.7 million)

Recent Trends in the Senior Market

Traditional Medicare

No Part D coverage Part D Prescription Drug Plan

Medicare Advantage

HMO (Local)

PPO (Local v. Regional)

Enroll in Part D Plan

Apply for Low-Income Subsidy

Medicaid Office

Social Security Office

Meet Income and Asset Test?Dual Eligibles

Below 100% FPL:

No premium or deductible, $1/generic Rx, $3/brand name Rx,

pay nothing after $5,100 in Rx costs

Below 135% FPL: Subsidy for premium, no

deductible, $2/generic Rx, $5/brand name Rx, pay nothing

after $5,100 in Rx costs

Below 150% FPL: Subsidy for premium on sliding scale,

$50 deductible, 15% coinsurance to $5,100 in Rx costs, $2/generic Rx,

$5/brand name Rx after $5,100

If yes, qualify for:

Private FFS

Decisions for Beneficiaries

Part D Benefits & Guidelines

Medicare Prescription Drug Benefit

$ 2 5 0 $ 2 2 5 0 $ 5 1 0 0

$ +

B e n e f ic ia r y L ia b i l i ty

D e d u c t ib le

C o v e r a g e G a p

T o ta l S p e n d in g

? 9 5 %

8 0 % R e in s u r a n c e

1 5 % P la n P a y s 5 % C o in s u r a n c e

M e d ic a r e P a y s R e in s u ra n c e

7 5 % P la n P a y s

2 5 % C o in s u r a n c e

D ire c t S u b s id y /B e n e f ic ia r y P r e m iu m

$ 7 5 0 $ 3 6 0 0 T r O O P

T o ta l B e n e f ic ia r y

O u t - O f - P o c k e t$ 2 5 0

R e d u c t io n in th e d e d u c t ib le C h a n g e s in c o s t-s h a r in g (e .g . , t ie re d

c o p a y m e n ts o r c o in s u ra n c e in a n a c tu a r ia l ly e q u iv a le n t m a n n e r to th e 2 5 % c o s t s h a r in g u n d e r s ta n d a rd c o v e ra g e

M o d if ic a t io n o f in it ia l c o v e ra g e lim it

R e d u c t io n s in c o s t s h a r in g :– R e d u c t io n in d e d u c t ib le– R e d u c t io n in th e c o in s u ra n c e

p e rc e n ta g e o r c o p a y m e n ts– In c re a s e in in it ia l c o v e ra g e lim it

C o v e ra g e o f d ru g s s p e c if ic a lly e x c lu d e d a s c o v e re d P a r t D d ru g s

B a s ic A lte r n a t iv e C o v e r a g e( A c tu a r ia l ly E q u iv a le n t to S ta n d a r d C o v e r a g e )

E n h a n c e d A lte r n a t iv e C o v e r a g e(E x c e e d s S ta n d a r d C o v e r a g e )

S ta n d a r d C o v e r a g e(E s t im a te d A n n u a l P r e m iu m : $ 4 2 0 )

1 0 0 % C o in s u r a n c e( )

2006 Standard Medicare Part D Coverage

Part D Benefits & Guidelines

Part D Plans

To participate in the program, sponsors must offer Medicare Part D benefits to all beneficiaries in one or more of the 34 PDP regions established by CMS

Plan Participation

Highmark’s Medicare Approved Drug Plans

BlueRx Benefits

Basic Plus Complete

Formulary Closed Incentive Incentive

Monthly Premium $26.55 $33.67 $47.46

Deductible $0.00 $0.00 $0.00

Initial Coverage

From deductible amount to $2,250 in total drug costs (member and plan)

Generic

$10 Copay

Brand

$30 Copay

Generic

$10 Copay

Brand

$25/$45 Copay

Generic

$8 Copay

Brand

$20/$40 Copay

Coverage Gap

From $2,251 in total drug costs (member and plan) to $3,600 out-of-pocket (member)

No Coverage No Coverage

$8 Copay for

Unlimited Generics

No Coverage

Catastrophic Coverage

Over $3,600 out-of-pocket (member)

Generic

Greater of $2 Copay or 5% Coinsurance

Brand

Greater of $5 Copay or 5% Coinsurance

Generic

Greater of $2 Copay or 5% Coinsurance

Brand

Greater of $5 Copay or 5% Coinsurance

Generic

Greater of $2 Copay or 5% Coinsurance

Brand

Greater of $5 Copay or 5% Coinsurance

To Request Additional Information, please call 1-866-465-4030

Plan Participation

Standard Part D Enhanced Part D

FreedomBlue FreedomBlue

Formulary Closed Closed

Deductible $0.00 $0.00

Initial Coverage

From deductible amount to $2,250 in total drug costs (member and plan)

Generic

$10 Copay*

Brand

$30 Copay*

Generic

$8 Copay*

Brand

$20 Copay*

Coverage Gap

From $2,251 in total drug costs (member and plan) to $3,600 out-of-pocket (member)

No Coverage $8 Coverage for Generics*

Catastrophic Coverage

Over $3,600 out-of-pocket (member)

Generic

Greater of $2 Copay * or

5% Coinsurance

Brand

Greater of $5 Copay* or

5% Coinsurance

Generic

Greater of $2 Copay* or

5% Coinsurance

Brand

Greater of $5 Copay* or

5% Coinsurance

Generic

Greater of $2 Copay* or

5% Coinsurance

Brand

Greater of $5 Copay* or

5% Coinsurance

Generic

Greater of $2 Copay* or

5% Coinsurance

Brand

Greater of $5 Copay* or

5% Coinsurance

Highmark’s Medicare Advantage Drug Plan Options

* Based on 1-34 Day supply. Copayment for 35-90 day supply (Retail) or 1-90 day supply (Mail Service) is 2.5 times 1-34 day supply.

Medicare Prescription Drug Plan Cost Estimator (BlueRx Basic)

Current Annual Drug Spend $1,440.00$120.00/Month

Est. Annual Medicare Drug Spend $ 798.60$66.55/Month

Est. Annual Savings: $ 641.40$53.45/Month

Description Cost with Medicare

Minimum Annual Premium* $318.60$ 26.55/Month

Cost Share applied toward the $250 Deductible $0.00

Annual Cost Share ** $480.00$40.00/Month

Estimated Savings Report:

Cost Breakdown:

*BlueRx Basic Plan** Assumption: 4 generic prescriptions/month

Part D Benefits & Guidelines

Low-Income Subsidy

• Medicare will provide premium and cost-sharing subsidies to assist low-income beneficiaries

• Dual eligibles will be automatically assigned to a PDP and auto-enrolled if they do not choose another plan

• Benefit: Reduction of premium, deductible & cost-sharing

• Process: Requires completion of SSA form

• Eligibility:

Income Assets*

Single $14,355 $11,500

Married $19,245 $23,000

*Excludes primary residence and automobiles

Part D Benefits & Guidelines

Medicare’s Low Income Subsidy Benefit Design

Title Income Assets Premium Deductible Initial Benefit

Coverage Gap

Catastrophic

Coverage

(1) Full-Benefit

Dual Eligible Non-

Institutionalized

Up to 100% FPL

Medicaid Eligible $0.00 $0.00 $1 generic

$3 brand

$1 generic

$3 brand

$0.00

(2) Full-Benefit

Dual Eligible Non-

Institutionalized

Above 100% FPL

Medicaid Eligible $0.00 $0.00 $2 generic

$5 brand

$2 generic

$5 brand

$0.00

(2) Other Low-Income

Beneficiary

Below 135% FPL

Not Above

$6,000 (single)

$9,000 (couple)

$0.00 $0.00 $2 generic

$5 brand

$2 generic

$5 brand

$0.00

(3) Other Low-Income

Beneficiary

Below 135% FPL

Between

$6,000 & $10,000 (single)

$9,000 & $20,000 (couple)

$0.00 $50 15% co- insurance

15% co- insurance

$2 generic

$5 brand

(3) Other Low-Income

Beneficiary

At or above 135% FPL but below 150% FPL

Not above

$10,000 (single)

$20,000 (couple)

Sliding Scale up to 100%

$50 15% co- insurance

15% co- insurance

$2 generic

$5 brand

(4) Full-Benefit

Dual Eligible

Institutionalized

Irrelevant Medicaid Eligible $0.00 $0.00 $0.00 $0.00 $0.00

Part D Benefits & Guidelines

The Donut Hole’s Impact to Out of Pocket Expenses

Part D Benefits & Guidelines

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$1

$1

84

$3

67

$5

50

$7

33

$9

16

$1

,09

9

$1

,28

2

$1

,46

5

$1

,64

8

$1

,83

1

$2

,01

4

$2

,19

7

$2

,38

0

$2

,56

3

$2

,74

6

$2

,92

9

$3

,11

2

$3

,29

5

$3

,47

8

$3

,66

1

$3

,84

4

$4

,02

7

$4

,21

0

$4

,39

3

$4

,57

6

$4

,75

9

$4

,94

2

$5

,12

5

$5

,30

8

$5

,49

1

$5

,67

4

$5

,85

7

$6

,04

0

$6

,22

3

$6

,40

6

$6

,58

9

$6

,77

2

$6

,95

5

W/o

W/

$0 $250 $2250 $5100 $7000

Annual Initial Donut Hole CatastrophicDeductible Benefit No Coverage of Costs Coverage

W/O

W/

< 100% FPL - $1/3 <135% - $2/5

135%-150%Low Income

Average Senior

Total Prescriptions Received

Ou

t of

Poc

ket

Exp

ense

s

Medicare Part D is an entitlement but enrollment is voluntary

Low-income subsidy provides additional cost savings

Waiting to enroll until after May 15, 2006 may come at a penalty

Nov 15, 2005 May 15, 2006

Sign up & pay = $32.20/Month*

*Amount based on $32.20 national average monthly beneficiary premium (CMS, August 2005).**Assumes national average premium does not increase annually

January 2007 January 2008

Sign up & pay = $34.78/Month**

Sign up & pay = $38.95/Month**

Late Enrollment Penalty

Part D Benefits & Guidelines

National Part D Enrollment not meeting HHS Projections

0.0

20.0

10.0

30.0 *Projected Part D Enrollment = 29.3M

6.2 mil

4.4 mil 4.5 mil

1 mil3.6 mil

Dec 2005 Jan 2006

Enrolled in Stand Alone PDPs

Enrolled in MA-PD

Dual Eligible Auto Assigned from CMS

Actual Part D EnrollmentSource: Projected: HHS, Medicare Drug Benefit Final Rule 1/28/05. Actual: HHS 12/22/05, 1/17/06 , 2/22/06, & 3/23/06

11.6 million

14.3 million

• 39.1 million beneficiaries would enroll in 2006 of which 10 million would have creditable coverage under a qualified plan such as an employer or union sponsored plan.

• 29.3 million would be enrolled in a Part D plan.

• Additional 11.4 million will need to sign up for a stand alone or MAPD plan in order to reach the 29.3 million member target.

Feb 2006

6.2 mil

4.7 mil

4.9 mil

15.8 million

6.2 mil

*Includes MAPD & Stand Alone PDP17.9

million

6.4 mil

5.1 mil

6.4 mil

Mar 2006

Formulary

– Over the counter medications

– Weight gain and loss drugs

– Fertility and cosmetic/hair growth drugs

– Drugs to relieve cold symptoms

– Some vitamins and minerals

– Barbiturates, and benzodiazepines

– Antidepressants

– Antipsychotics

– Anticonvulsants

– Antiretrovirals

– Immunosuppressants

– Antineoplastics.

Statutory ExclusionsCovered Drugs

Prescription Drug Plans Must:

Assure a broad access to drugsRequire two drugs per Categories & Classes

Must comply with USP model guidelines

Provider Challenges

Drug coverage can differ based on how the drug is prescribed dispensed or administered to the patient

Formulary

Provider Challenges

Inhalation DME supply drugs – solution for inhalation via nebulizer only

Oral Anti-cancer agents

Diabetic test strips & lancets

Influenza, pneumococcal, Hepatitis B vaccines

Exceptions & Appeals Process

• Plans must have a drug transition process in place to assure a seamless transition for patients– A 90 day period may be needed for patients taking non formulary drugs

– For rapid transitions, beneficiaries may need to use a plan’s exceptions & appeals process

– Establish an adequate exceptions process to help LTC residents who need non formulary drugs

– Provide a one time temporary or emergency supply to ensure that there is no coverage gap during the exceptions process

Provider Challenges

Medication Therapy Management

Provider Challenges

MTM programs must be designed to assure that covered medications will be used appropriately by targeted beneficiaries. A plan’s MTM services must be developed in cooperation with licensed and practicing pharmacists and physicians.

Optimize therapeutic outcomes

Improve medication use

Reduce risk of adverse events & interactions

Increase patient’s adherence & compliance with regimens

Key Date

May 15, 2006 – The last day that current Medicare eligible beneficiaries can join a drug plan without paying a penalty.

Message Points for Providers

• Patients will ask you for advice

• One plan does not fit all Medicare beneficiaries

• Evaluate Drug Benefit Cost Sharing

• Encourage patients to look into low income subsidies

• Premium Penalty for delay in signing up

• Advise to compare formularies and pharmacy networks

• Know where to tell patients to turn for more information

Where to Turn for More information:

• Highmark– 1-866-465-4030

– www.highmarkblueshield.com

• Medicare– 1-800-MEDICARE

– www.medicare.gov & www.cms.gov

– www.medicare.gov/medicarereform/minitool.asp

• Social Security Administration– 1-800-772-1213

– www.socialsecurity.gov