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Medicare Compliance & Reimbursement

Health Plans:

New Rx Cards Shake Up Managed Medicare Market

Published on Thu Apr 29, 2004

Insurers hope to use the cards to drive business for Medicare Advantage products.

Phase I of the Medicare drug benefit begins June 1 as several health plans will start marketing their new prescription drug cards.
 
The Department of Health and Human Services announced its approval of 28 companies -- mostly health plans and pharmacy benefits managers -- to sponsor the new drug discount cards March 25, then added another 12 to the list on April 19. Some of the companies will offer more than one card, so there will be 40 nationwide cards and another 21 offered in specific geographic areas. In addition, another 43 sponsors will offer cards to enrollees in 84 specific Medicare Advantage health plans.

Remember: The drug cards will only be in effect until December 31, 2005, after which time Medicare will begin its new "Part D" drug benefit. That means the drug cards are only temporary, but several plans still thought it worth their while to offer them.

Few if any plans are expecting to make much money from the cards themselves, due in part to HHS requirements mandating that sponsors establish a pharmacy network that meets access standards and also cover a certain amount of drugs in every therapeutic class.

But the cards still have their uses for health plans, and they could help reshape the Medicare market in the following ways:

  • Building brand loyalty for sponsors. The cards could be used as loss leaders to help draw in seniors who may opt for the plans' full Medicare package in the future, explains John Richardson, director of Medicare with The Health Strategies Consultancy in Washington.

    "The plans are using it as a way to build some brand recognition -- brand loyalty, even -- for the Medicare Advantage plans," says Richardson. "They are planning to offer the drug benefit in 2006 and they are trying to build a relationship with people so they can just roll them into the prescription drug plan."

    "This is a way for companies to attract new members, especially if competitors didn't offer a discount card," says John Gorman of Gorman Health Group in Washington.

    Medicare Advantage plans who won HHS approval to sponsor a drug card will be able to market the card not only to their members but to other Medicare beneficiaries -- even those who are enrolled in their competitors' health plans. That means the companies with the cards could use them to snatch up new members, whom they'll hope to hold onto until 2006, when the lucrative Medicare drug benefit kicks in.

    "It's more of a marketing device or a way to reach people who haven't really had a lot of exposure to a prescription drug benefit," Richardson says.
     
  • Gaining experience with an untapped market. Indeed, the cards are a way for plans to introduce themselves to - and learn more about - members who currently lack drug coverage, as these are the people most likely to sign on for the cards, Richardson says.

    "They're definitely looking at this as a way to get data on this population," Richardson agrees.

  • Getting a foot in the Medicare drug-benefit door. Although the cards will expire in eighteen months, working on drug cards is a great way for health plans to get experience administering a prescription benefit to Medicare benes. When the full benefit begins in 2006, plans offering the card are optimistic that they'll have an advantage.

    "I've heard some people comment that by doing it they could get more information that will help them with Part D when Part D comes down the road," says Gary Donner of MMC 20/20 in Atlanta, GA. This will help them by giving them information on how the process works and what the rate of pharmacy utilization is for this population.

    "There's going to be a lot going on in the next couple years, and this is a big step," says Bruce Middlebrooks, spokesman for Blue Cross and Blue Shield of Florida. The plan has already offered drug cards to their members, and it will now offer a Medicare drug card to both members and nonmembers.

    "An awful lot of work had to go into implementing this for a very short period of time, but we first of all thought it was important to do this for our members, and also we feel like we're learning a lot about how CMS is looking at handling the Part D benefit," says Ghita Worcester, vice president of public affairs and development for UCare of Minnesota, which also is offering cards to members and nonmembers. "We'll be better positioned for that by being involved here."

  • No one wants to be left out. Although plans don't expect to make much money off the cards themselves, "I was surprised at how many [plans] are offering the card," Richardson says. That's evidence of the fact that "most of them decided that it would be a competitive disadvantage not to have one."

    Richardson points out that few of the major health plans decided not to get a card. "I think everybody tried to get in, because they saw it as a way to get this brand recognition."

    So why did anyone chose not to offer a card? Those Medicare Advantage plans that decided not offer a card may have done so as a way of "pruning high drug utilizers from their membership and quietly encouraging them to join a competitor's plan," Gorman says. Such a strategy would reduce a plan's overall membership but increase its margins.

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