Medicare Compliance & Reimbursement

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.
 
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