Medicare Compliance & Reimbursement

PHARMACEUTICALS:

Disaster Predicted If 2006 Part D Enrollment Is Low

Too many high-utilizing benes will drive up premiums for everyone.

Premiums for Medicare prescription drug plans could skyrocket in 2007--if many low-utilizing beneficiaries decide against 2006 PDP enrollment, analysts reported at the recent National Medicare Prescription Drug Congress.

If large numbers of beneficiaries pass on PDPs in 2006, the remaining benes will have to pick up a potentially monstrous tab the next year, according to the Kaiser Family Foundation's and Avalere Health's "The Impact of Enrollment in the Medicare Prescription Drug Benefit on Premiums."

"If enrollment is less than expected, average premiums will increase. Premiums could rise [dramatically] if relatively healthy beneficiaries opt out in the flagship year of the drug benefit," according to an Avalere Health release. Worst-Case Scenario: Premiums Nearly Double Currently, the Congressional Budget Office estimates 2007 average Part D premiums will be $37.10. But "the actual [premium] number could be significantly higher if higher-income, low-spending beneficiaries decide not to enroll in 2006," Jonathan Blum, who wrote the report along with Jennifer Bowman and Chiquita White, told MLR.

And if a high percentage of the benes Blum refers to do not enroll next year, the situation could cause a massive boost in 2007 PDP premiums. Relying on CBO estimates and current data on the three subgroups for projection purposes, the report predicted that:

• if 2006 PDP enrollment is limited to the highest spending 20 percent of benes in each of the three groups, the average premium could be as much as 42 percent higher than officials predicted for 2007.

• if 2006 PDP enrollment is limited to the highest spending 40 percent of benes, the average premium could be as much as 34 percent higher in 2007. The authors based these premium increases on lower-than-anticipated enrollment numbers, Blum pointed out--just one factor that could potentially drive a 2007 premium increase. He pointed to other events that could result in higher premiums, regardless of enrollment numbers: Higher drug costs, increases in utilization and administrative costs for private plans than Medicare officials predicted, and competitive dynamics among PDPs could all lead to inflated premiums, he noted. Feds Counting PDP Chickens That Aren't Hatched Of course, the projected premium increases won't come to bear if almost all eligible Medicare benes enroll in 2006 PDPs. Federal officials have come out with some rosy estimates on 2006 PDP participation--and their 2007 premium projection is based on these estimates. The CBO predicted that 80 percent of Medicare benes will enroll in a PDP; the Centers for Medicare and Medicaid Services feels 91 percent of benes will sign up in 2006.

But based on past events, there is ample reason to expect a lot of opt-outs in 2006--especially if the beneficiary has little to no prescription drug needs, the report maintained.

The authors cited [...]
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