Medicare Compliance & Reimbursement

Success of Medicare Part Dis anything but certain. Private prescription drug plans simply won't show up in 2006, and the federal fallback plan is likely the main vehicle through which beneficiaries will get drug-only coverage. That's the feeling expressed by Alliance Capital Senior Vice President Norm Fidel at a recent conference in Washington. Fidel noted that "I still do not find much enthusiasm from [pharmacy benefit managers] or health plans to come out and underwrite" PDPs. The biggest problem: Potential underwriters can't weigh risks because they don't know which beneficiaries -- with what level of health problems and drug utilization -- will sign up for a PDP.

Some policymakers, including administration officials, have said that the robust participation by companies in the Medicare discount cards is good news, providing evidence of a comparable level of interest in PDPs come 2006. Wrong, and wrong, said Robert Laszewski, president of the Health Policy and Strategy Associates, Inc., consultancy. The Medicare-approved discount cards are being offered by entities that already sponsor discount cards -- and wanted the government's "Good Housekeeping seal of approval" for an existing product -- along with Medicare supplemental insurers and MA plan sponsors, who want to be sure they hold onto their customers, Laszewski said. "Policywise, this means nothing for Part D."

The Part D benefit likely will make MA less attractive to beneficiaries, many of whom joined HMOs based on a decision to give up some provider choice in return for drug coverage, said Roberta Goodman, a long-time market analyst who is a principal with Nashville-based consultancy Health Care Analytics. With drug coverage available in FFS Medicare, "at the margins," it will siphon subscribers away from MA, she predicted.

But others said that MA plans will be in a strong position to woo beneficiaries with their far superior drug benefits.

Plans believe "they'll be able to design a drug benefit [that's] much more attractive," perhaps even comparable to current employer-sponsored drug coverage, said Fidel.

MA plans can "internalize all the savings associated with appropriate drug usage," and therefore provide the standard Part D benefit more cheaply, added Urban Institute President Robert Reischauer. With the savings, they'll be allowed to fill the so-called coverage doughnut hole -- the gap between low-dollar and catastrophic coverage -- that's likely to make the standalone benefit unattractive to many beneficiaries.