Medicare Part D Oversight

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Policy Brief: Oversight of Medicare Part D Plans
Fact Sheet: The Problems with Medicare Part D

Policy Brief
Oversight of Medicare Part D Plans
- Downloadable Format -

With the advent of Medicare Part D on January 1, 2006, Congress and the Bush Administration created a new structure to administer outpatient drug benefits for those on Medicare who decide to enroll. As a result of prohibiting the government from negotiating for the best drug prices on behalf of the 43 million eligible people on Medicare, the Medicare Part D program was placed in the hands of private health insurers.

This short policy brief describes the oversight of these newly-created private prescription drug plans, which are charged with covering needed medications for seniors and people with disabilities. Among the findings:

The federal government has placed few resources in overseeing these new drug plans.
The federal government is not providing data to the public on complaints about these drug plans
Five of these plans are operating but not licensed in California; two are not licensed anywhere.

California has the opportunity to lead the way in filling one of the major gaps in the Medicare Part D program, most notably the lack of oversight over these prescription drug plans.

The New Private Prescription Drug Plans in Part D: Insurers, not the Medicare program, negotiate with drug companies, and each plan establishes its own lists of approved drugs, individual premiums, co-insurance, deductibles, coverage, customer service, and appeals processes. Also, some prescription drug plans operate as part of an established managed care business in California and some, called “stand-alone” plans, are offering an entirely separate prescription drug package.

The Problems Raised With These Private Plans: This has led to a bewildering array of plans from which beneficiaries had to choose by prescribed deadlines, with penalties for late enrollment. In addition, the clumsy conversion of each state’s Medicaid population (Medi-Cal in California) to Medicare Part D resulted in delays in getting drugs, higher beneficiary costs, and worse health outcomes for this very vulnerable population. The problems in the last year arose due to the confusion created by the complexity of the new program; computer problems that affected beneficiary eligibility and out-of-pocket costs; and the fact private prescription drug plans were ill-equipped to handle calls and questions and resolve problems. In addition, beneficiaries are now falling into the so-called Donut Hole—the gap in coverage where plans pay nothing but beneficiaries must continue to pay their prescription drug plan premium. This occurs after drug costs reach $2250 and continues until they reach $5100 when the private plan again begins to pay a percentage.

Minimal Federal Oversight: CMS will shortly announce the benefit packages for the plans that will remain in the program; reveal which plans will leave the program; and disclose the specifics of any new plans that will be offering benefit packages for the first time. Consumer and health advocates have been left to fill the information gap, assisting beneficiaries and caregivers in making informed decisions about choosing a Part D Plan.

CMS acknowledges there are great differences among plans, but has provided little information about those differences. In addition, CMS has undertaken minimal visible oversight of the plans at a time when the differences in plan performance could strongly influence plan selection.

Spotty State Oversight: States are authorized to license these new prescription drug plans. In 2005, California enacted AB1359(Chan), which attempted to make clear California’s ability to license these plans, as the state licenses other health insurers. However, the Medicare Part D law attempts to limit state oversight, and gives the federal government broad authority to pre-empt it.

Findings: In reviewing the oversight of these private prescription drug plans, Health Access has learned:

THERE IS LITTLE FEDERAL ATTENTION OR OVERSIGHT ON DRUG PLANS

CMS has insufficient resources devoted to plans being regulated at the federal level. There are only two employees at CMS responsible for overseeing PDPs. In addition, they must review quarterly financial submissions by all PDPs under contract to CMS as well as presumably undertake a more thorough review of plans not licensed in any state.

CMS says that their data shows complaints about PDPs run at the rate of two complaints per 1000 enrollees, but there are considerable variations among plans.

CMS is not making public at this time any data regarding beneficiary complaints about individual plans, nor is it undertaking administrative sanctions or penalties. Even though CMS has data to suggest that consumers are experiencing greater troubles with some plans more than others, that is not being shared with the public—which soon has to make decisions about which plan to join in the next few months.

SOME DRUG PLANS ARE LEFT WITHOUT ANY STATE OVERSIGHT

There are five Prescription Drug Plans (PDPs) who are doing business in California who have applied for federal waiver of state oversight under the Medicare Part D program. This means there are five plans operating without a state license in California. Their consumer and business practices are not being overseen by either The California Department of Managed Health Care (DMHC) or The California Department of Insurance (DOI).

Two of the PDPs are not licensed in California and are not licensed in any state. CMS stated that some plans have “no domestic license,” but implied some do business outside of the U.S.

The five plans who have applied for the federal waiver of California licensing requirements are only loosely overseen by CMS in the interim. Those plans have until January 1, 2008 to submit proof to CMS of things such as financial solvency. During this time when CMS is monitoring the PDPs, it is possible for a plan to withdraw its state application for licensure, and then resubmit its application when circumstances are more favorable for its approval.

Significant numbers of Californians are enrolled in stand-alone drug plans that are not being overseen by state regulatory agencies:

MEDICARE STAND-ALONE DRUG PLANS IN CA

Drug Plans Doing Business But Not Licensed in CA	Licensed in Other Jurisdictions	CA Enrollment as of 4/27/06*	National Enrollment as of 4/27/06*
RX America	No Domestic License	14,100 (est.)¹	214,400
Member Health	No Domestic License	25,300	924,100
SilverScript	TN	6,600 (est.)¹	413,200
Wellcare	AZ, DE, DC, FL, HI, ME, MA, MS, NV, NY, ND, OK, PA, SC, SD, TX, UT, VT	136,100	849,700
Medco Health Solutions	FL, NJ	143,400 (est.)¹	410,400

*Latest enrollment figures available
¹No California figures available on CMS website. Estimated figures obtained by subtracting other states’ enrollment from national enrollment data
Source: www.CMS.HHS.gov, confirmed by telephone with CMS, Baltimore

Recommendations: Given the minimal oversight of these new private Part D prescription drug plans at the federal level, it is crucial for California draw on its knowledge and experience with plans and insurers and to exercise its regulatory authority where appropriate.

* As a Regulator: The Department of Managed Health Care has clear regulatory authority over managed health care plans in California. The beneficiary concerns under Medicare Part D coincide with typical concerns for health plans in general. Even where federal vs. state regulatory responsibility is not entirely clear, DMHC has the established relationships with health plans and the expert knowledge to intervene on behalf of consumers on these same issues. California should not relinquish our role in California to help safeguard consumer rights, particularly in light of lack of aggressive oversight at the federal level.

Two significant measures have been passed by the California legislature to assist consumers. At the time of release of this policy brief, both bills are awaiting Governor Schwarzenegger’s signature. In both bills, California policymakers have shown interest in creatively using the state’s authority to provide some oversight to protect beneficiaries.

* As a Purchaser & Provider: AB2667(Baca) would allow California to use its ability as a purchaser of services in other lines of business (such as CALPERS, Medi-Cal, etc.) to penalize those companies with bad records.

* As a Public Evaluator: AB2170(Chan) would add prescription drug plans to the state’s HMO report card, collecting information and publishing helpful data about the plans’ quality, services, and access to care.

This brief is done in coordination with Health Access Foundation, the statewide health care consumer advocacy coalition, and the California Alliance for Retired Americans, the Congress of California Seniors, the Gray Panthers, and the Older Women’s League of California.. It was prepared by Elizabeth Abbott, Project Director, Health Access Foundation, who previously served as Regional Administrator for the Centers for Medicare and Medicaid Services, in the San Francisco regional office.

For more information, contact Elizabeth Abbott, Project Director, Health Access Foundation, 1127 11th Street, Suite 234, Sacramento, CA 95814. 916-497-0923, eabbott@health-access.org.

FACT SHEET
The Problems with the Private “Part D” Prescription Drug Plan
-Downloadable Format-

The Need: Prescription drug prices are skyrocketing, and the biggest impact is on seniors and people with disabilities, who often take multiple medications.

For over 40 years, Medicare has provided health coverage for over four million California seniors and people with disabilities, a lifeline for those with significant health needs, and who otherwise would not get care. However, until this year, Medicare did not provide outpatient prescription drug coverage, leaving many to either bear this cost or skip needed medicines.
The Law: While many senior, health, and consumer advocates urged the federal government to simply expand Medicare to include prescription drugs, the Medicare Modernization Act of 2003 (MMA) took a different direction. The new program, Part D, provides drug coverage through private prescription drug plans, rather than the traditional Medicare program. Insurers and the drug companies successfully lobbied the bill. A fatal flaw was to prohibit the federal government from directly negotiating with drug companies to get the best prices.

As a result, Part D is not comprehensive and complex, confusing, and costly, both to consumers and the community. While some seniors and people with disabilities will benefit, others will find that they are worse off.

Part D is Costly and Not Comprehensive, partially because the federal government is prohibited from using the purchasing power of all 44 million in Medicare to negotiate for the best possible price from the drug companies. Such negotiations are left to the private prescription drug plans, which have only have a fraction of the bargaining power.

Most seniors and people with disabilities will have significant costs, including monthly premiums (around $30) a deductible (around $250), and other high out-of-pocket costs. Under the program, only 75% of expenses are covered up to $2250; then there is no coverage until costs reach $5100—a huge “donut hole” gap in coverage --when the plan begins to pay 95% of costs.
The prescription drug plans often have restricted formularies, so certain drugs are not covered.
In fact, many seniors and people with disabilities are worse off. They include:

Nearly one million low-income seniors and people with disabilities, “dual-eligibles” that used to get Medi-Cal drug coverage from the state, but now have more restrictive coverage, with newly-imposed co-payments.
Light users of prescription drugs, which won’t see any coverage until spending several hundred dollars worth of drugs, yet face a penalty for signing up later. There is a 1% surcharge added each month to the premium for those who do not select a plan before May 15, 2006. Consumers who miss the deadline cannot then sign up until November with coverage beginning in January 2007.
Some who had existing coverage through other sources, or who fall through the “donut hole.”

Part D’s Private Plans Are Complex and Confusing

In California alone, there are 47 stand-alone drug plans offered, plus 16 plans available through HMOs, plans with different formularies, pharmacy networks, and cost structures. These range and details of these plans are expected to change every year.
This complexity led to many of the problems with the initial implementation of Part D, including people not getting enrolled and being denied the drugs they need. Some plans did not live up to their contractual obligations. In turn, this led California and other states to extend emergency coverage.

Part D Lacks Consumer Protections and Community Oversight

The program is run by private drug plans with only loose oversight by the federal agency, the Centers for Medicare and Medicaid Services, and restricts the ability of states to provide consumer protections. There is no government-run Medicare plan which beneficiaries can select. There is no guarantee that plans will remain in the program and provide consistent coverage for beneficiaries.
There are limited unbiased resources to provide consumer advice to navigate this complex program—and they are overwhelmed. Callers to the private drug plans suffer long waits, receive some incomplete and inaccurate information and receive little help if they speak no English.