Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


Medicare Part D—Fewer Plans, Better Service in 2007?

MARCH 7, 2006 -- What changes lie ahead for the Medicare drug benefit? Judging from comments Tuesday by HHS officials to the private plans that deliver the benefit, the answer is better customer service, a simpler program, and fewer plans.

"The market has very clearly driven the prices down" for Medicare prescription drug plans, HHS Secretary Michael O. Leavitt declared in remarks to a meeting of Medicare private plan executives sponsored by America's Health Insurance Plans (AHIP). "We believe that the market will also simplify this program."

With Democrats hoping to unseat congressional Republicans using complaints that the benefit is too confusing, the administration is fighting back with the argument that market forces will more effectively put the benefit on a smoother track than bureaucrats could.

Medicare administrator Mark McClellan told the gathering that people signing up for the drug benefit overwhelmingly have selected plans other than the standard plan designed by Congress when it passed the Medicare overhaul law (PL 108-173).

Benefits designed by private plans competing for market share, including those with low or no deductibles or that fill in the "doughnut hole" gap in coverage in the standard plan, have been picked by 90 percent of individual beneficiaries signing up for the drug benefit, McClellan said.

McClellan hinted that less popular plans would be dropping out. Responding to a questioner in the audience who asked if there would be fewer Part D standalone drug plans next year, he said "some plans are definitely proving to be more popular than others" for reasons of cost and quality. "We are seeing some consolidation," he added. "I suspect we are going to see some more of that, particularly from plans that haven't generated a large level of enrollment."

Medicare officials may not be leaving it entirely up to market forces to reduce plan offerings, however. A draft "call letter" from the Centers for Medicare and Medicaid Services inviting plans to offer plan bids for 2007 proposed to reduce to two the number of optional drug plans a Part D plan sponsor could offer.

One questioner at the meeting noted pointedly that her company offers three options, each of which has enrollment of more than 10,000 Medicare beneficiaries. McClellan was non-committal about whether more than two options would be permitted, however.

Leavitt, who dubbed the first version of the drug benefit "Medicare Part D 1.0," told the executives that "Part D 2.0" will reflect "the need for simplification and standardization." He said, "I'm looking forward, for example, to the day when we will not need to have separate applications . . . for every plan." How much more than that "simplification" and "standardization" will mean is unclear, however.

Customer Service
Leavitt and McClellan emphasized that plans have improved their operations since the first days of the benefit, which saw numerous complaints that low-income beneficiaries could not get prescriptions filled for vital medications.

Leavitt noted, for example, that all but 9 of the 44 states who temporarily resumed Medicaid coverage to ensure continued access to prescription drugs have now turned it off.

But the officials sprinkled some dissatisfaction among the big dollops of praise they bestowed on plans for their work in implementing the unprecedented expansion of Medicare coverage.

Leavitt said he's still worried about the number of beneficiaries who are being turned away because they do not have a plan number. "And plans need to do a better job of responding to inquiries by beneficiaries and pharmacists," he suggested. "I am also concerned that there are too many people who are getting answering machines during business hours asking them to call back at a different time," he said.

Leavitt and McClellan said Medicare is stepping up its monitoring of plan call center operations and of how swiftly plans enroll beneficiaries who apply. Medicare not only is constructing performance measures of those functions that will be considered in whether to contract with plans, it also will publicly release data comparing how well plans provide customer service, McClellan said.

Leavitt also seemed to say plans should pay pharmacies faster, particularly drugstores in rural areas that may be more vulnerable if payment is slower. Pharmacies are having to learn how to function under a "new business model," he said—one in which margins are lower and volume is greater.

"Customer service is clearly getting better but we may have a ways to go yet," Leavitt summarized.

Medicare Advantage
AHIP's members include not only those who offer standalone Part D plans but also those who participate in the managed care side of Medicare called Medicare Advantage. Plan participation will be "very strong" in that program next year, McClellan said.

Payment rates will be "stable," but the market also see changes—in the form of offerings similar to health savings accounts, he said. Under the Medicare law, Medicare can't offer tax-advantaged health savings accounts of the kind now offered in the private market. But Medicare does have authority to offer medical savings accounts (MSAs), which like HSAs consist of accounts controlled by individuals paired with high-deductible health plans.

McClellan suggested that there's room for Medicare to change features of MSAs that made them unattractive for insurers to offer in Medicare. For example, MSA-related health plans had much higher deductibles than HSAs do.

McClellan strongly encouraged companies that want to offer the new plans to contact Medicare as soon as possible. But another speaker at the conference, House Democrat Henry Waxman of California, appealed on moral grounds to AHIP to steer clear of HSAs. Waxman suggested that as insurers, AHIP members are well aware that HSAs would "fracture" the risk pool that allows older and sicker Americans access to more affordable health coverage.

"You are part of the health care system, and if you care about it, you need to oppose these tax policies," he said. "You have incredible connections with this administration," Waxman noted. "What are you going to do with it?"

Waxman also had a different take on how the Medicare drug benefit is going to play out in coming months. "We're . . . seeing the beginning of what could be very great frustrations" on the part of seniors with plans that hike drug prices and cut coverage of medications enrollees want, he said.

Publication Details