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Study Finds Beneficiaries Face Wide Variations in Medicare Drug Plans

FEBRUARY 14, 2006 -- Medicare drug plans tend to require higher cost-sharing of beneficiaries than do other commercial offerings. Medicare plans are also more likely to use cost controls such as step therapy, prior authorization, and quantity limits.

These findings and others are part of a new analysis of the 2006 Medicare Part D marketplace by the health care consulting firm Avalere Health LLC.

The report, which examined the nearly 3,000 Medicare drug plans, found wide variation in plan design across the Medicare program. For example, prescription drug plan (PDP) monthly premiums range from $1.87 to $104.89 and there are varying degrees of coverage, ranging from 598 to as many as 3,891 drugs covered, the report found. Some 834 plans offer a zero deductible option.

Plans are competing heavily to cover the dual eligibles—beneficiaries who qualify for both Medicare and Medicaid, but who now receive their drug coverage under Medicare as part of the drug law—with dual eligibles having at least six plan choices in every state.

"Consumers will have a broad range of plans to choose from in 2006," Avalere Medicare expert Valerie Barton said in a news release. "Plans entered this untested marketplace with a variety of strategies and will likely alter their benefit designs and business strategies moving forward. We expect to see marked changes in benefit offerings, including market consolidation, as plans course-correct based on experience and legislative and regulatory changes."

Other highlights of the report include:

  • 51 percent of stand-alone PDPs and 63 percent of Medicare Advantage plans have four or more cost-sharing tiers. By contrast, the report concludes, standard commercial plans average three tiers. Commercial plans also typically cover more drugs than the average Part D plans.
  • Monthly premiums for Medicare Advantage plans are, on average, almost $18 lower than for PDP plans and zero premiums are available in 496 plans across the country.
  • Zero or reduced deductibles are being offered by 66 percent of PDPs and 75 percent of the managed care plans, but few plans offer coverage for the "donut hole," a provision in the drug law (PL 108-173) that requires beneficiaries to pay their own drug expenses between $2,250 and $5,100, after which point catastrophic drug coverage begins.
  • The average PDP formulary covers 1,526 drugs; the average Medicare Advantage plan formulary covers 1,456 drugs.

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