Jack Hoadley

Medicare’s Part D Drug Benefit At 10 Years: Firmly Established But Still Evolving

Despite initial controversy and uncertainties, Medicare Part D now provides drug coverage to thirty-nine million beneficiaries through dozens of private plans in each region. Although firmly established, the program faces challenges, including projected spending growth. Enrollees also face challenges as plans adopt new strategies to control costs.

Performance Ratings and Plan Selection by Medicare Beneficiaries

MUCH OF THE US HEALTH SYSTEM ALLOWS CONsumers to select among various competing plans. This approach is used in some employerbased health insurance arrangements, in some state Medicaid programs, and in Medicare. In addition, the insurance exchanges that will begin operation in 2014 under the Affordable Care Act will be based on a similar marketplace arrangement. In Medicare, most beneficiaries have the option of enrolling in the Medicare Advantage program, which offers them a choice among multiple private health plans that contract with the government to furnish enrollees with their Medicare benefits. Beneficiaries who elect the traditional fee-for-service Medicare program must also select from competing drug plans if they wish to participate in the Part D drug benefit. In making plan choices, consumers may consider differences in out-of-pocket costs, variations in the benefits offered, and the networks of available clinicians and health care entities. In addition, most programs include some type of rating system that offers consumers some insight into the performance and quality of the competing choices. Like product ratings that are popular among some consumers shopping for cars, computers, or refrigerators, health plan ratings offer consumers one point of comparison. Performance ratings may serve several purposes. First, the use of published ratings may play a role in encouraging consumers to select high-quality plans. This occurs if consumers are aware of and understand the ratings and use them as part of a plan selection process. Second, ratings can be used by program managers to encourage quality improvement. This may be accomplished if managers focus attention on low-performing plans for remedial measures or even exclusion from the program. Quality improvement efforts also may take the form of pay-for-performance systems in which higher payments are provided to highly rated plans. Third, ratings may offer plans an incentive for internal improvement. The potential for a market response and program rewards or penalties may lead plans to understand the sources of good or poor results and to address shortcomings. There is some evidence to support Medicare’s use of ratings in all of these areas. In this issue of JAMA, the article by Reid et al provides suggestive evidence that both firsttime enrollees in Medicare Advantage and those switching plans were more likely to select higher-rated plans. For the more than 900 000 first-time enrollees in Medicare Advantage, higher star ratings for plans were associated with a higher likelihood of enrolling in those plans by 9.5 percentage points for a 1-star increase. Similarly, for the more than 300 000 enrollees who were switching plans, higher star ratings also were associated with a higher likelihood of enrollment, by 4.4 percentage points for a 1-star increase. Second, in 2012, Medicare began to make bonus payments based on quality ratings to Medicare Advantage plans. Total bonus payments in 2012 are projected as about

Medicare Part D turns four: trends in plan design, enrollment, and the impact of the program on beneficiaries.

3.1 billion or about 3% of total payments to plans. In addition, plans with poor ratings over several years could be excluded from participation in the program. Third, anecdotal evidence suggests that some plans have focused on the ratings as part of internal quality-improvement strategies. Although all uses of performance ratings are important, understanding the consumer perspective is especially critical. One reason for establishing a system whereby a choice of plans is available is to harness competition as a means of controlling costs and encouraging high quality. If consumers choose plans without careful consideration of costs and quality, an important incentive for plans to manage their costs and quality is diminished. Similarly, a reluctance of consumers to reconsider their choices on a regular basis lessens the impact of competition. If plans can rely on current enrollees to ignore large premium increases or lower performance ratings, they may take fewer steps to prevent these negative changes. Considerable evidence from the Medicare Part D program shows that Medicare beneficiaries often neglect to optimize their selections when they first enroll. Some analysts point to factors such as the large number of choices and the complexity of researching and making a selection as potential explanations for nonoptimal selections. But in some cases, consumers may select a plan that is perceived

Popular Medicaid Programs Do Battle With State Budget Pressures: Perspectives From Twelve States

PURPOSE As Medicare Part D enters its fifth year, we assess how the supply side of the market has evolved and what research has shown about how Medicare drug coverage has affected consumers. METHODS We conduct descriptive data analyses to explore the varied nature of Medicare standalone prescription drug plans (in terms of both price and non-price features), examine features associated with high enrollment, and show trends over time in both plan design and enrollment patterns from 2006 to 2010. We also review existing evidence about Part Ds effects on drug access for beneficiaries and conclude with a discussion of current policy concerns. FINDINGS Medicare Part D has been successful in certain ways, but several areas of concern remain. Although it is a measure of success that 90% of Medicare beneficiaries now have drug coverage, efforts continue to reach the vulnerable populations who are not yet signed up. Use of medications (and relative use of generics) has increased under the program, while out of pocket costs have fallen. Policymakers continue to question governments role in areas such as negotiating prices directly with pharmaceutical manufacturers and limiting the number of plans offered. Results from data analysis indicate, among other things, high growth in premiums, whereas plans have become less generous by certain measures. ORIGINALITY This chapter brings together data on all plans offered in Medicare Part D standalone drug coverage market and shows new evidence on the landscapes rapid evolution.