Medicare Advantage poised to take off

November 1, 2005

Hundreds of private insurers are marketing Medicare Advantage plans and state-wide PPOs with unexpectedly low prices for expanded drug coverage to gain a bigger slice of the radically changing Medicare pie. While the public has been focused on deciphering new prescription drug coverage options through stand-alone prescription drug plans (PDPs), Medicare officials also note an "enormous rise in MA plans with Part D benefits," reports Medicare Senior Advisor Abby Block. More than 5 million seniors now belong to MA plans, and the number is growing monthly.

Hundreds of private insurers are marketing Medicare Advantage plans and state-wide PPOs with unexpectedly low prices for expanded drug coverage to gain a bigger slice of the radically changing Medicare pie. While the public has been focused on deciphering new prescription drug coverage options through stand-alone prescription drug plans (PDPs), Medicare officials also note an "enormous rise in MA plans with Part D benefits," reports Medicare Senior Advisor Abby Block. More than 5 million seniors now belong to MA plans, and the number is growing monthly.

Under the revised MA program, regional PPO products now are available in 37 states, providing managed care options for the first time to seniors in many rural areas. MA plans and local PPOs also have been expanding in many markets. The Centers for Medicare and Medicaid Services (CMS) reported that it approved 143 new MA plans in 2005, giving 73% of Medicare beneficiaries access to coordinated care programs. Coverage options vary among regions and states: seniors in New York and Texas, for example, may sign up for one statewide PPO plan, while Florida has two.

One challenge for MA-PDs is to explain to members that they need to re-enroll in their current plan's MA-PD to retain benefits. If an MA plan member inadvertently signs up for a separate PDP, Medicare will cancel MA membership automatically. Many plans offer MA-only options primarily to accommodate members who receive drug coverage from retiree programs, but plans have to educate members about the new MA-PD option and how it works.

MA-PDs aim to secure current and new members by offering prescription drug coverage at no additional premium. A "significant number" of MA-PDs are promoting zero-premium coverage, notes Leslie Norwalk, deputy administrator of CMS. Beneficiaries in 44 states will be able to select low-cost MA-PD options: Florida, for example, has 23 MA plans providing no-added-cost drug coverage; New York and California have 10; Illinois, eight; Texas, seven; and New Jersey, three.

Even though seniors can find affordable drug coverage outside the MA program, the complexities of PDP coverage makes MA-PD options fairly attractive. Some MA-PDs offer low-deductible options and fill in the much-discussed Part D "donut hole." Most current MA plan members are expected to join their plan's MA-PD, and several million low-income seniors who have received drug benefits through Medicaid will be automatically enrolled in PDPs. The real challenge for PDPs and MA-PDs alike is to sign up some of the 15 million seniors who are too well-off to qualify for subsidies and have been paying for drugs out of pocket.

MANAGING COSTS

To operate viable low-payment programs, plans will utilize multiple strategies to keep drug costs as low as possible. Drug plans are demanding stiff discounts and rebates from drug manufacturers, which have been willing to negotiate to have their products included on formularies. Tier structures, step therapies, prior authorization and therapeutic interchange programs all play a role in formulary management efforts.

CMS has reviewed plan benefits and bids to see that they meet requirements for pharmacy access, that formularies list all medically necessary drugs, and that tiering and utilization management strategies don't discriminate against high-cost patients. Most of the formularies are fairly robust, according to Babette Edgar, director of the CMS formulary review group, many already in use by commercial MCOs and PBMs. But while MA-PDs adjust to the dramatic changes in Medicare managed care for 2006, CMS will start revising its model formulary and mandatory coverage requirements for 2007.

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.