Prepare for Part D

August 1, 2005

There also needs to be sufficient access and guidance so the beneficiary can make informed and knowledgeable choices.

You have likely heard significant buzz about the forthcoming Medicare Part D Prescription drug benefit. Navigating the hundreds of pages of legislation associated with Part D can be a daunting task, and this comprehensive new program spawned by political motivations has a potential nest of problems.

It poses great responsibility on each Medicare Advantage Part D (MA-PD) and Part D Prescription Drug Plan (PDP) to effect this significant transition in a seamless and timely manner. A significant increase in the number of physician visits and some footwork by the Part D plan to position retail and mail order pharmacies to address needs are essential. Being proactive is the key to avoid being swept away by the complexity and enormity of this transitory phase in healthcare.

Amid the anticipation of this Medicare prescription drug benefit are several significant challenges that will require timely response before this becomes effective on January 1, 2006. If organizations do not design effective implementation strategies now, this benefit could engender a significant backlash. No one wants to see a return of the negative publicity that resulted from stringent gatekeeping and denial-based care.

Under Part D, the beneficiary will pay approximately $37 per month in premiums plus a $250 deductible, so the patient has paid almost $700 out of pocket just to enter the game. The beneficiary is responsible for another $500 of the next $2,000 in spending. In other words, once the first $2,250 is spent, the Medicare beneficiary has paid almost $1,200 of the $2,250, and the government has paid the remainder.

New legislation often provides a safety net aimed at preventing beneficiaries from falling through the cracks. However, with Part D, there are no nets, but instead the donut hole, which many will encounter.

The hole starts at $2,251 of expenditures and ends at $5,100. The entire cost burden falls upon the Medicare beneficiary while they are in the Part D donut hole. Many expect that during 2006, one in four participants will have spending in the donut hole. But for the approximately 5% to 10% of participants who traverse the hole and reach $5,100 of drug spending, the government will then pay for 95% of the cost of drugs. The design of this benefit is critical to understanding why we expect Part D formularies to heavily emphasize generic and cost-efficient brand drugs in an attempt to maximize the beneficiary's bang for their buck.

Stakeholders must prepare now for educating and supporting beneficiaries. They must also prepare for the significant challenges of physician access. The potential exists that Congress will fail to resolve the flawed Sustainable Growth Rate (SGR) formula that guides how Medicare sets the fee schedule conversion factor.

Failure to fix the SGR would otherwise result, by law, in a yearly 4% to 5% decrease in the conversion factor and physician payments from 2006-2012. Thus, at the same time that beneficiaries will visit their physicians to request prescriptions for the Part D plan, and require adjustment of their medication regimens based on formulary design, there could be a physician backlash limiting access.

PROVIDING PAYMENT

It's amazing that Medicare has not seen fit to recognize pharmacists as professionals under Part B who provide essential services to patients with complex medical problems. Many are skeptical that Pay-For-Performance (P4P) by itself will change physician focus from more testing and procedures to keeping patients well through a reward or bonus system.

Most are not convinced that Medicare has the fortitude to use the five-year review process to meaningfully redistribute physician payments from procedural to cognitive services. And, we doubt that Medicare and members of Congress will be able to reject "solutions" cloaked in protectionist rhetoric rather than embrace free-market competition. Few have considered how this reimbursement framework will affect the rollout of this extensive Part D benefit.

The Part D appeals process will be cumbersome and consume significant amounts of time, energy and money. It is one of the most underestimated, shortsighted and aberrant parts of this transition.