The Medicare Drug Benefit: C A L I FOR N I A H EALTH C ARE Options for Low-Income Californians in 2008 F OU NDATION Overview based on their specific drug needs — as well as At the end of 2007, approximately 500,000 factors not reflected here, such as the location of low-income Californians participating in the pharmacies that accept the plan — before deciding Medicare Part D drug benefit were re-assigned what is best for them. fact sheet to a different plan by the Center for Medicare & Medicaid Services (CMS). The reassignment was Part D Benefits for Low-Income done without regard to the drugs a beneficiary was Beneficiaries using or differences in drug coverage among these Of the 4.4 million Medicare beneficiaries in plans, including whether their prescriptions would California, approximately 1.1 million qualify for continue to be covered under the new plan. This a full or partial subsidy for their prescription drug change has important implications for low-income coverage.1 Known as the low-income subsidy, Medicare beneficiaries in California, as there are or LIS, it is available to two groups: Those who often sizeable and important differences among qualify for both Medicare and Medicaid, a the nine prescription drug plans to which these population referred to as dual eligibles, and certain beneficiaries were reassigned. other low-income beneficiaries earning less than 150 percent of the federal poverty level ($15,315 While the opportunity for higher income Medicare for an individual), provided they do not have assets beneficiaries to enroll in a Medicare Part D above specified levels (Table 1). prescription drug plan or switch plans for 2008 ended on December 31, 2007, beneficiaries who These subsidized premiums are for beneficiaries are eligible for the full low-income subsidy can who enroll in a basic prescription drug plan, or change plans throughout the calendar year. These “PDP,” that charges no more than $1 above the beneficiaries should carefully examine their options benchmark level for their region.2 All low-income and consider whether to enroll in a different plan beneficiaries, regardless of the amount of subsidy Table 1. Low-Income Beneficiary Tiered Subsidy Levels, 2008 I n c om e a n d Ass e ts C r it e r i a P r e mi u m D e d u c tibl e d r u g Co - p ay s Co v e r a g e G a p Income up to 100% of the federal poverty level None None $1.05 generic / None (FPL) and a dual eligible $3.10 brand; none after $5,726.25 Those eligible for Medicare Savings Programs None None $2.25 generic / None and individuals with incomes; up to 135% FPL $5.60 brand; and assets of less than $7,790 (individual) or none after $5,726.25 $12,440 (couple) Income from 135 to 150% FPL and assets of Sliding scale $56 15% of cost; None less than $11,990 (individual) or $23,970 (couple) from 25% to 75% $2.25 generic / $5.60 of premium brand after $5,726.25 Over 150 percent FPL Varies by PDP $275 25% of cost; Yes (between $2,510 M arch 5% after $5,726.25 and $5,726.25) 2008 they receive through the LIS program, are required to pay different company sponsors, and 100,000 beneficiaries the full price for any drug not covered by their plan. were re-assigned into a plans offered by the same company sponsor.4 Assignment into Medicare Part D Plans Prior to the implementation of Medicare Part D, CMS does not automatically re-assign beneficiaries who dual-eligible beneficiaries received coverage for are eligible for the partial low-income subsidy. It also prescription drugs through Medicaid. Benefit policies does not re-assign full-subsidy beneficiaries who actively varied by state, so dual eligibles had better coverage switched from their assigned plan to another PDP, even in some states than others. Low-income Medicare if that plan is no longer eligible for the full premium beneficiaries who did not qualify for Medicaid could subsidy because its premiums have risen above the either purchase private Medigap coverage or enroll in a benchmark limit. Nearly 100,000 Californians eligible for Medicare Advantage (formerly Medicare+Choice) plan the full subsidy are expected to have made such a switch; that included prescription drug coverage, or enroll in instead of re-assigning these beneficiaries, CMS sent them pharmaceutical manufacturer patient assistance programs a letter that explained that their current plan is no longer or state pharmacy assistance programs, where available. eligible for the full premium subsidy. Should they want to avoid paying a share of the monthly premium, they must In January 2006, dual-eligible beneficiaries were required switch into one of the nine plans in California that have to switch to Medicare Part D to continue receiving drug qualified for the full subsidy in 2008. benefits. To prevent disruptions in coverage and to ensure all dual eligibles were enrolled in a Medicare drug plan, Variation in Coverage among Drug Plans CMS automatically assigned these beneficiaries into Formulary and Cost Controls qualifying PDPs. Today, CMS continues to automatically To better frame the choices available to California assign Medi-Cal beneficiaries when they become Medicare beneficiaries eligible for the full premium eligible for the Medicare program. However, these subsidy, this analysis examines differences among the nine new enrollments are done on a random basis, and the qualified PDPs, known formally as “Auto-Enrollment assignment process does not take into account a particular PDPs.” It also compares these nine plans with the beneficiary’s drug needs or the differences in coverage 47 PDPs that do not qualify for the full premium among the nine qualified plans whose premiums fall subsidy.5 For this analysis, the number of drugs covered below the LIS benchmark. in a given Part D plan is compiled by counting brand name drugs and their generic equivalents separately. For Among beneficiaries already enrolled in Part D, CMS example, Zocor and its generic simvastatin are counted as automatically re-assigns individuals eligible for the full two separate drugs. Drug form and dosage are not taken low-income subsidy into new plans in two situations: they into account in the aggregate drug counts reported here. are enrolled in a plan that left the Medicare program, or they are enrolled in a plan that raised premiums more The nine Auto-Enrollment PDPs cover fewer drugs, on than $1 above the low-income benchmark. Re-assignment average, than the plans that do not qualify (Figure 1). is conducted by CMS to ensure that these beneficiaries Auto-Enrollment PDPs cover 1,641 drugs compared to do not have to pay a premium. At the end of 2007, 1,930 drugs for all other Part D plans. This difference is CMS re-assigned over 500,000 Californians into new primarily due to variations in coverage for brand name PDPs for calendar year 2008.3 Approximately 400,000 of drugs: Auto-Enrollment PDPs cover 29 percent fewer these beneficiaries were re-assigned into plans offered by brand name drugs, on average, than other PDPs. 2  |  California HealthCare Foundation Figure 1. umber of Covered Drugs in California’s N Enrollment plan that covers the highest number of Auto-Enrollment Plans Compared with Plans Ineligible for Auto Enrollment, 2008 brand-name drugs (1,285) provides more than twice as many as the plan that covers the least (541). Plans also apply different cost controls, such as prior authorization Brands Generics (required for 10 to 21 percent of covered drugs) and 1,930 quantity limits (placed on 2 to 22 percent of covered drugs). Plans that cover above-average number of drugs 1,641 tend to impose a greater number of quantity limits than 1,105 those plans with a smaller number of covered drugs. Step 858 therapy — requiring the use of a generic before a brand- name medication is prescribed — is applied to a very small percentage of covered drugs across plans. 782 825 Coverage of 100 Most Commonly Used Drugs This analysis also found important similarities and Auto-Enrollment All Other differences among the nine Auto-Enrollment PDPs PDPs PDPs in their coverage for 100 drugs most commonly used Note: Numbers may not sum to total figure due to rounding. by dual-eligible beneficiaries. Since there is no recent, Source: Avalere Health analysis of Medicare Part D plan features. Data from November 2007. publicly available list of these drugs from CMS, the results presented here are based on a list of the most Among the nine Auto-Enrollment PDPs, there is also commonly prescribed drugs to dual-eligible beneficiaries substantial variation in prescription drug coverage generated in 2006 by the Office of the Inspector (Table 2). The number of covered drugs ranges from General (OIG) from data collected in 2005 (prior to the 1,121 to 2,153. The differences are greater for brand- implementation of Part D), and 2006 Medicare plan name drugs than generic drugs. For example, the Auto finder data.6 Table 2. Formulary Comparison of PDPs Eligible for Auto Enrollment, Coverage of Commonly Prescribed Drugs, 2008 Number of Drugs on Formulary pe r centa g e o f D r u g s w i t h … P l an N a m e t o ta l B r and s g ene r i c s P r i o r A u t h o r i z at i o n qty Limits Step T h e r ap y Advantage Star Plan 1,370 748 622 20% 2% 1% Blue Cross Medicare Rx Value 1,829 914 915 11% 15% 0% Bravo Rx 1,611 810 801 10% 14% ~ 0% First Health Part D Premier 1,592 853 739 18% 22% 2% Health Net Orange Option 1 2,153 1,285 868 21% 15% ~ 0% HealthSpring PDP 1,455 771 684 12% 9% ~ 0% MedicareRx Rewards Standard 1,816 901 915 11% 14% 0% MedicareRx Rewards Value 1,818 903 915 11% 14% 0% WellCare Classic 1,121 541 580 13% 4% ~ 0% Average 1,641 858 782 14% 13% ~ 0% Source: Avalere Health analysis of Medicare Part D plan features. Data from November 2007. The Medicare Drug Benefit: Options for Low-Income Californians in 2008  |  3 On average, the nine Auto-Enrollment PDPs cover 96 Conclusion of the top 100 most commonly used drugs prescribed to There are important differences among the nine Medicare dual-eligible beneficiaries on their formulary (Table 3).7 prescription drug plans that are eligible for both the Among these PDPs, coverage ranges from 89 to 99 auto enrollment of dual eligibles and the full premium percent. The application of cost control mechanisms subsidy for low-income beneficiaries. Identifying the most also varies. For example, one Auto-Enrollment PDP appropriate plan for dual eligibles and other low-income does not require prior authorization on any of the most beneficiaries is difficult, since the generosity of the prescribed drugs to dual eligibles, while another requires formularies varies according to which measure is used. prior authorization on 11 percent of covered drugs. However, a few plans stand out. Blue Cross Medicare Rx There is also substantial variation in the percentage of Value and two MedicareRx Rewards plans (Standard and drugs that require quantity limits (1 to 44 percent). Value) cover more brand and generic drugs than average, Auto-Enrollment PDPs impose quantity limits with and use prior authorization on a smaller-than-average greater frequency among the 100 most commonly share of drugs. By contrast, Advantage Star Plan and First prescribed drugs than overall (28 percent and 13 percent, Health Part D Premier cover fewer brand and generic on average, respectively). Very few drugs require step drugs while using prior authorization on a greater-than- therapy, although it is more common among this group average number of drugs. Nevertheless, before choosing of medications than overall. whether to switch plans, beneficiaries should consider their specific circumstances and needs, such as which Table 3. overage of 100 Commonly Used Drugs, C drugs they are taking and any characteristics of drug by Dual Eligibles, 2008* plans that are important to them but not reflected in this Number pe r centa g e analysis. on Prior qty s tep P l an N a m e formulary a u t h o r i z at i o n limits t h e r ap y Advantage Star Plan 97 4% 1% 6% Blue Cross 99 2% 32% 0% Medicare Rx Value Bravo Rx 92 7% 34% 2% First Health Part D 98 11% 44% 5% Premier Health Net Orange 96 4% 41% 0% Option 1 HealthSpring PDP 95 0% 29% 1% MedicareRx 97 1% 30% 0% Rewards Standard MedicareRx 98 1% 31% 0% Rewards Value WellCare Classic 89 5% 10% 2% Average 96 4% 28% 2% *Commonly used drug list is based on a list generated by the Office of the Inspector General in 2006 based on 2005 data and data pulled from Medicare Plan Finder Web site in 2006. Source: Avalere Health analysis of Medicare Part D plan features. Data from November 2007. 4  |  California HealthCare Foundation Authors 6. The list of the top 200 drugs can be found at www.oig.hhs.gov/oei/reports/oei-05-06-00090.pdf. Andrea Kastin Noda, Matthew Livingood, and Jonathan Blum Approximately a dozen brand name drugs on the Office of Avalere Health, LLC of the Inspector General list had generic counterparts enter the market between January 1, 2006 and the publi- About the F o u n d at i o n cation of Part D plan formularies in November 2007. Given the rapid adoption of new generics onto Part D The California HealthCare Foundation, based in Oakland, plan formularies, the analysis replaced brand name drugs is an independent philanthropy committed to improving whose patent had expired on the list of commonly used California’s health care delivery and financing systems. drugs with their generic counterparts. The revised list Formed in 1996, our goal is to ensure that all Californians does not, however, incorporate brand name drugs intro- have access to affordable, quality health care. For more duced after the commonly used drug list was generated information about the foundation, visit us online at because there is no publicly available utilization data www.chcf.org. to determine their use among the dual eligible popula- tion. Because of inevitable differences between the most commonly used 100 drugs in 2006 and 2008, what is Endnotes most pertinent for this analysis is the relative coverage 1. Centers for Medicare and Medicaid Services, LIS Eligible among plans rather than the absolute numbers. Medicare Beneficiaries with Medicare Prescription Drug 7. When excluding generic versions of the commonly Coverage by State, January 2008. prescribed drugs that were introduced between 2006 and 2. Regional low-income subsidy benchmarks are based on the 2008, plan coverage ranges from 78 to 96 percent of average Prescription Drug Plans and Medicare Advantage these top 100 drugs. Prescription Drug plan premiums, weighted by plan enrollment. Centers for Medicare and Medicaid Services, Release of the 2008 Part D National Average Monthly Bid Amount, the Medicare Part D Base Beneficiary Premium, the Part D Regional Low-Income Premium Subsidy Amounts, and the Medicare Advantage Regional Benchmark, August 2007. For California, the 2008 benchmark is set at $19.80 per month 3. Centers for Medicare and Medicaid Services, Year 2007 Re-Assignment Data-Premium Increase, November 2007. 4. Ibid. 5. The authors used DataFrame ®, a proprietary database of Medicare Part D plan features. The Medicare Drug Benefit: Options for Low-Income Californians in 2008  |  5