The Progress of Medicare Part D: Current Trends and Future Opportunities

With the passage of the Affordable Care Act in 2010, defined mechanisms for optimizing healthcare management and cost savings were set into motion. However, the dominant presence of still-rising expenditures and a substantial financial deficit has prompted further exploration of cost-effective methods, including Medicare reforms.

In today’s featured presentation at the 2012 America’s Health Insurance Plans’ Medicare and Medicaid Conferences, 2 key speakers discussed the progression of Medicare Part D in a program titled “The Medicare Part D Program: The Secrets of Its Success.”

Juliette Cubanski, PhD, associate director for the Program on Medicare Policy at the Kaiser Family Foundation, opened the discussion by mentioning that Medicare enrollment, since 2006, has steadily increased, resulting in an estimated 50.7 million individuals in 2012 (Part D enrollment of 32.7 million beneficiaries), with every state containing at least 2 plans to choose from.

Coupled with the increased availability of health plan choices, Dr Cubanksi noted that the use of utility management tools, such as prior authorizations and step therapy, by health plans has also demonstrated a progressive increase over the years. However, Part D plan availability has shown a decrease since 2007. She continued to discuss the factors that have affected Medicare Part D drug spending trends, such as a slower pipeline for new drugs with increased generic drug utilization since Part D’s inception, leading to a greater generic penetration in Part D of 75% in 2010 compared with 61% in 2007. Other influential factors included slowed growth in retail drug prices, large manufacturer rebates and discounts, and a lower-than-expected Part D enrollment of 70%, rather than the projected 90%.

Multiple plan sponsors and offerings in Medicare Part D, however, have pointed to an active marketplace since 2006. The program has driven new innovations, such as utilization and benefit design tools for appropriate drug use, prompted formulary changes, pushed for pharmacy chain collaborations, and provided beneficial discounts and rebates. However, lower drug spending trends are not exclusive to the Medicare Part D program. There is concentrated enrollment in only a few select plan sponsors, prompting concerns that question the actual level of consumer engagement. Such focused enrollment may be indicative of brand loyalty or the greater issue of a health plan marketplace that is simply too complex, where the burden of comparing plans may be too substantial for enrollees.

Following Dr Cubanski was Steven Lieberman, president of Lieberman Consulting, Inc, who laid out 3 objectives for his portion of the discussion: to assess Medicare Part D’s success, explain why the program works, and discuss if the Part D design could be implemented for acute care settings. Although he believes that the program is “actually quite successful,” he contended there is no “easy” benchmark to assess Medicare Part D’s success, since projected costs by the Congressional Budget Office are merely estimates and extrapolations for a care model environment that doesn’t yet exist.

Mr Lieberman elaborated on the reasons behind the Medicare Part D program’s success, citing competitive bidding with heavy subsidizing and financial risks for plans, strong pricing indicators and signals for enrollees and beneficiaries, low-income subsidies and risk adjustments, a wide availability of consumer information such as plan finders to simplify the selection process, vigorous marketplace competition among plans, a fairly regulated market behavior, and a large, aggregated purchasing power.

Mr Lieberman also discussed challenges that face the integration of a Medicare Part D model in an acute care setting. Unfortunately, an acute care environment limits competitive abilities and bidding with components such as patent monopolies, medications without therapeutic alternatives, or the limited capacity of acute care doctors; thus, there is a concentrated market power of consolidated providers formed by “must have” physicians and institutions that are not conducive to market competition. In addition, Lieberman added that physicians and hospitals may not be interchangeable due to strong patient subjectivity and personal preferences.

Dr Cubanski’s parting thoughts identified the trends to watch and assess to gauge the running progress of Medicare Part D, such as the enrollment growth due to an aging population of baby boomers, annual spending growth rate, generic drug utilization and penetration in available plans, the pipeline for new medications, the growth of specialty drug use, and the results of closing the Part D donut hole.

AHIP 2012 Medicare and Medicaid Conference website

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