Fact Sheets

STRONG COMPETITION AND BENEFICIARY CHOICES RESULT IN DRUG COVERAGE WITH LOWER COSTS THAN PREDICTED LAST YEAR

About 38 million people with Medicare, 90 percent of all beneficiaries, are now receiving comprehensive prescription drug coverage through Medicare Part D, employer-sponsored retiree health plans or other creditable coverage.   A surge in enrollment took place in the closing weeks of the enrollment period, with more than 2 million beneficiaries signing up between May 1^st and the May 15^th, 2006 deadline.   The benefit created an enormous challenge and a great opportunity.   The promise is being fulfilled with more than 2 million Part D prescriptions being filled every day.  As a further sign of success, the expected cost of the average monthly plan premiums in 2007 is nearly 40 percent lower than originally estimated.

Achieving Strong Competition and Effective Beneficiary Choices

CMS took a series of steps to promote strong competition and to assist beneficiaries with choosing their coverage to save even more money.

Making Competition Work for Seniors and People with a Disability.   Using a process similar to the Office of Personnel Management oversight of the Federal Employees Health Benefit Program, CMS established a predictable process for plans to submit competitive bids and to negotiate the details of their benefit packages.   In addition, CMS held numerous conferences and industry training forums to assist its partners in using the bid submission process.  CMS has also enforced the plan requirements with compliance actions and sanctions where necessary, including over 650 warning letters, corrective action plans, and other enforcement actions.  For 2007, CMS required plans to justify their benefit options based on coverage designs that were meaningfully different and that were clearly preferred by many beneficiaries in 2006. Generally, plans were allowed to offer only three options, including one option that provided coverage in the “donut hole.” 

Improved Options to Help Choose a Plan.  As a part of our continuing effort to refine the Medicare Prescription Drug Plan Finder on www.medicare.gov, enhancements will be made in late August and in October of 2006 that will improve navigation and usability of the tool as well as provide users with clearer monthly prescription drug plan cost share information. The enhancements include: 

 

• Total Monthly Cost Estimator functionality will provide a graph of the month-by-month cost share for a selected plan. In this way, users will be able to view how their cost share may change on a monthly basis as reflected by the coverage levels of the drug benefit.

• This information will reflect the beneficiary’s low income subsidy status as well as their drug list and pharmacy selection.
• Decrease in the number of steps leading to plan comparisons and results.
• Changes in the layout and design of the tool based on usability testing.

In addition, the Medicare Personal Plan Finder (MPPF), which assists beneficiaries in selecting a Medicare Advantage plan, will be redesigned. Based on a lessons-learned approach, CMS has been able to incorporate many attributes of the Medicare Prescription Drug Plan Finder into the redesign of the MPPF.  This includes the ability to personalize searches, greater integration with the Medicare Prescription Drug Plan Finder to access prescription drug plan information, and changes to the layout and design to improve usability. 

Many Ways to Enroll.   In the past year, CMS established flexible enrollment options for beneficiaries who chose to enroll in a Medicare prescription drug plan. Specifically, CMS now allows plans to accept enrollment requests over the telephone or through their Internet Web sites, in addition to paper enrollment forms. CMS has also offered beneficiaries the opportunity to submit enrollment requests via 1-800-MEDICARE and through the Medicare.gov Web site, which CMS then forwards to the plan for processing.  Over 3.8 million enrollments have been received via www.Medicare.gov since November 15, 2005. CMS will continue to support all of these enrollment approaches in 2007

Protecting Beneficiaries.  CMS also streamlined the exceptions and appeals process that allows Medicare beneficiaries access to medically necessary drugs, by requiring timely processing and tracking any failures to perform. CMS implemented strict requirements for processing enrollment and copay data in a timely manner for beneficiaries eligible for the low-income subsidy, and for providing pharmacies with information to enable them to bill the beneficiary’s plan properly even if the beneficiary does not have a plan benefit card.

Finding and Fixing Problems.   Nationally, during the month of June 2006, CMS received about 2.3 complaints per 1,000 Medicare beneficiaries enrolled in prescription drug plans. Complaint rates averaged about 2.6 per 1,000 beneficiaries for stand-alone prescription drug plans and abut 1.4 per 1,000 beneficiaries for Medicare Advantage drug plans. To ensure that complaint rates continue to remain very low, CMS is using the data to address plans’ weaknesses, to continue to find and fix problems, and to drive for excellence in the services being provided to enrollees.

Better Benefits

• Almost 90 percent of beneficiaries have enrolled in coverage other than the standard benefit.  Most beneficiaries have chosen zero-deductible plans that help with drug costs starting with the first prescription, and most have chosen plans that have fixed predictable co-payments for most prescriptions.  Almost all beneficiaries had the option of getting coverage that at least partially filled in the coverage gap, or “donut hole,” and one in six beneficiaries opted for this more comprehensive coverage.
• In July, a Kaiser Family Foundation survey showed that millions of seniors and people with disabilities are satisfied with their coverage (over 80 percent), and would choose to stay in their plan by a margin of more than 7 to 1. 

Much Lower Costs

• Because strong competition is continuing in 2007, the Medicare drug benefit costs are coming down further.  The “bids” by the prescription drug plans are 10 percent lower, on average, in 2007 than 2006.
• The average premium in 2006 for the basic Medicare drug benefit is about $24.  Last year, premiums were estimated to be about $37 per month on average – a difference of 35 percent. Because of Part D, seniors are saving an average of over $1,100 a year.
• The lower premium is the result of much slower-than-expected prescription drug cost growth in 2004 and 2005, strong competition among Medicare drug plans and beneficiaries’ tendency to choose low-cost plans. More than 75 percent of beneficiaries chose plans that cost less than the average, and most choosing higher-cost plans did so because of extra benefits offered.
• Average Medicare Part D premiums are projected to increase by only 0.1 percent in 2007, based on current enrollment.  These premiums are 40 percent lower than the roughly $40 premium predicted last year for 2007.  For specific Part D plans, some premiums will be higher than in 2006 and others will be lower.  The vast majority of beneficiaries will have access to both stand-alone and Medicare Advantage prescription drug plans that cost less than their current plan.  If beneficiaries choose lower-cost plans again in 2007, like most did in 2006, average premiums paid by beneficiaries will decline compared to 2006.
• Because the cost of drug coverage is lower in 2007 than had been predicted, the projected costs of Medicare Part D are likely to decline again.

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