Premiums and Cost Sharing Features of Medicare's New Prescription Drug Program
premierbenbrief.pdf (application/pdf Object)
The Medicare drug benefit that Congress created in 2003 aims to provide more private plan options for senior and disabled beneficiaries in Medicare, with increased payments to attract sponsors and to support added benefits attractive to enrollees, especially in rural areas.
This brief provides a comprehensive look at premiums, deductibles, and selected cost-sharing features of Medicare Advantage prescription drug plans in 2006, including Medicare HMOs, new regional (and traditional local) PPOs, and private fee-for-service plans, and compares them to stand-alone Medicare drug plans.
Under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), beneficiaries who wish to enroll in the new Medicare prescription drug benefit must enroll either in a free-standing prescription drug plan (PDP) that complements traditional Medicare benefits or in a Medicare Advantage plan that covers prescription drugs (MA-PD).
MA-PD plans, which integrate the new drug benefit into a more comprehensive package that includes Medicare Parts A and B benefits and supplemental benefits, often impose more restrictions than traditional Medicare on a beneficiary's choice of providers.
These plans have the longest history in Medicare and account for most MA enrollment.
Regional plans are paid similarly, but the methods used take regional PPO bids (not just traditional Medicare costs) into account in setting benchmarks and other modifications consistent with the regional focus.
The amount of premium paid by enrollees in MA-PD plans is based on the difference between (1) the costs that plans estimate are associated with their benefits and (2) CMS's payments to them for Medicare covered benefits.
MA plans available for no additional premium beyond that which is charged for Part B have been important in attracting beneficiaries to MA and particularly important for those beneficiaries whose incomes, assets, and other characteristics lead them to be most price sensitive (Gold, 2004).
However, some providers may still be reluctant to participate in such plans.
The package offered by each plan has a unique set of benefits that are available for a specified premium to beneficiaries in all or part the full geographic area included within the contract.
