Late last week, the Kaiser Family Foundation (KFF) released a new report, “Medicare Part D in 2016 and Trends over Time.” The report examined several different aspects of the Part D program, including enrollment and plan availability, premiums, benefit design and cost-sharing, the low-income subsidy (LIS) program, and plan performance ratings. This article hits some of the highlights from that report.
Part D Enrollment and Plan Availability
Since 2006, the share of Medicare beneficiaries enrolled in a Part D plan has increased from 52 percent to 71 percent of all eligible Medicare beneficiaries. In 2016, nearly 71% of all Medicare beneficiaries nationwide are enrolled in Part D plans, including plans open to everyone and employer-only plans designed solely for retirees of a former employer. The percent of Medicare beneficiaries with Part D coverage in 2016 varies from state to state, from 56% in Alaska to 89% in North Dakota.
Additionally, while 60% of Part D enrollees are in PDPs, the share who are in MA-PD plans has risen from 28% in 2006 to 40% in 2016. That growth is roughly in line with overall growth in Medicare Advantage enrollment. Interestingly, there are five states (Arizona, California, Florida, Hawaii, and Oregon) where MA-PD plan enrollees account for over half of all Part D enrollees.
In 2016, three Part D sponsors accounted for more than half of all Part D enrollees: UnitedHealth, Humana, and CVS Health. This market concentration has increased slightly since 2006, but more so among PDPs. While UnitedHealth and Humana have had large market shares since the program began, CVS Health enrollment grew primarily through acquisition of other plan sponsors.
Part D Premiums
Average monthly PDP premiums rose in 2016 after being essentially flat since 2010, with the average monthly premium for PDP enrollees being $39.21. MA-PD plan premiums for Part D coverage have only risen modestly in the past few years; the average monthly premium is $16.99 for MA-PD plan enrollees. MA-PD enrollees tend to have lower monthly premiums, in part because of the ability of firms to use rebate dollars from Medicare payments for benefits covered under Parts A and B to lower their Part D premiums.
Premiums varied widely from plan to plan, even among those offering an equivalent benefit type, as well as across geographic regions. The average monthly premium for PDPs offering basic benefits in New Mexico runs about $17.05 per month, while the same plan in New Jersey is more than twice that amount – $37.13. In most regions, the range of premiums for PDPs offering the basic benefit is substantial. For example, in Illinois, the highest basic PDP premium is $139.70, almost seven times higher than the lowest basic PDP premium of $20.50.
Part D Benefit Design and Cost Sharing
According to the report, stand-alone PDPs and MA-PD plans differ along several key characteristics related to benefit design. The majority of PDP and MA-PD plan enrollees are in plans with five-tier formularies, tiered pharmacy networks, enhanced benefits, no additional gap coverage, and deductibles lower than the standard $360.
In 2016, 58% of PDP enrollees – but only 14% of MA-PD plan enrollees – are in plans offering the basic benefit, a sizeable decrease from 83% of PDP enrollees in basic-benefit plans in 2006.
Cost sharing for brand-name drugs has been relatively stable in recent years, but is much higher in 2016, as compared to 2006. Median cost sharing for preferred brands increased by about 46% in that time for PDP enrollees and by nearly 70% for MA-PD plan enrollees. For PDP enrollees who face coinsurance for preferred brands, the median coinsurance rate is 20%. Copayments for brand-name drugs in Part D are higher than those typically charged by large employer plans.
Nearly all Part D plans use specialty tiers for high-cost drugs and charge coinsurance of 25% to 33% during the benefit’s initial coverage period. Forty-nine percent of PDP enrollees and forty-three percent of MA-PD plan enrollees are in plans that charge the maximum 33% coinsurance rate for specialty drugs.
The Low-Income Subsidy Program
Nearly 30% of Part D enrollees receive additional financial subsidies for Part D coverage through the Low-Income Subsidy (LIS) program. The LIS pays Part D premiums for eligible beneficiaries, as long as they enroll in PDPs designated as benchmark plans, and also reduces cost sharing.
Some LIS beneficiaries pay premiums, even though they are eligible for premium-free Part D coverage. Of the 1.5 million LIS beneficiaries, about 13% pay a premium because they are not enrolled in benchmark plans. Additionally, CMS reassigns some beneficiaries to a zero-premium PDP during open enrollment if their previous PDP loses benchmark status and charges a premium.