Medicare
Part D Strategies to Change Over Time
The second year of Medicare Part D coverage is drawing to a close.
The vast majority of employers who sponsor a drug benefit for Medicare-eligible
retirees are choosing to continue the benefit and collect the tax-free
retiree drug subsidy (RDS). There
is evidence, however, that the landscape will change in 2008 and
beyond. Findings of the Kaiser/Hewitt 2006 Survey on Retiree Health
Benefits indicate company-sponsored plans that selected RDS are
seriously evaluating alternatives.
When
asked about their likely strategies beyond 2007, firms that accepted
the subsidy in 2006 are less certain about which future they will
pursue.
About
79 percent say it is very likely or somewhat likely they will offer
drug coverage and accept the subsidy in 2008. That drops to 54 percent
for 2010 (see Figure 5).
As
anticipated, the RDS payment administrative process is cumbersome
and can be costly for employers. The compliance risk and potential
for government audits represent added challenges to employers who
choose the subsidy.
Competitive
Alternatives to RDS
Medicare Prescription Drug Plans (PDPs) and Medicare Advantage Prescription
Drug (MA-PD) Plans are providing more options and becoming attractive
alternatives to RDS. These plans also are marketing more aggressively
to employers.
The
number of national PDPs serving all regions and representing one-stop
shopping for employers increased from 10 in 2006 to 17 in 2007,
according to Centers for Medicare and Medicaid Services (CMS) data.
PDPs are expanding their formularies, offering more donut hole coverage,
and extremely competitive premiums.
MA-PDs
offer a competitive alternative to PDPs. There are now 1,675 unique
MA-PDs across the country, with 34 percent of them offering $0 premiums.
The introduction of Medicare Advantage Medical Savings Accounts
(MSAs) promises yet another alternative likely to find a market
niche.
What’s
Ahead
Benefits consultants expect employers to migrate to PDPs and, increasingly,
to MAPDs.
Likely
to increase are customized prescription drug plans (including employer
group waiver plans), tailored to an employer’s retiree population
and benefit structure.
Some
retirees will be faced with premium increases in company-sponsored
drug plans and Medigap policies. They may migrate to Medicare Advantage
plans that offer lower premiums and more open access.
As
a result, some employers may eventually decide to discontinue drug
coverage and provide a subsidy to retirees. That will allow them
to shop for the plan that best meets their needs.
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