LegiStorm

Summary:

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; P.L. 108- 173) established a voluntary, outpatient prescription drug benefit under Medicare Part D, effective January 1, 2006. Medicare Part D provides coverage through private prescription drug plans (PDPs) that offer only drug coverage, or through Medicare Advantage (MA) prescription drug plans (MA-PDs) that offer coverage as part of broader, managed care plans. Private drug plans participating in Part D bear some financial risk, although federal subsidies cover most program costs in an effort to encourage participation and keep benefits affordable. At a minimum, Medicare drug plans must offer a “standard coverage” package of benefits or alternative coverage that is actuarially equivalent to a standard plan. Plans also may offer enhanced benefits. Although all plans must meet certain minimum requirements, there can be significant differences among offerings in terms of benefit design, specific drugs included in formularies (i.e., list of covered drugs), cost sharing for particular drugs, or the level of monthly premiums. In general, beneficiaries can enroll in a plan, or change plan enrollment, when they first become eligible for Medicare or during open enrollment periods each October 15 through December 7. For plan year 2018, there are between 19 and 26 PDPs in the nation’s 34 PDP regions, in addition to Medicare Advantage plans. Because sponsors are allowed to change plan offerings from year to year, beneficiaries annually face the need for careful review of their choices to select the plans that best meet their needs. A key element of the Part D program is enhanced coverage for low-income individuals. Persons with incomes up to 150% of the federal poverty level (FPL) and assets below set limits are eligible for extra assistance with Medicare Part D premiums and cost sharing. Individuals enrolled in both Medicare and Medicaid (so-called dual eligibles) and certain other low-income beneficiaries are automatically enrolled in no-premium plans, which are Part D plans that have premiums at or below specified levels. In 2017, about 42.5 million out of a total of 58.6 million Medicare beneficiaries received prescription drug benefits through a PDP or an MA-PD, with almost one-third receiving a low- income subsidy. Another 1.6 million received drug assistance through a Part D-subsidized retiree health plan. Of the remaining 25% of Medicare beneficiaries not enrolled in Part D, about half had coverage through health care plans that was at least as generous as Part D; the other half had no coverage or coverage less generous than Part D. Overall, about 88% of Medicare beneficiaries had drug coverage through either PDP or MA-PD plans, retiree coverage, or private insurance of comparable scope. Total Part D expenditures were approximately $100.0 billion in calendar year 2017. Medicare Part D has cost less than originally forecasted, due in part to lower-than-predicted enrollment and increased use of less expensive generic drugs. However, the Medicare Trustees project that spending on Part D benefits will accelerate over the next 10 years due to the expectation of further increases in the number of enrollees, costs associated with the gradual elimination of the out-of-pocket cost coverage gap, changes in the distribution of enrollees among coverage categories, a slowing of the trend toward greater generic drug utilization, and an increase in the use and the prices of specialty drugs.