Marketplace Volatility Is Harming The Poorest Medicare Beneficiaries

by NSCLC's Oakland Office

When Congress passed legislation creating the Medicare Part D prescription drug program, it promised a “seamless transition” for those eligible for both Medicare and Medicaid – America’s poorest seniors and individuals with disabilities.  The idea was to use private sector health insurance companies to provide what these people had been getting for decades through Medicaid:  stable, comprehensive drug coverage, subsidized in order to keep needed medicines affordable. 

  Congress gave the Centers for Medicare and Medicaid Services (CMS) responsibility for getting dual eligibles into drug plans automatically and giving them the full subsidy.  Sound simple?  It wasn’t.  From the beginning the program has been endlessly complex and confusing, with plenty of protections for Part D private insurers and few for those in greatest need.

  Two years into Part D, major cracks in the so-called seamless transition for the poor are clearly showing. Unlike the generally consistent drug coverage provided by states through Medicaid, drug plans change the specific drugs they cover each calendar year.  The cost of coverage can also change dramatically; from 2007 to 2008, plans increased monthly premiums an average of 17 percent.  Plans can also impose new restrictions on drug usage, like dosage limits or requirements for prior authorization of prescriptions. 

  These yearly changes have the potential to particularly harm low-income Medicare beneficiaries.  People who used to get drug coverage from Medicaid are now entitled to a full subsidy for the vast majority of their drug costs, but the subsidy has a catch.  Only plans that meet certain criteria—by providing only “basic” coverage with a premium at or below an average bid—qualify to receive full subsidy recipients automatically. 

  This year’s bidding process revealed that the market serving these low-income beneficiaries is enormously volatile.  In each state, between five and twelve of the plans offered at the fully subsidized level in 2007 are no longer available at the same level in 2008.  As a result, 2.1 million low-income individuals found themselves automatically reassigned to a different plan this January.  More than 442,000 weren’t reassigned, but will start getting monthly premium bills—even though their income is so low that they qualify for a full premium subsidy. 

  For this vulnerable population, yearly changes aren’t as simple as tossing out an old drug card and replacing it with a new one.  Besides enduring the snafus and data transfer delays that have plagued the program since its inception, many people subject to reassignment are finding out that their new plan isn’t as good or as comprehensive as last year’s.  In 2008, plans qualifying to receive automatic reassignment cover fewer drugs, and are more likely to require prior authorizations for those drugs.  Yet people being reassigned have, on average, higher drug needs than other Medicare recipients.  They are also more likely to suffer cognitive impairments and many have limited English proficiency, making it hard to understand the changes and their options.     

  CMS recently proposed regulations that would guarantee a minimum of five plans available each year at the full subsidy level.  Despite statements to the contrary, the agency’s proposal would do nothing to reduce volatility.  In fact, CMS estimates that the regulation would result in half a million ADDITIONAL reassignments than under the current policy, in which adjustments to premiums are made after bidding. 

  Congress should ensure that the program lives up to its promises and provide protection.  A better alternative would be to offer a reliable, government-sponsored prescription drug plan instead of private plans.  Some legislators have already floated proposals to do just that, but so far there is no sign that Congress is prepared to tackle the issue, especially in the face of a likely presidential veto.  We hope that the next administration takes a  much closer look at the Medicare prescription drug program—and fulfills its obligations to care for those who are currently falling through its cracks.