October 18, 2016
Fewer, Clearer Medicare Part D Choices
A decade ago, the nation’s Medicare enrollees had more than 1,800 different prescription drug plans to choose from. In the 2017 open enrollment that started on Oct. 15, that number dropped to just 746.
News of higher Part D drug plan premiums and out-of-pocket costs in 2017, estimated in a new report by the Henry J. Kaiser Family Foundation, will not be welcome by the nation’s older population. But Squared Away also wanted to know whether fewer plan options are good or bad for consumers.
“It’s good in the sense [federal] efforts are bearing fruit in giving people options that are more distinct from each other than in the past,” said Juliette Cubanski, Kaiser’s associate director of Medicare policy. At the same, she said, retirees “still have a lot of choice in this marketplace.”
The number of plans has shrunk steadily for a variety of reasons since the 2006 inception of the prescription component of Medicare, known as Part D. In the early years of the program, plans started disappearing amid consolidation among insurers and pharmacy benefits managers, she said. More recently, a few Part D plan providers have pulled out of the market.
But Cubanski said recent reductions in the number of plans were primarily by federal design. In 2011, the Centers for Medicare and Medicaid (CMS) stepped in and began requiring insurers that offered more than one Part D plan in a region to make sure the differences among their plans were clear and distinct to Medicare beneficiaries.
Driving the regulation, she said, was that “people weren’t able to differentiate between their plans.” In theory, having more options should be good for consumers if it spurs competition among providers and potentially reduces premiums. But research has shown that people are only confused when they have too many health plan choices and are more likely to make costly mistakes.
The new regulation went so far as to state that CMS might ask an insurer to “withdraw a [Part D] formulary in which no meaningful differences can be demonstrated.” In the wake of this regulation, insurers are more likely today to offer just two plans per region rather than the three plans offered in the past, Cubanski said.
Picking the right Part D plan is crucial at a time of surging prices for prescription drugs, particularly specialty drugs. Seniors taking multiple medications are vulnerable to rising prices, yet Medicare is barred by law from negotiating drug prices on their behalf.
Average Part D premiums increased from $37 per month in 2015 to $39 in 2016. In addition, plans charge copayments or deductibles.
A couple more dollars per month “doesn’t sound like a lot of money,” Cubanski said, “but it came after several years of a flat trend in the average premium or even some decreases.”
In 2017, Kaiser estimates monthly premiums will increase to more than $42, and annual prescription deductibles are expected to rise from $182 in 2016 to $195 in 2017.