Medicare drug benefit gets good marks

The Medicare drug benefit may have caused confusion when it was launched in 2006, but the program has since “exceeded expectations” in getting seniors coverage and trimming their medication costs, according to a new report.

A study by the non-profit research organization RAND found that by 2008, nearly 90 percent of Medicare beneficiaries had drug coverage that was at least as generous as the standard benefit required of insurers participating in the program.

On average, the drug benefit—known as Medicare Part D—cut seniors’ annual out-of-pocket costs by 16 percent, while increasing the number of prescriptions by 7 percent.

“In the beginning there was a lot of concern about Medicare Part D, but we found convincing evidence that it has exceeded expectations and generally has been successful,” lead researcher Dr. Geoffrey F. Joyce, a senior economist at RAND in Santa Monica, California, said in a written statement.

“Most seniors now have prescription drug coverage that allows them to buy drugs at a reasonable cost,” he added.

What’s more, the study found, much of the medication savings has been concentrated among lower-income beneficiaries.

“It appears that Medicare Part D has been particularly successful in lowering costs for the poor and the disabled,” Joyce said, “which is an important finding since initially there was concern these groups would be particularly vulnerable under a privately administered benefit.”

There is, however, still room for improvement, the RAND researchers report in the American Journal of Managed Care.

For one, they write, there remains a “substantial core of seniors”—mostly low-income individuals—who “need to be educated that enrolling in Part D is in their own interest.”

The researchers also point to the issue of the so-called “doughnut hole” gap in Part D coverage. This refers to a temporary break in coverage that seniors face once their drug spending hits its specified annual limit; at this point, beneficiaries must cover their own prescription costs until they spend enough to be eligible for “catastrophic” coverage.

According to one study, Joyce’s team notes, 3 million Part D enrollees hit that coverage gap in 2007, and 20 percent either stopped taking their medication, cut back on doses or switched to a different drug.

Still, the RAND study suggests that the private insurance plans participating in Part D are offering coverage that is comparable to at least some private and public plans not involved in the Medicare program.

Joyce’s team compared the 10 largest plans participating in Part D with seven non-participating public and private plans often cited as offering low-cost or generous drug coverage.

They found that the Part D plans and most non-participating plans were similar as far as out-of-pocket costs and the medications each plan covered.

The average out-of-pocket medication costs to seniors in 9 of the 10 Part D plans ranged from about $1,000 to $1,400. This was comparable, the researchers note, to several of the private and public plans not participating in Part D, including coverage offered by the Veterans Administration.

The researchers call on the government to “continue to monitor the competitiveness of the Part D market to ensure it meets the diverse needs of Medicare beneficiaries.”

SOURCE: American Journal of Managed Care, August 2009.