Value of Medicare Advantage Prescription Drug Plans
Medicare Part D coverage is offered through private plans that are approved by the federal government. Beneficiaries who enroll in Medicare Fee-for-Service (FFS) have the option to purchase a standalone prescription drug plan (PDP) to supplement their coverage. Alternatively, beneficiaries can choose to enroll in MA-PDs, which integrate prescription drug coverage with other Medicare benefits (Parts A and B) into one plan with one monthly premium.
Established in 2006 by the Medicare Modernization Act (MMA), more than 42 million, or roughly 73% of all Medicare beneficiaries, are now enrolled in Medicare Part D coverage, either through standard PDP’s or Medicare Advantage Prescription Drug plans (MA-PD).
While Part D was considered controversial at the time of its passage, primarily due to the cost to government and the use of private plans to operate the new benefit, Part D has been a successful program. It greatly expanded coverage for prescription drugs to millions of Medicare beneficiaries, and the annual costs of the program have been below spending projections.
MA-PDs comprises a growing share of overall Part D enrollment as more beneficiaries choose plans with integrated medical and drug benefits. Most Medicare Advantage enrollees (88%) are in Medicare Advantage plans that provide prescription drug coverage. By integrating prescription drug coverage with other Medicare benefits in one plan, MA-PD plans are able to coordinate care and manage costs across both the medical and drug benefits compared to PDPs. Additionally, while the Part D program requires all plans to offer at least a minimum level of benefits, MA-PD plans are allowed to use a portion of their Medicare Advantage capitated payments to offer lower premiums, reduced cost-sharing, or coverage of more drugs, and supplemental benefits.
Despite the rising costs of prescription drugs, Part D plans have been able to offer stable premiums to beneficiaries since the program’s inception. While there have been significant changes made to the Part D program, there is also increasing interest in addressing the cost of prescription drugs, both in Part D and for drugs covered by Part B.
Here’s what you need to know about Medicare Advantage Part D:
Medicare offers three forms of subsidies to Part D plans. These payments are intended to ensure plan participation by taking potential risk of high cost enrollees away from plans.
- The low-income subsidy (LIS) program assists in subsidizing Part D premiums, deductibles, coinsurances, and copayments for eligible enrollees. In 2018, 28% of beneficiaries received LIS, of which 39% were enrolled in integrated MA-PD plans.
- By integrating prescription drug coverage with other Medicare benefits in one plan, MA-PD plans are able to coordinate care and manage costs across both the medical and drug benefits compared to PDPs.
- Despite the rising costs of prescription drugs, Part D plans have been able to offer stable premiums to beneficiaries since the program’s inception.
- Similar to #MedicareAdvantage, payments to PDPs are determined through a bidding process, and enrollee premiums are tied to plan bids. There is a standard benefit design in Part D, outlined in the graphic below.
- Most #MedicareAdvantage enrollees (88%) are in MA plans that provide prescription drug coverage. Take a look at Avalere Health analysis using enrollment data released by the Centers for Medicare & Medicaid Services.
- MA-PD plans, because they offer coverage that integrates medical and prescription drug benefits, are uniquely positioned to coordinate care and manage costs for their enrollees, particularly those with multiple chronic conditions.
- Part D plans also use utilization management tools to ensure beneficiaries have access to the most effective, lowest-cost prescription drugs. Utilization management tools include: Prior Authorization, Step Therapy, and Quantity Limits.
Part D 101
Rebate Advocacy Action
Sign up to receive updates on Medicare Advantage prescription drug plans.