MEDICARE REFORM SERIES The Bottom Line on Providing Prescription Drug Coverage for Medicare Beneficiaries
One of the key issues being debated by Congress and in this year's presidential election is whether and how prescription drug coverage could be provided to older Americans. The American Academy of Actuaries Medicare Reform Task Force has examined a number of questions that would need to be resolved in designing a Medicare prescription drug benefit.
One of the central questions is whether a drug benefit should be provided absent an overall reform of Medicare to strengthen its financial soundness. Adding another expensive benefit to Medicare may not be appropriate unless both the financing and the overall benefit structure of the program are evaluated.
If a drug benefit is offered it will need to be coordinated with existing coverage provided to Medicare beneficiaries by employer health plans, Medicare Supplement insurers and Medicare+Choice plans.
Policymakers will need to decide whether the new drug program will be "single payer" with only one entity providing the benefit or should a number of drug plans compete to provide the coverage.
A number of important issues exist concerning whether commonly used pharmacy management techniques will be permitted and if so, to what extent. These techniques include the presence and design of formulary, generic substitution rules, the use of drug utilization management mechanisms, mail order, and patient cost sharing features.
Questions exist regarding the requirements for design and administration of pharmacy network access, including issues related to participation requirements and the use of pharmacy incentive programs.
The use of risk adjusted payment mechanisms that take into account the health status of the beneficiaries who participate in the program also requires careful study. Risk adjustment helps to make payments to competing payers more equitable and is especially important to encourage competing PBMs to seek beneficiaries with higher than average needs for prescription drugs.
In designing the overall program, it will be important to decide whether, and to what extent, the fiscal intermediaries will be at financial risk for their role in controlling costs.
These issues are more fully discussed in the monograph Providing Prescription Drug Coverage For Medicare Beneficiaries. For more information, please contact Holly Kwiatkowski, Health Policy Analyst at (202) 785-7871 (Kwiatkowski@actuary.org).
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