Rx for Seniors: Understanding the Numbers
Capitol Hill briefing
April 9, 2001
Rx for seniors:
Actuaries examine Medicare prescription drug options
Design it so they will come.
That was the advice of Academy health experts at an April 9 Capitol Hill briefing on prescription drug coverage for Medicare recipients.
"In designing any program, you need to be aware that while pharmaceutical costs are more predictable than medical costs, adverse selection issues are much greater," said John Bertko, chief actuary for Humana.
To avoid adverse selection, Bertko said, policy-makers must encourage broad enrollment in the program with benefits that are attractive to healthy beneficiaries.
He said benefit design and cost sharing structure are critically important to striking the right balance in attracting enrollees, encouraging cost-effective use of the benefit, controlling overall costs, and minimizing adverse selection. And any Medicare drug plan should be structured so that all alternative benefit options offered meet a minimum actuarial equivalence standard, he added.
Bertko was part of a trio of health practice experts speaking at the Academy-sponsored briefing. More than 60 House and Senate staffers and other interested parties attended the event, which was part of an ongoing series of educational briefings. Congress is expected within the next few months to consider proposals to provide a Medicare prescription drug benefit.
"We don't have all the answers for you," Bertko told the group, "but these are all the tradeoffs."
Cori Uccello, the Academy's senior health fellow, provided an overview on prescription drug spending in the United States. Not surprisingly, seniors account for a disproportionate share Ñ although they make up only 13 percent of the population, they account for one-third of prescription drugs dispensed and about 40 percent of prescription drug expenditures.
Since prescription drug spending is projected to more than triple between 1999 and 2010, those costs will be disproportionately borne by the elderly, Uccello said.
Margaret Wear, chief actuary of AdvancePCS, a pharmacy benefits manager, described how prescription drug utilization and costs are managed in the private sector. Management strategies include monitoring drug utilization online through pharmacies, requiring prior authorization for certain drugs, using formularies that list drugs eligible for reimbursement, setting maximum allowable cost pricing, and requiring that doctors use traditional drug therapies before moving to newer, more expensive drugs that might provide minimal additional clinical benefit.
A new, more visible, effort in pharmaceutical cost control, Wear said, is academic detailing, in which insurance company representatives visit providers, much as pharmaceutical salesmen do, to talk about the kinds of prescriptions they are offering to patients.
Bertko and Wear are both members of the Academy's Prescription Drug Coverage Work Group, chaired by Thomas Tomczyk. The work group recently released a new issue brief, "Providing Prescription Drugs to Seniors: A Patchwork of Coverage." The issue brief outlines private-sector programs providing prescription drugs to seniors, and it is designed to complement a 2000 monograph, "Providing Prescription Drug Coverage for Medicare Beneficiaries."
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