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Economic Forces Reshaping Medicare Drug Benefit

WashingtonB_820After years of relative consumer inertia in the Medicare drug  benefit plan selection process, the economy
created the first real test of Medicare drug plans' stickiness.  Would seniors stay loyal  to their last drug plan choice, or would they be more willing to shop around to chase savings?

New data released today by Avalere Health shows that 1 of every 3,  or more than 9 million, Medicare beneficiaries has picked a Medicare  Advantage plan with prescription drug coverage (MA-PD plans) as their way to access medications.  Growth in MA-PDs far outpaced enrollment in standalone drug plan, or PDPs, for 2009.  MA-PDs; picked up about 730,000 people relative to mid-2008 levels, while  total enrollment in standalone prescription drug plans, or PDPs, increased by about 140,000 individuals over the same period.

How to explain MA-PDs newfound popularity?  It's the economy, of course.  

Undoubtedly as seniors watched their home equity and retirement accounts plunge during Medicare open enrollment season,  many sought low upfront premiums and great predictability in out of pocket spending.  A true test of economic pressures:  by selecting  managed care, many beneficiaries were willing to forgo physician  choice for lower cost.

On the PDP side, beneficiaries also voted with their feet by  selecting plans that kept their monthly premiums lower.  As a  result, one of the previous leaders of the pack Humana slipped back,  losing 31 percent of its PDP enrollment relative to mid-2008 levels.  New leaders emerged, including Coventry Healthcare and CVS/ Caremark.

Medicare beneficiaries are typically on a fixed income and will  likely be looking for these kinds of savings going forward as well.   This signals the potential for a more turbulent enrollment  environment compared to the first three years of the Medicare drug benefit program.  It also may ignite new policy conversations about  the relevance and value of Medicare Advantage, and how payment cuts  may affect the stability of the market.Bonnie Washington is a vice president at Avalere Health in Washington D.C. More information about Avalere Health may be found at AvalereHealth.net.

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Milton Beychok Recent comment authors
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Milton Beychok
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Milton Beychok

756% PRICE INCREASE IN 3 YEARS!!
I am an 86 year old WWII veteran (100th Infantry Division). In January 2006, my wife and I signed up for the basic Medicare Prescription Drug Insurance from Humana (one of the providers of that insurance) at a cost of $5.41 per month per person. By January 2009, the monthly cost has risen to $41.90 per person.
That is a 756 percent increase in 3 years!! That is not “free market capitalism” … it is outright “highway robbery” !!
We seniors are being abused by such despicable bait-and-switch tactics.