Wednesday, May 30, 2012

Medicare Trust Fund Looks Awful

May 25, 2012

The AAA says putting off fixing Medicare will make matters worse.

The actual financial condition of the Medicare hospital insurance trust fund is probably worse than the grim official projections based current federal law suggest, according to the American Academy of Actuaries.
The AAA, Washington, has presented that conclusion in a Medicare issue brief developed in response to the latest Medicare trustees' report.

The trustees themselves have said in earlier Medicare reports that the official numbers understate Medicare's problemsand a team of Medicare trustees' technical advisors met in January 2011 to talk about concerns about the actuarial assumptions, economic assumptions and methods used to create the official trust fund projections.

The trustees now are predicting in their official projections that the Medicare hospital insurance trust fund will run dry in 2024. That forecast is unchanged from what the trustees announced a year ago, the AAA says in its brief.
The Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS), an arm of the U.S. Department of Health and Human Services, developed an alternative scenario at the request of the Medicare trustees.
One big difference between the official projections and the alternative scenario is that the official projections assume Medicare would impose significant Medicare provider reimbursement cuts every year for many years. The CMS Office of the Actuary assumes the reimbursement cuts would slow beginning in 2020.
The official projections indicate that the hospital insurance fund's 75-year deficit is equal to about 1.35% of projected taxable payroll, the AAA says.
The alternative scenario indicates that the 75-year deficit could be 2.43% of taxable payroll, the AAA says.
The trustees are officially projecting that Medicare alone will eat up 6.7% of U.S. gross domestic product (GDP) in 2085, but the alternative scenario suggests that Medicare could eat up about 10% of GDP.
The AAA's Medicare steering committee wants to see Congress act to restore the long-term sustainability of the program, the AAA says.
"The sooner such corrective measures are enacted, the more flexible the approach and the more gradual the implementation can be," the AAA says, in bold type. "Failure to act now will necessitate far more drastic action later."
CORRECTION: Actuaries are projecting the main Medicare trust fund will run dry in 2024. The year was identified incorrectly in an earlier version of this article.

Friday, May 25, 2012

People with Medicare Beware: COBRA Is Not Coverage as a "Current" Employee

Advocates are seeing an increase in the number of Medicare beneficiaries who have delayed enrolling in Medicare Part B, thinking, erroneously, that because they are paying for and receiving continued health coverage under COBRA, they do not have to enroll in Medicare Part B.[1]  COBRA-qualified beneficiaries who have delayed enrollment in Medicare Part B do not qualify for a special enrollment period (SEP) to enroll in Part B after their COBRA coverage ends.[2] (They may, however, qualify for a SEP to enroll in Part D at that time if the drug coverage they had under COBRA constitutes creditable coverage.)[3] Only individuals who delay enrolling in Part B because they are covered under an employee group health plan (EGHP) by reason of "current" employment may take advantage of the SEP rules.[4]  Individuals on COBRA do not meet the definition of having current employment status.[5]
Medicare Part B - The consequences of delayed Part B enrollment can be severe.  Generally, the beneficiary who does not enroll during his or her initial enrollment period and who is not entitled to a SEP must wait to enroll in the next general enrollment period (January - March of the year), with benefits starting on July 1 of that year.[6]  Further, there is a 10% late enrollment penalty added to the standard monthly premium for every 12 months of delayed enrollment in Part B.[7]  The penalty has no durational limit.[8]
Medicare Part D - Under Part D, the penalty is 1% of the national base beneficiary premium in a given year times the number of full, uncovered months of eligibility without other creditable drug coverage.[9] A Part D eligible individual must pay the late penalty if there is a continuous period of 63 days or longer at any time after the end of the individual's initial enrollment period during which the individual meets all of the following conditions: (1) The individual was eligible to enroll in a Part D plan; (2) The individual was not covered under any creditable prescription drug coverage; and (3) The individual was not enrolled in a Part D plan.[10]
COBRA is the acronym applied to continuation coverage that was made available through the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985.[11] Private employers who offer EGHP coverage and who normally employed 20 or more workers on a typical business day during the preceding calendar year must offer COBRA coverage to employees and their dependents when they lose their EGHP-sponsored health insurance because of certain specified events.[12]  Covered employees, or workers, are only eligible for COBRA based on termination of their employment or reduction in their hours.[13]
An individual eligible to purchase COBRA is referred to as a "qualified beneficiary."[14]  Qualified beneficiaries include covered employees, spouses, dependent children, and retirees, their dependents, or their surviving spouses if the retiree's former employer files a petition for bankruptcy.[15]
The six qualifying events for COBRA coverage are defined in the statute as:[16]
  • The death of a covered employee
  • The termination (other than for gross misconduct), or reduction in hours, of the covered employee's employment
  • The divorce or legal separation of the covered employee from the employee's spouse
  • The covered employee's entitlement to Medicare
  • A dependent child's losing dependent status
  • The filing for bankruptcy by a retiree's former employer.
It is important that people with Medicare are advised about COBRA rules and about the circumstances under which they can use a SEP to avoid a late enrollment penalty.  For more information, please contact attorney Alfred Chiplin ( or attorney David Lipschutz ( in the Center for Medicare Advocacy's Washington, DC office.

[1] See § 9.05 (Coordination of COBRA Rights and Medicare) of the "2012 Medicare Handbook," Wolters Kluwer Law & Business, written by the staff of the Center for Medicare Advocacy, Inc.  The book is available through[2] 42 C.F.R. §§407.20, 406.24(a)(3).  See also the "Medicare & You Handbook for 2012, p. 23.[3] See 42 C.F.R. §423.38(c) (special enrollment period) as described in §423.38(c)(8)(ii).  See also 42 C.F.R. §§423.46; 423.286(c)(3); 423.286(d)(3). The SEP begins with the month the beneficiary is advised of the loss of creditable drug coverage and ends 60 days from the loss of the coverage or from the date of the notice, whichever is later. See also, "Disclosure of Creditable Coverage to Medicare Part D Eligible Individuals Guidance, OMB 0938-0990 (Feb. 15, 2007),
. A Part D eligible individual must pay the late penalty if there is a continuous period of 63 days or longer at any time after the end of the individual's initial enrollment period during which the individual meets all of the following conditions: (1) The individual was eligible to enroll in a Part D plan; (2) The individual was not covered under any creditable prescription drug coverage; and (3) The individual was not enrolled in a Part D plan. 42 U.S.C. §1395W-113(b)(2), 42 C.F.R. §423.46 (Late enrollment penalty).[4] 42 C.F.R. §§407.20(b), (c).[5] 42 C.F.R. §411.104.[6] 42 C.F.R. §§407.15(a), 407.25.[7] 42 U.S.C. §1395(r); 42 C.F.R. §408.22.  See also Medicare's late enrollment penalty calculator:
.[8] See 42 C.F.R. §§408.24, 408.25.  For disabled beneficiaries under age 65, the penalty will end when they turn 65. For persons under age 65 paying the penalty, the penalty goes away at age 65. See §1837(g)(1) of the SSA; POMS HI00805.085(B). Note, for Part A, the 10% penalty extends for twice the number of full 12 months of delay.  42 C.F.R. §406.32(d).[9] See 42 U.S.C. §1395W-113(b)(3).[10] 42 U.S.C. §1395W-113(b)(2), 42 C.F.R. §423.46(Late enrollment penalty).[11] See Pub. L. No. 99-272 (Apr. 7, 1986), 100 Stat. 222, codified at 26 U.S.C. §4980(b), 29 U.S.C. §1161 et seq, 42 U.S.C. §§300bb-1, et seq.[12] See 29 U.S.C. §1161(b).  State and local governments employing more than 20 employees also must offer continuation coverage.  42 U.S.C. §300bb-1(a).  Federal employees have their own health care continuation coverage. 5 U.S.C. §8905a.[13] See 29 U.S.C. §§1163(2), 1167(2).[14] 29 U.S.C. §1161(a).[15] 29 U.S.C. §1167(2), (3).[16] 29 U.S.C. §1163.

Thursday, May 24, 2012

The Next Wave of Growth for Managed Care Organizations Will Come from Dual-Eligibles

Dual-Eligible Population Accounts for an Estimated $320 Billion in Combined Spending, According to HealthLeaders-InterStudy
NASHVILLE, Tenn., May 15, 2012 (BUSINESS WIRE) -- HealthLeaders-InterStudy, the leading provider of managed care market intelligence, finds that the next wave of growth for health plans will come from states looking to them for experience with coordinated care for high-cost dual eligibles, according to the recently published National MCO Analyzer: Medicaid report. Dual-eligibles are high-cost patients who qualify for both Medicaid and Medicare benefits. The report finds that, 38 states are currently preparing dual-eligible coordination programs to begin in late 2012 or early 2013. Other states may follow suit.
There are 9 million Americans who are eligible for both Medicare and Medicaid. They include elderly Americans in poverty and severely disabled individuals of all ages who receive their hospital, physician and pharmacy benefits through Medicare, and their long term care services, rehabilitation and other supports through Medicaid. Federal officials hope that coordination of that care will lead to significant savings. This change will shift control of care of this fragile segment to MCOs chosen by the states to administer coordinated benefits. This segment accounts for an estimated $320 billion in combined spending between the Medicaid and Medicare programs.
"This increased care coordination of the dual-eligible segment, and the contracts' structure and savings requirements will mean that pharma can expect formulary designs to offer broad access to the best medications," said HealthLeaders-InterStudy Analyst Paula Wade.
In addition to the changes in dual-eligible coverage, states are also taking advantage of new federal funding to establish "healthcare homes" for Medicaid enrollees with chronic illnesses, according to the report. Medicaid MCOs are contracting with hospitals and physician practices that are equipped to coordinate care.
"Medicaid enrollees with chronic illnesses and the non-dual-disabled population are the highest utilizers of Medicaid pharmacy," said Ms. Wade. "These health homes may improve members' compliance with drug regimens."
The coordination for duals is not the only major change for Medicaid plans. Cash-strapped states are cutting optional services, raising cost sharing, trimming Medicaid expansion programs and cutting provider reimbursements.
Members of the media are welcome to attend our upcoming Medicaid Analyst Call entitled: Five Things You Need to Know About Medicaid Now. The call will be held on June 14th at 2 p.m. EDT For more information please contact Kristi Guillemette at
The National MCO Analyzer: Medicaid report includes a profile for each state and the District of Columbia to capture each program's unique structure and operation. An abstract of the report can be found here:
About HealthLeaders-InterStudy
HealthLeaders-InterStudy, a Decision Resources Group company, is the authoritative source for managed care data, analysis and news. For more information, please visit . HealthLeaders-InterStudy is part of the Market Access Business Unit at Decision Resources Group which also includes Fingertip Formulary, Pinsonault and PharmaStrat.
About Decision Resources Group
Decision Resources Group is a cohesive portfolio of companies that offers best-in-class, high-value information and insights on important sectors of the healthcare industry. Clients rely on this analysis and data to make informed decisions. Please visit Decision Resources Group at .
All company, brand or product names contained in this document may be trademarks or registered trademarks of their respective holders.
SOURCE: HealthLeaders-InterStudy


In The First Four Months Of 2012, More Than 416,000 People with Medicare Saved an Average of $724 on Prescription Drugs and 12.1 Million Used a Free Preventive Service
Under the new health care law – the Affordable Care Act --  seniors and people with disabilities in Medicare have saved a total of $3.5 billion on prescription drugs in the Medicare drug benefit coverage gap or “donut hole” from the enactment of the law in March 2010 through April of 2012.  The Centers for Medicare & Medicaid Services (CMS) released data today showing that, in the first four months of 2012 alone, more than 416,000 people saved an average of $724 on the prescription drugs they purchased after they hit the prescription drug coverage gap or “donut hole,” for a total of $301.5 million in savings.  These savings build on the law’s success in 2010 and 2011, when more than 5.1 million people with Medicare saved over $3.2 billion on prescription drugs.

In addition, CMS announced that this year, from January through April, 12.1 million people in traditional Medicare received at least one preventive service at no cost to them – including over 856,000 who have taken advantage of the Annual Wellness Visit provided in the Affordable Care Act.  In 2011, over 26 million people in traditional Medicare received one or more preventive benefits free of charge.

“Thanks to the health care law, millions of people with Medicare have paid less for health care and prescription drugs,” said CMS Acting Administrator Marilyn Tavenner.  “The law is helping people with Medicare lower their medical costs, and giving them more resources to stay healthy.”

People with Medicare who hit the coverage gap “donut hole” in 2010 received a one-time $250 rebate.  In 2011, people with Medicare began receiving a 50 percent discount on covered brand name drugs and 7 percent coverage of generic drugs in the “donut hole.”  This year, Medicare coverage for generic drugs in the coverage gap has risen to 14 percent.  Coverage for both brand name and generic drugs in the gap will continue to increase over time until 2020, when the coverage gap will no longer exist.

For more information on how the Affordable Care Act closes the Medicare drug benefit coverage gap “donut hole,” please visit:

Prior to 2011, people with Medicare faced cost-sharing for many preventive benefits like cancer screenings and smoking cessation counseling.  Now, many of these benefits are offered free of charge to beneficiaries, with no deductible or co-pay, so that cost is no longer a barrier for seniors who want to find and treat problems early.

For more information on Medicare-covered preventive services, many of which are now provided without charge to beneficiaries thanks to the Affordable Care Act, please visit:

To learn what screenings, vaccinations and other preventive services doctors recommend for you and those you care about, please visit the myhealthfinder tool at 

Wednesday, May 23, 2012

Today's Datapoint

Nearly 3.2 million small businesses that employ more than 19 million workers are eligible for $15 billion in tax credits under the health reform law, according to a study released recently by the Small Business Majority and Families USA.

Quote of the Day

“Everywhere I go, I get a group of people telling me we’re moving too slow [in getting dual Medicare-Medicaid eligibles into integrated programs] and a group of people telling me we’re moving too fast. We’re not going nationwide in these two years, but we do feel some urgency.”
— Melanie Bella, director of the CMS Medicare-Medicaid Coordination Office established by the reform law, told an audience at a recent American Enterprise Institute panel discussion.

Tuesday, May 22, 2012

Waiting for Employers: Is the Train Finally Leaving the Station?

By James Gutman - May 18, 2012
It has been an article of faith, but now it may finally become an article of fact. Employers that still offer retiree medical benefits — a vanishing but not yet vanished breed — seem at last to be doing what the Medicare health plan industry has been predicting for years. They are, in growing numbers, shifting post-age-65 retirees who have company medical benefits to Medicare Advantage (MA) and stand-alone Prescription Drug Plans (PDPs).
Some of the evidence comes from first-quarter financial reports and earnings calls. Aetna Inc., for instance, said April 26 that of the company’s 44,000 increase in Medicare members in the 2012 first quarter, 75% came from group business. Humana Inc. reported April 30 that it had 385,800 MA members on March 31, up 25% from the 308,600 one year earlier. With figures like this as a backdrop, it did not seem to surprise anyone when employee benefits consulting firm Towers Watson on May 14 agreed to pay $435 million to acquire Extend Health Inc., which runs the largest private Medicare plan exchange.
The reason for the employer sector’s moves now seems to come down to — no surprise — money and convenience. The money stems from a combination of the pure cost of furnishing retiree medical benefits, the impending loss in 2013 for employers that furnish retiree drug benefits of the tax-favored status of the federal Retiree Drug Subsidy and the coming excise tax on insurers, which also applies to self-insured employer plans. The convenience comes from the relative ease of giving retirees a fixed contribution and having them purchase coverage on a private exchange.
With those factors in the forefront, are we now finally in a climate when historically slow-to-decide employers will “push the button” and move retirees to MA plans or PDPs? Or are such factors as inertia, fear of disruption and labor-union contracts going to continue inhibiting these moves? What would happen to this trend if the Supreme Court strikes down the reform law? Would that derail the train before it leaves the station?

Monday, May 21, 2012

Today's Datapoint

33% … of consumers are using social media for health-related matters, according to a recent survey by PwC’s Health Research Institute.

Friday, May 18, 2012

Reports Describe Spending Trends and Competition in Medicare Part D

The Kaiser Family Foundation (KFF) released two reports this month that discuss the role of competition in Medicare spending under the Medicare prescription drug benefit (Part D), as well as proposals to address areas of limited competition, which could yield federal savings in the Medicare program.

According to one report, “Medicare Part D Spending Trends: Understanding Key Drivers and the Role of Competition,” net spending in Medicare Part D has been about 30 percent lower than initial projections, which were made when the program was first enacted into law. While many argue that the lower-than-expected spending is a direct result of competition among many Part D plans, the KFF report, “Prescription Drug Procurement and the Federal Budget,” finds that in a couple of key areas of the Medicare prescription drug market, competition is actually quite limited. For instance, because Medicare Part D is unable to efficiently purchase drugs for low-income beneficiaries, the program is not getting the best deal on prescription medications. Rebates from drug companies are generally lower under Part D than they are under Medicaid, resulting in higher drug costs throughout the Medicare program. One KFF report suggests that by applying Medicaid rebates, rather than those prices negotiated by Part D plans, to drugs purchased by low-income beneficiaries, the federal government could save over $100 billion over 10 years without shifting costs onto people with Medicare.

According to both reports, lower Medicare Part D spending is more likely attributed to a number of factors other than competition, including increased utilization of generic drugs. This trend may be influenced in part by private plan benefit designs, such as tiered copayments, that restrict beneficiaries’ access to brand-name medications.

46 Insurers Included in 2012 Fortune 500 List

Berkshire Hathaway cracks top 10 for second year in a row; 14 insurers land in the top 100.
Insurance Networking News, May 10, 2012
While the number of overall insurers included in the Fortune 500 diminished slightly yet again—from 49 in 2010 to 47 last year to 46 this year—Nationwide provided insurers with one more top-100 slot by moving up 27 spots.
Berkshire Hathaway earned the top spot among insurers, being placed seventh overall for the second year in a row.
Fortune categorizes all companies in the list, including five categories for insurers: Health Care: Insurance and Managed Care; Insurance: Life, Health (mutual); Insurance: Life, Health (stock); Insurance: Property and Casualty (mutual); and Insurance: Property and Casualty (stock).
The first and last categories listed above—Health Care and P&C (stock)—received the most attention; each had four companies in the top 100, while the former placed 11 companies overall and the latter 15.
For the Health Care category, UnitedHealth Group ranked the highest at 22, followed by WellPoint (45), Humana (79), Aetna (89) and Cigna (130). UnitedHealth Group also ranked second overall among insurers, as AIG dropped from 17 to 33 this year, good enough for third overall and second in the P&C (stock) category behind Berkshire Hathaway. That category also placed Liberty Mutual (84), Allstate (93), Travelers (112), The Hartford (131), USAA (144), Progressive (169), Loews (190) and Chubb (202) in the top-half of the full list.
The P&C (mutual) category placed three insurers overall—State Farm (43), Nationwide (100) and Auto-Owners (429).
Topping the life/health categories were, on the stock side, MetLife (34), followed by Prudential (55), Aflac (128), and on the mutual side, New York Life (86), TIAA-CREF (88), Northwestern Mutual (116) and MassMutual, who dropped 20 spots from last year to 121.
Aflac was also ranked in Fortune’s list of best employers at 77, making itself and USAA, who was ranked 20 among best employers, the only insurers to make both lists.
American Financial Group and Universal American dropped out of the list this year, after placing 489 and 401 in 2011, respectively.
Below is the full list of 46 insurers included in 2012’s Fortune 500 List, with last year’s rankings in parentheses:
7. Berkshire Hathaway (7)
22. UnitedHealth Group (22)
33. AIG (17)
34. MetLife (46)
43. State Farm (37)
45. WellPoint (42)
55. Prudential (64)
79. Humana (79)
84. Liberty Mutual (82)
86. New York Life (71)
88. TIAA-CREF (87)
89. Aetna (77)
93. Allstate (89)
100. Nationwide (127)
112. Travelers (106)
116. Northwestern Mutual (112)
121. MassMutual Life Insurance (101)
128. Aflac (125)
130. Cigna (122)
131. Hartford Financial Services Group (117)
144. USAA (145)
169. Progressive (164)
190. Loews (168)
202. Chubb (185)
219. Coventry Health Care (212)
221. Health Net (179)
247. Lincoln Financial (235)
250. Guardian Life Insurance Co. of America (245)
258. Genworth Financial (243)
260. Unum Group (239)
289. Reinsurance Group of America (290)
295. Principal Financial (268)
310. Assurant (285)
332. Thrivent Financial (318)
382. American Family Insurance Group (358)
385. Amerigroup (396)
401. WellCare Health Plans (420)
411. Mutual of Omaha Insurance (399)
420. Pacific Life (405)
429. Auto-Owners Insurance (425)
453. Centene (493)
471. W.R. Berkley (475)
472. Fidelity National Financial (398)
482. Western & Southern Financial Group (456)
497. Erie Insurance Group (461)
500. Molina Healthcare (—)

Requiem for an Earnings Reporting Season

By James Gutman - May 11, 2012
For those of us crazy enough to listen to all the quarterly earnings calls of publicly held Medicare Advantage and Part D plan sponsors, there always are a few "rewards" in the form of especially quotable remarks of company executives. And the just-completed first-quarter 2012 round of calls was no exception. Beyond the corporate-speak of being "pleased" with their results, as most of the companies said, there were some examples of picturesque speech and candor that seem worthy of special mention.
In the category of imagery use in financial-results comments, consider first Humana Chairman and CEO Michael McCallister's response to a question about companies repositioning themselves to gear up for expected business managing Medicare-Medicaid dual eligibles. "There are a lot of chairs moving around," observed McCallister. On the overall climate facing health plans in 2012, UnitedHealth Group President and CEO Stephen Hemsley said, "We greatly respect the headwinds facing us this year." And in a comment that would make Yogi Berra proud, Health Net, Inc. CEO Jay Gellert, answering a question about the pricing climate in its California market, said, "We're comfortable that we've been able to figure out what's going on with us."
In the candor category, Universal American Corp.'s Greg Scott, CEO of APS Healthcare, which Universal just acquired, gets an honorable mention for "Exchanges are still a 'TBD' for us." Another honorable mention goes to WellPoint, Inc. Chief Financial Officer Wayne DeVeydt for acknowledging that "the senior business is really a long-term turnaround focus." For pure humility, it's hard to top Gellert of loss-reporting Health Net, Inc., who said that "we're deeply disappointed in the first-quarter results and know we'll have to execute for the rest of the year to regain your trust."
But probably the winner and still champion in both categories is the always colorful Coventry Health Care, Inc. Chairman and CEO Allen Wise, who, when speaking of the company's results so far in the Kentucky Medicaid market, said, "Actually, we're getting our tails kicked" and "It's ugly, but it's going to get better." Do you have any other nominees that can top this?

As Generics Wave Continues, Plans Seek Tools to Track and Manage Copay Card Use

Reprinted from DRUG BENEFIT NEWS, biweekly news, proven cost management strategies and unique data for health plans, PBMs, pharma companies and employers.
By Lauren Flynn Kelly, Editor
May 11, 2012 Volume 13 Issue 9
Managed care organizations are increasingly being put in a position of subsidizing consumer copay coupons as pharmaceutical manufacturers attempt to maintain market share of brand-name drugs. And while coupons may be considered beneficial by certain stakeholders outside the pharma industry, there are ways plans can curtail their use without negatively impacting the patient-clinician relationship, suggested two pharmacy benefit experts.
“These cards are coming fast and furious and as we see a record introduction of generics, there’ll be a very close correlation to the number of cards being introduced,” predicted Rob Noel, practice leader, managed care market, at Pharmaceutical Strategies Group, LLC, speaking at the April 26 AIS webinar, “Health Plan Strategies to Combat Consumer Drug Copay Coupons.” As of November 2011, there were 362 cards being offered, compared with just 86 in July 2009, he said, citing a study released by the Pharmaceutical Care Management Association (DBN 11/11/11, p. 7).
While opponents of the cards argue that they raise plan sponsors’ drug costs by steering patients toward high-cost, nonpreferred drugs, pharmacists and physicians are fans of the cards, and consumers know little about their impact on plans, explained Brent Eberle, R.Ph., vice president of health strategies at Wisconsin-based PBM Navitus Health Solutions, LLC, who also spoke at the webinar.
Eberle pointed out that pharmacists are in favor of the cards because they receive a secondary dispensing fee paid by the pharmaceutical company sponsoring the copay card. The drug company essentially acts as the secondary payer because pharmacists submit claims to both the drug company and the insurer. “And if the copay has been a barrier to refill and adherence, it does contribute to increased business as well,” he observed.
Physicians like the cards because they not only enhance access to medications that patients might not otherwise be able to afford, but they come with toll-free numbers and Web sites with a great deal of information about the medication and the patient’s condition, which saves the physician time, added Noel.
Recognizing that there are two sides to the copay coupon debate, Eberle said one of the challenges in looking at ways to manage these cards is determining when it’s appropriate to work against them and when it might be to an insurer’s advantage to work with them.
Aside from traditional plan design strategies such as increased cost sharing for brand and specialty tiers or the more aggressive approach of implementing a closed formulary, Eberle advised that payers consider a more targeted method of removing certain brand products from specific categories that have ample generic options as opposed to eliminating coverage of an entire tier. “This is more of a scalpel approach and can be targeted to specific products and help drive utilization to preferred products, which can lead to increased generic utilization and also can lead to increased rebates on preferred products as your formulary compliance is improved,” suggested Eberle.
Supporters of copay cards have argued that PBMs want to combat their use simply because they’re concerned about losing rebate revenue (DBN 12/16/11, p. 6), but Eberle argued that from Navitus’s perspective, that’s not the case. “100% of all rebate revenue goes directly back to our clients, so we do not benefit in any way, shape or form from rebate revenue. And we combine that in when we do our pharmaceconomic modeling to determine our net cost,” he maintained. “I think if you have a different model or your incentives are different, any spillage away from preferred products does decrease revenue and drive up the plan cost but also could potentially take money away from the PBM if they’re generating revenue from that perspective. Whether it’s being done to increase PBM revenue in those traditional models or decrease plan costs, the end result I think is similar.”
Plans Can Work With Pharmacies, Prescribers
Some additional payer strategies outlined by Eberle are:
·         Utilization edits. “If your hands are tied from a plan design perspective and don’t have the ability to remove specific products from the formulary, the next approach is to get at a similar end result by applying prior authorization and step edits across the brand and specialty products that you are concerned may be targets of copay cards.…And using your step therapy and prior authorization rules, you can work with prescribers to get those policies adopted quickly.”
·         Partnering with the pharmacy network. If plans have an opportunity to work with a more limited pharmacy network, that may be a good opportunity to drive and dictate how these cards are used, such as implementing language in the pharmacy contract that limits the use of cards to only those products that are on formulary. Other options are to mandate plan approval prior to those cards being used or require that the information be provided back to the plan so it can track how many cards are being used and who’s using them. This may not be as doable with a broad network, he added.
·         Member and prescriber education. “It’s pretty clear that members are only hearing one side of the debate in terms of the savings that can be available to them. So it’s really about educating the members on the purpose of the cards, the true cost of the products that the cards are being used for and making sure the members understand there may be times where it’s completely appropriate or where it’s really working against the payers’ true cost, and that includes being prepared with specific examples.” Employers can get involved in this as well through various forums, he suggested. Depending on the relationship that a plan has with its prescriber network, there may also be an opportunity to educate the physician around how the cards are shielding members from true drug costs and the potential negative impact down the road once the cards expire.
Tracking Copay Card Use Is Difficult But Doable
One of the biggest challenges for insurers and PBMs looking to manage copay cards is tracking their use and figuring out which ones are impacting a plan’s membership. That’s particularly difficult because the card is processed after the claim is adjudicated to the PBM, asserted Eberle. “The data that is shared is really limited in most cases to between the sponsor of the card and the pharmacy, and it’s really hard for the payers to get any access to that,” he sighed.
Nevertheless, Eberle said there are several methods a plan can adopt to identify situations where those cards are being used:
·         Monitor tier 3 utilization or utilization of particular products. “If you start to see a spike despite a benefit change such as an increase in copay and you’re still seeing utilization that’s higher than what you’d expect, then it’s very likely that the copays are being offset with some type of discount card.”
·         Develop tracking reports for products being heavily promoted with cards.
·         Ask manufacturers to supply data on the number of cards being used in your market through your rebate contracting group and industry relations team.
There may also be opportunities to partner with a brand manufacturer on a copay card, such as looking to improve adherence in situations where cost is a barrier or offering copay cards for over-the-counter products, he added.