Medicare's Prescription Drug Plan Finder: Using Technology to Benefit Medicare Clients

By Phillip Fuller, DBA, Betty B. Green, and Michael M. Grayson, DBA, CPA

Executive Summary

During each annual election period, from November 15 to December 31, individuals enrolled in valid Medicare prescription drug plans (PDPs) can switch to another plan. Those who are eligible for Medicare Part D but are not enrolled can also register. The number of PDPs available increased 31 percent from 2006 to 2007. Some plans increased premiums while reducing the cost of medicines to enrollees. Other plans lowered their premiums and reduced the number of preferred brands covered. Financial planners can help clients evaluate and enroll in PDPs by utilizing Medicare's Prescription Drug Plan Finder (Finder). Finder provides information about premiums, deductibles, cost of medicines, and restrictions, and can be used to compare three PDPs at a time. Finder can help clients identify the PDPs that best satisfy their requirements.

Until recently, many senior citizens have lacked access to affordable prescription drugs. The Medicare Prescription Drug, Improvement and Modernization Act of 2003 was designed to offer access to stand-alone prescription drug plans (PDPs), referred to as Medicare Part D, to Medicare participants who have Medicare Parts A and/or B, or participants in Part C who lacked prescription drug coverage. In January 2006, Medicare enrollees began participating in PDPs offered by Medicare-approved health insurance companies. In the latter part of 2006, Part D enrollees were provided an opportunity to switch to a different PDP.

Some individuals who would have benefited by switching did not switch, perhaps because they found the switching process confusing, time-consuming, and/or frustrating. Financial planners can help clients evaluate and enroll in, or switch, PDPs by using Medicare's Prescription Drug Plan Finder. This is particularly important because in every year from 2007 forward, individuals eligible for Part D can switch PDPs or register for the first time for coverage.

Enrollment Periods

During the annual election period (AEP) from November 15 to December 31, individuals enrolled in a valid PDP can switch to another plan. Those who are eligible for Medicare Part D but not already enrolled in an approved PDP can select a plan. Satisfied participants do not need to reapply in order to continue their coverage. Most individuals who do not take advantage of the AEP in 2007 must wait till the next AEP, in November of 2008, to make a change.

Individuals can enroll in a stand-alone PDP during their initial enrollment period (IEP), which is the three months before, the month of, and the three months after the month of initial eligibility. There are also some Special Enrollment Periods (SEPs). The more common SEPs are associated with:

• Moving out of current plan's service area
• Losing one's creditable prescription service through no fault of one's own
• Resigning from a Medicare private drug plan that stops offering coverage, fails to provide benefits on a timely basis, or misleads customers about the benefits provided

Although participation in Part D is touted as being voluntary, individuals are subject to penalty if they do not sign up for Part D when they first become eligible, or if they go without creditable coverage (coverage that is at least as good as Part D) for more than 63 days. The penalty may be equal to 1 percent of the national monthly average premium for each full month without coverage.

Many seniors who selected PDPs in 2006 did not switch plans in 2007, even though more PDPs were available. Individuals whose pharmacological needs changed during the year may have found it advantageous to switch plans, depending on the plan's cost and formulary.

Changes in 2007

The basic PDP establishes minimum standards that all Medicare approved PDPs must meet or exceed. The basic PDP changed in 2007. Table 1 indicates that the deductible for the standard plan increased by $15. The brackets increased slightly. The infamous "donut hole" whereby the enrollee pays 100 percent of the plan's cost of covered medicines increased by approximately $351. Catastrophic cost increased minimally.

Table 1

Changes in the Basic Policy

* In 2007 (2006) the catastrophic out-of-pocket costs are 5 percent of covered drugs, or a co-payment of $2.15 ($2.00) for covered generic/preferred drugs and $5.35 ($5.00) for covered brand-named, whichever is higher.

Table 2 indicates that the number of PDPs available increased by 31 percent, from 1,429 in 2006 to 1,875 in 2007. Though the nominal number of plans in each category increased, the actuarially equivalent plans decreased by 7.7 percent, while the enhanced PDPs increased by 4.8 percent.

Table 2

Distribution of PDPs and 2006 Enrollment by Type of Benefit, 2006-2007

Note: Excluded PDPs in the territories

Source: Hoadley, Jack, Elisabeth Hargrave, Kate Merrell, Juliette Cubanski and Tricia Neuman. 2006. Benefit Design and Formularies of Medicare Drug Plans: A Comparison of 2006 and 2007 Offerings: A First Look.  Henry J. Kaiser Family Foundation. November, p.1.

One of the obvious concerns some Part D participants have is the gap coverage in the donut hole. One hundred twenty plans offered gap coverage in 2006, while 537 offered gap coverage in 2007. Seventy-one percent of the PDPs do not offer gap coverage.

Gap coverage primarily pays for generic drugs. Twenty-seven plans in 2007 offer both generic and brand gap coverage. Average premiums for (1) PDPs with no gap coverage, (2) generic-only coverage, and (3) generic plus brand coverage in 2007 are $30.17, $51.11, and $93.46, respectively (Hoadley et al. 2006). Individuals who believe there is only a remote possibility of needing gap coverage may find it cheaper to select policies without gap coverage.

Hoadley et al. (2006) analyzed changes that occurred in the ten PDPs with the largest 2006 enrollment, which collectively accounted for 66 percent of the total stand-alone Part D enrollment in 2006. They noted that some plans increased premiums while reducing the cost of medicines to enrollees. Other plans lowered their premiums but reduced the number of preferred brands covered. They recommended, "Beneficiaries considering their options in 2007 should take into account the many changes that occurred across plans. Because of the changes, the plan with the best choice for 2006 may not be the best choice in 2007."

Hoadley et al. (2006) also reported on changes in restrictions that occurred in the same ten PDPs. Six PDPs decreased the number of medicines subject to prior approval, while three increased that number. All but one PDP increased the number of drugs subject to quantity limits. Four PDPs increased the number of medicines requiring step therapy, while two decreased that number. Step therapy means a plan will agree to cover a medicine only if an enrollee has already tried one or more drugs which did not work or which caused intolerable side effects. Step therapy is frequently called fail-first policy.

As the PDPs continue to morph and clients' needs change, other plans might better satisfy their requirements in 2008 or later years. Failure to switch PDPs can result in avoidable expenses. Annual review is recommended.

Financial Planners to the Rescue

It is reasonable to assume that PDPs will continue to change in 2008 and beyond, and that some Part D enrollees will continue to be frustrated, confused, and intimidated by the process of selecting the plan that best satisfies their needs. Financial planners can help clients select PDPs by using Medicare's online Prescription Drug Plan Finder (Finder). Finder can be accessed through www.medicare.gov by utilizing the Prescription Drug Plans link. The link Compare takes the visitor to a screen where he or she can click on Find & Compare Plans, which takes the user to the screen providing access to two alternatives for evaluating plans: general search and personalized search.

The personalized search is recommended in most situations as it provides specific information about a client's current enrollment and indicates if the client has been approved to receive financial assistance. The estimated costs of PDP premiums, deductibles, and drugs are based on the level of financial assistance awarded. In most situations, financial planners will not be concerned about a client's qualification for financial assistance, due to the client's higher income and value of assets, although planners may also be providing services to qualifying individuals—for example, relatives or friends of their regular clients. An individual (couple) whose annual income is at least $15,315 ($20,535) or with countable assets worth at least $11,710 ($23,460) will not qualify for financial assistance (Medicare Rights Center, 2007). Some assets are not counted, such as burial plots, vehicles, or the primary residence. Since numerous people who had low earnings but too high a value for assets will not qualify for assistance, some politicians are trying to increase the valuation of assets an individual and couple can own in order to qualify.

To use the personalized search at Medicare's Find & Compare site, the following client information is required:

• Medicare claim number
• Effective date of Part A or Part B
• Last name
• Date of birth
• Zip code

Once the client's information is entered, the next screen(s) may contain a short survey. The following screen provides information concerning current enrollment, potential for financial assistance, and other options.

Drug List

The next screen allows access to either the drug cost for available plans, or available plans without drug cost, if a list of medications had previously been entered and saved. The drug list can be retrieved at this site. To get estimated cost for available plans, click on the link Enter My Drugs, and enter each drug name or search alphabetically for a prescription.

When a medicine is entered, Finder indicates if a generic alternative is available. The drug list can be saved at various stages of the process, enabling the addition or removal of medicines before an individual's list is finalized. Once the medicines are entered, click on the Continue link to specify each medicine's quantity and dosages.

Your Personalized Plan List

The next screen allows for selection of a pharmacy. In most cases, selecting a particular pharmacy is not recommended. However, specifying a pharmacy is recommended if the PDP is being chosen by or for someone in a nursing home or with limited mobility and/or other limitations, who has a preferred pharmacy. The next screen, Your Personalized Plan List, provides an overview of the PDPs available by Zip code. The PDPs, Medicare Health Plans, and Special Need Plans are accessed by clicking on their respective links.

Medicare Health Plans are plans offered by private companies that contract with Medicare to provide Medicare A and B, (and in most cases, Part D) benefits. Special Need Plans are Medicare Advantage coordinated plans that focus on individuals who are institutionalized, dual eligible – qualifying for both Medicare and Medicaid, and/or have severe or disabling chronic conditions. The following discussion is based on selecting a stand-alone PDP.

Each plan's name and identification number, enrollee's estimated annual cost, monthly premium, annual deductible, and number of network pharmacies in the area will be presented. The client's current plan will be presented first. Other PDPs are initially presented, based on affordability. Plans can be sorted based on estimated cost, monthly premiums, annual deductible, or number of network pharmacies. Options to identify favorite plans and a link to enroll are provided.

We now present how to review an individual plan to acquaint users with the information that Finder provides. We then present how to use Finder to compare three plans simultaneously.

Reviewing an Individual Plan

Clicking on the name of a specific plan will present information about the plan. At the top of the page, contact information offers a link to access the plan's Web site. The Lower My Cost Share link recommends cheaper alternatives for brand name medicines and for medicines not included in the plan's formulary. The View Pharmacy Network link provides the names of local area pharmacies that participate in the plan. View Important Notes and Benefits Summary link offers comments relating to the plan, such as co-pay, deductibles, and whether the plan is offered nationwide.

The Fixed Cost section displays the plan's monthly and annual premiums and deductible. The Annual Drug Cost section presents the full year and remainder of year drug cost (including premiums) for preferred retail and mail order pharmacies. When selecting a plan that will be enforced for only part of the year, using the PDP's remainder of the year costs may be advisable.

The Drug Coverage Information section provides the formulary status, or tier, of each medicine. By law, medicines not part of the formulary will not be covered by Medicare, although a plan may choose to cover one or more as a supplemental benefit. To reduce cost, it may be advisable to have the client's physician identify an appropriate substitute medicine listed on the formulary.

Finder presents restrictions on prescriptions. Medicines may require prior authorization, have quantity limits, and/or require step therapy. Enrollees who are stabilized and who were taking medications that otherwise fall under the step therapy restriction prior to enrolling in a plan, are not required to participate in step therapy. Their physician may need to inform the plan of the enrollees' medical history. In addition, a client's doctor can request exemption of restriction(s).

Monthly Drug Cost Details presents cost data at preferred network and mail order pharmacies. For PDPs with a deductible, the full monthly cost of each medicine is presented first, followed by: 2) monthly costs of each medicine after deductible is met but before reaching initial coverage limit, 3) monthly costs of each medicine after initial coverage limit is met but before exceeding the $3,850 out-of-pocket costs limits, and 4) monthly cost of each drug once the catastrophic threshold has been attained. For PDPs without a deductible, full monthly cost of each medicine before reaching initial coverage limits is presented first, followed by: 2) monthly costs of each medicine after exceeding initial coverage limit but before surpassing the $3,850 out-of-pocket costs, and 3) monthly cost of each drug once the catastrophic threshold has been attained. Information presented for clients with assistance may be different since they receive assistance in the donut hole. In addition, enrollees can view the estimated cost of medication at a specific preferred network pharmacy. After the cost information is presented on a per-medicine and aggregate basis, the My Drug section follows that can also be used to edit the client's drug list.

The Total Monthly Cost Estimator for Preferred Network Pharmacies presents the estimated total monthly costs for the next 12 months. Clicking onto the Show Explanation of These Costs link reveals how each monthly estimate is calculated. Perusing individual estimated monthly costs may enable the planner to better counsel clients. The screen also contains an enrollment link.

Compare Plan Benefits

On the Personalize Plan page, up to three plans can be selected. Clicking on the Compare link will open the Compare Plan Benefit screen, which allows simultaneous comparison of the three selected plans. Information for each plan is presented in a columnar format. Information initially focuses on total annual cost, deductibles, and premiums, followed by monthly cost of drugs, individually and aggregate, both before and after the deductible has been met. Number of network pharmacies in the area and availability of mail order delivery are indicated.

Drug coverage information is presented next. Tier/classification of each medicine is indicated, in addition to restrictions such as prior authorization, quantity limits or step therapy requirements. Full monthly costs are presented for individual medicines and in aggregate. When reviewing the information, one can access a link to enroll in a chosen plan. The Compare page has an icon called More Information, which allows the options of: View Plan Drugs Details, View Important Notes and Benefits Summary, and Lower My Cost Share, which present the same information discussed in the preceding section, Reviewing An Individual Plan.

Customer Service

Before selecting a plan it is prudent to click the link Get Plan Performance Information. This link provides information covering various aspects of customer service: Telephone Customer Service, Complaints, Appeals, Information Sharing with Pharmacists, and Drug Pricing. Finder uses a three-star ranking and provides data on which rankings are based:

• One-star ranking is considered poor, with service not meeting expectations.
• Two-star ranking is considered acceptable, with service meeting expectations.
• Three-star ranking is considered very good, with service better than expected.

In Telephone Customer Service, wait time and percent of dropped calls for customers and pharmacists are evaluated. Complaints are grouped in four categories: 1) benefit/access, 2) enrollment/disenrollment, 3) pricing and coinsurance, and 4) other. Appeals Performance evaluates the plan's response to special requests. Appeals Performance is rated on: 1) whether an appeal was handled in a timely manner, and 2) if an independent review entity agrees with the plan's decision. Sharing Information evaluates whether: 1) complete enrollment records have been made available to the pharmacist and 2) the plan's records match CMS records on beneficiaries who qualify for low income subsidies. Drug Pricing does not evaluate the cost of a plan, but only the accuracy of information presented in Finder. It evaluates: 1) percent of plan's updates available on Finder, and 2) percent of drugs in a PDP that experienced price increases.

Helpful Advice in Selecting a Plan

Planners should consider both cost and customer service aspects when helping clients select a plan. If and when things go wrong, the financial planner wants the PDP to handle the situation promptly and correctly. Though Finder evaluates how well PDPs interact with customers and pharmacies, it does not provide similar feedback about direct interaction between physicians and/or staff and the PDPs. Clients taking numerous medicines may find it advantageous to contact their primary physician's office to find out if the office works well with the PDP or sponsoring company.

Prior to enrolling in a plan, clients taking prescriptions not part of the formulary should ask their doctors if a similar medicine on the formulary list would be as effective. The physicians may be able to recommend PDPs that are more willing to approve requests for exemptions from restriction(s) and/or provide coverage for medicines not part of the formulary. Clients can be advised to discuss the PDPs with relatives and acquaintances who are participating in Part D to identify user-friendly PDPs.

Conclusion

There is already a demand for assistance in selecting a Medicare Part D plan. As baby boomers age, this demand will increase. Current and future Part D participants who find both the plans and the process for selecting plans confusing will need help in selecting plans for 2008 and future years. What may be the optimum plan in any given year may not remain adequate as changes occur in legislation, PDPs, the client's health, and the client's financial circumstances. Annual use of Finder will help clients make more informed and appropriate decisions.

Useful Internet Sites

www.ssa.gov – Social Security Administration

www.medicare.gov – Medicare

www.medicarerights.org – Medicare Rights Center

www.kff.org – Henry J. Kaiser Foundation

Glossary of Acronyms

AEP annual election period

IEP initial enrollment period

PDPs prescription drug plans

SEPs special enrollment periods

References

Hoadley, Jack, Elisabeth Hargrave, Kate Merrell, Juliette Cubanski and Tricia Neuman. 2006. Benefit Design and Formularies of Medicare Drug Plans: A Comparison of 2006 and 2007 Offerings A First Look. Henry J. Kaiser Family Foundation, November.

Medicare Rights Center. 2007. The Medicare Drug Benefit: What You Need to Know. www.medicarerights.org/partd_onepager_ny.pdf.

Authors' Information

Phillip Fuller, DBA, is a Professor of Finance at Jackson State University in Jackson, Mississippi. His research focuses on issues in the areas of personal finance and financial planning. His email address is finprof@aol.com.

Betty B. Green is Senior Medicare Patrol Coordinator for Aging and Adult Services, a division of the Mississippi Department of Human Services in Jackson, Mississippi.

Michael M. Grayson, DBA, CPA is an Assistant Professor of Accounting and Interim Chair of the Division of International Banking and Finance Studies at Texas A & M International University in Laredo, Texas.