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It doesn’t seem possible that the Medicare prescription drug benefit turns 20 years old this year, but it’s true. The legislation was signed into law December 8, 2003, following years of unfruitful efforts to add the benefit to the nation’s premier healthcare program for seniors and the disabled. While the implementation of the drug benefit didn’t begin until 2006, the implementation effort started immediately following President George W. Bush’s signature.

Medicare kicked off the program with voluntary drug discount cards that Medicare beneficiaries could use to trim their drug expenses. The cards provided a credit of $600 for eligible prescription drugs with a co-insurance of 5% to 10% depending on income. Seniors with incomes up to 135% of the poverty level were eligible for an additional $600 credit in 2005.

Impact on Long-Term Care of Part D

Prior to 2006, the primary payer for nursing home residents’ prescription drugs was Medicaid. Since two-thirds of nursing home residents were dually eligible for Medicare and Medicaid, they relied on Medicaid for drug coverage.

The LTC pharmacy industry fought across dozens of Medicaid drug programs against lower reimbursement at a time when only a few states provided any differentially higher reimbursement for institutional residents, usually added reimbursement for dispensing in unit dose. At the time, I was executive director of an LTC pharmacy trade association. In 2004, we had contract lobbyists in 28 states devoted to pushing back against dispensing fees as low as $1.35. In 2006, that all changed when dual eligibles began getting their drug benefit through Medicare.

Rocky Beginning for Part D

During the pre-implementation phase of the Part D program, CMS reached out to our trade group and other organizations, including ASCP®, to prepare the health plans to serve nursing home residents. Over the course of several meetings and conference calls, CMS created a long-term care guidance that delineated requirements for plans serving residents of nursing homes. This proved invaluable in motivating PBMs to listen and act when claims were unresolved or improper prior authorizations were imposed.

Despite our collective best efforts, the initial rollout in 2006 proved chaotic. Pharmacies were quickly overwhelmed with claim denials and delays, and CMS quickly responded by agreeing to regular semi-weekly conference calls to review operational status of the benefit to LTC residents. Problems were reported and CMS had conversations with PBMs, and eventually the chaos ended.

Future of Part D

As we observe the 20th anniversary of the Medicare drug benefit, a recent survey shows overwhelming satisfaction with the value of the program among seniors. Pharmacies have benefited from CMS’ willingness to better serve LTC residents, and most pharmacy managers agree that Medicare coverage is a better option for dual eligibles than Medicaid.

Pharmacies have begun to experience changes as Medicare beneficiaries are increasingly likely to be enrolled in managed Medicare plans, which gives health plans more discretion in how medications are covered and reimbursed.

Most observers agree that the Medicare drug benefit has been successful. The bonus has been that the total cost to taxpayers has been consistently lower than projected by the Congressional Budget Office. This is attributable to competition between plan sponsors to attract Medicare enrollees. They have an incentive to keep prices as low as possible.

The looming problem is how Medicare will contend with rising drug prices. Most new entrants are expensive biologics and other specialty drugs. CMS is grappling with potential new treatments for conditions such as Alzheimer’s disease, which, when approved, have the potential to push costs much higher and perhaps result in the imposition of new restrictions on access to new therapies.

Congress and the Biden Administration have their eye on Medicare Managed Care plans’ use of prior authorization (PA) and have set a 2026 deadline for requiring plans to facilitate online resolution of PAs.

Whatever the future holds, let’s wish Medicare Part D a very happy 20th birthday!

X Factors for Success in Medicare Part D

  • Stay well-informed on the latest CMS policies related to Medicare Part D.
  • If you haven’t done so already, start monitoring the number of residents you serve who are covered by Medicare Managed Care, also known as Part C. It’s important to note the coverage and reimbursement policies for Part C differ from those of other Medicare plans.
  • Keep a lookout for Medicare landscape files to see which plans are most likely to be auto-assigned to dual eligibles.

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Written by: Paul Baldwin, Baldwin Health Policy Group
Paul’s pharmaceutical industry experience in public and government affairs led to becoming Executive Director of the Long Term Care Pharmacy Alliance, helping lead the industry through the Medicare Modernization Act and creation of the prescription drug benefit. Paul was VP of Public Affairs for Omnicare before founding Baldwin Health Policy Group.

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