More choices and lower premiums available for MA and PDPs in CY 2018

As calendar year (CY) 2018 approaches, CMS reports that both the Medicare Advantage (MA) and the Part D prescription drug plan (PDP) programs continue to grow, currently providing care and services to more than one-third of Medicare beneficiaries. CMS also reports that the average monthly premium for an MA plan will decrease, enrollment in MA is projected to reach an all-time high, and premiums for a basic PDP will fall for the first time since 2012.

Earlier this year, CMS announced new policies in the 2018 Rate Announcement and Final Call Letter that support flexibility, efficiency, and innovative approaches that are designed to improve quality accessibility and affordability in MA and PDP programs.

MA program data

CMS data provides the following information regarding the MA program for CY 2018:

  • MA enrollment is projected to be an all-time high of 20.4 million beneficiaries, representing a 9-percent (1.7 million) increase from 18.7 million in CY 2017.
  • MA average monthly premiums will decrease by $1.91 to $30.
  • 99 percent of Medicare beneficiaries will have access to at least one MA health plan in their area.
  • More than 85 percent of Medicare beneficiaries will have access to 10 or more MA plans.
  • The average number of MA plan choices per county will increase by two plans—up to approximately 29 plan choices per county.
  • Access to popular supplemental benefits, such as dental, vision, and hearing, continues to grow in MA plans.
  • Approximately 77 percent of MA enrollees in 2017 will have the same or lower premium in 2018 if they continue in the same plan.

PDP program data

CMS projects that the average monthly premium for a basic Medicare PDP in CY 2018 will decrease by $1.20 to an estimated $33.50 per month. CMS also reports that all Medicare beneficiaries will have access to at least one stand-alone Medicare PDP.

Medicare Open Enrollment improvements

CMS is announcing several consumer-friendly improvements so that people with Medicare can make an informed choice between original fee-for-service Medicare and MA plans during open enrollment. These improvements include: (1) updating the “Medicare & You” handbook to better explain coverage options; (2) establishing a help wizard on Medicare.gov that will point to resources to help make informed health care decisions; and (3) establishing a new email communication opportunity to improve the customer service experience through important messages and reminders.

2018 MA and PDP premium, bid amount, related information released

Important 2018 Medicare Part D prescription drug plan (PDP) and Part C Medicare Advantage (MA) information for MA organizations and PDP sponsors has been announced by CMS. The information includes the average basic premium for a PDP, the Part D national average monthly bid amount, the Part D base beneficiary premium, the income-related monthly adjustment amount (IRMAA) for enrollees in PDPs who have incomes above certain threshold amounts, the Part D regional low-income premium subsidy amounts, the MA regional preferred provider organization (PPO) benchmarks, and the MA employer group waiver plan (EGWP) regional payment rates.

Average basic PDP premium

The average premium for 2018 is based on bids submitted by drug plans for basic drug coverage for the 2018 benefit year and calculated by the independent CMS Office of the Actuary. The average basic premium for a PDP in 2018 is projected to decline to an estimated $33.50 per month. This represents a decrease of approximately $1.20 below the actual average premium of $34.70 in 2017. The decline comes despite the fact that spending for the Part D program continues to increase faster than spending for other parts of Medicare, largely driven by spending on high-cost specialty drugs.

Part D national average monthly bid amount

CMS computes the national average monthly bid amount from the applicable Part D plan bid submissions in order to calculate the base beneficiary premium. The national average monthly bid amount is a weighted average of the standardized bid amounts for each stand-alone PDP and MA prescription drug plan (MA-PD). The calculation does not include bids submitted by Medicare medical saving account plans, MA private fee-for-service plans, specialized MA plans for special needs individuals, Program of All-Inclusive Care of the Elderly (PACE) programs, any “fallback” PDPs, and plans established through reasonable cost reimbursement contracts. The reference month for the 2018 calculation was June 2017. The national average monthly bid amount for 2018 is $57.93.

Part D base beneficiary premium

The base beneficiary premium is equal to the product of the beneficiary premium percentage and the national average monthly bid amount. Part D beneficiary premiums are calculated as the base beneficiary premium adjusted by the following factors: (1) the difference between the plan’s standardized bid amount and the national average monthly bid amount; (2) an increase for any supplemental premium; (3) an increase for any late enrollment penalty; (4) a decrease for MA-PDs that apply MA A/B rebates to buy down the Part D premium; and (5) elimination or decrease with the application of the low-income premium subsidy. The Part D base beneficiary premium for 2018 is $35.02. In practice, actual premiums vary significantly from one Part D plan to another and seldom equal the base beneficiary premium.

Income-related monthly adjustment amount (IRMAA)

If a beneficiary’s “modified adjusted gross income” is greater than the specified threshold amounts ($85,000 in 2018 for a beneficiary filing an individual income tax return or married and filing a separate return, and $170,000 for a beneficiary filing a joint tax return), then the beneficiary is responsible for a larger portion of the total cost of Part D benefit coverage. Therefore, in addition to the normal Part D premium paid to a plan, such beneficiaries must pay an IRMAA to the standard base beneficiary premium of $35.02 for 2018. Beneficiaries do not pay the IRMAA to the Part D plan; instead, IRMAAs are collected by the federal government.

Part D regional low-income premium subsidy amounts

Full low-income subsidy (LIS) individuals are entitled to a premium subsidy equal to 100 percent of the premium subsidy amount. A Part D plan’s premium subsidy amount is the lesser of the plan’s premium for basic coverage or the regional low-income premium subsidy amount (LIPSA). The 2018 regional LIPSAs are available through the CMS website.

MA regional PPO benchmarks

The standardized PPO benchmark for each MA region is a blend of: (1) a statutory component consisting of the weighted average of the county capitation rates across the region for each appropriate level of star rating; and (2) a competitive, or plan-bid, component consisting of the weighted average of all of the standardized A/B bids for regional MA PPO plans in the region. For 2018, the national weights applied to the statutory and plan-bid components are 66.5 percent and 33.5 percent, respectively.

Beginning in 2017, these benchmarks reflect the average bid component of the regional benchmark excluding EGWPs. The statutory and plan-bid components of the MA regional standardized benchmarks for 19 of the 26 MA regions are available from CMS. In the remaining seven MA regions, there are no regional MA plans.

MA regional EGWP payment rates

For detailed descriptions of the payment policy finalized for 2018 MA regional EGWP payment rates see the 2018 Advance Notice and Rate Announcement. The payment rates for Regional EGWPs are in the file Regional Rates and Benchmarks 2018 which can be accessed on the CMS website.

Report examines Medicare Part D trends since 2006

Seventy-one percent of Medicare beneficiaries are enrolled in Medicare Part D plans in 2016, in either stand-alone Part D plans (PDPs) (60 percent) or Medicare Advantage drug (MA-PD) plans (40 percent). A Kaiser Family Foundation (KFF) report examined trends among plans in 2016 and since 2006, analyzing areas including differences between PDP versus MA-PD plans, cost-sharing, and market share among insurers.

Enrollment and availability

In 2006, only 28 percent of beneficiaries were enrolled in MA-PD plans, increasing 12 percent by 2016. MA-PD plans sponsored by local firms play a larger role in that market segment than PDPs sponsored by local firms. At 886 in 2016, the number of available PDPs is lower than it has ever been. On average, 26 PDP plans are available to beneficiaries, compared to 55 in 2007. Sixteen MA-PD plans are available, on average.

Premiums, deductibles, and cost sharing

Premiums vary widely across plans, even among those offering an equivalent type of benefits. For example, basic benefit PDP premiums range from $11.40 to $139.70. They vary based on geography; the average basic benefit PDP monthly premium in New Mexico is $ 17.05, for example, compared to $37.13 in New Jersey. Average national monthly PDP premiums have increased by 6 percent since 2015 to $39.21, while MA-PD plan premiums have risen only modestly to $16.99.

While most PDP and MA-PD plans have five-tier formularies, tiered pharmacy networks, enhanced benefits, no additional gap coverage, and deductibles less than the standard $360 amount, more PDP enrollees are enrolled in plans with tiered pharmacy networks and more MA-PD plan enrollees are enrolled in plans with deductibles less than $360. In 2006, most enrollees were enrolled in plans with only three or four tiers, whereas in 2016, 98 percent of PDP enrollees and 96 percent of MA-PD plan enrollees participate in multi-tiered plans.

Coinsurance is becoming more common in PDPs, as 31 percent of enrollees pay coinsurance for preferred brand drugs and 96 percent pay coinsurance for non-preferred brand drugs. Still, almost all PDPs and MA-PD plans charge copayments for generic tiers. Most MA-PD plans use copayments for all tiers other than the specialty tier.

Market concentration

Market concentration has increased modestly since 2006, particularly among PDPs. UnitedHealth, Humana, and CVS Health enrolled 52 percent of all Part D participants in 2016. Should Aetna acquire Humana, the resulting company would account for 26 percent of all Part D enrollment in 2016, although it would account for 40 to 50 percent of enrollment in seven specific regions. If the both the Aetna-Humana and Anthem-Cigna mergers go through, 23 of 34 regions would be considered highly concentrated.

Legislation

Some senators would like to take action to stabilize the amount of money that rural pharmacies pay for Part D prescriptions. Senators Shelley Moore Capito (R-WVa) and Jon Tester (D-Mont) noted that some Medicare Part D sponsors and pharmacy benefit managers have begun retroactively imposing fees on pharmacists weeks and months after prescriptions were filled. The Improving Transparency and Accuracy in Medicare Part D Drug Spending Act (H.R. 5951) would prohibit such retroactive fees with respect to accurate claims.