Part D Rule Reduces Plan Reassignments For Low-Income Enrollees

CMS' new approach to setting the premium "benchmark" for low-income enrollees in Medicare drug plans will trim the number of enrollees who are reassigned each year - but not eliminate the issue.

The approach, outlined in a ¹ final rule published April 3 in the Federal Register, revises the weighting methodology used by CMS to calculate the low-income benchmark premium. It takes effect beginning in 2009.

The rule calls for CMS to calculate the low-income premium amounts by weighting each plan's premium with its share of enrollees receiving Medicare's low-income subsidy, rather than its share of total Part D enrollment as is done now.

Individuals receiving Medicare's low-income subsidy are automatically assigned to plans with premiums below the benchmark or enrolled with assistance from certain other organizations. These LIS enrollees pay no premiums out of pocket to these plans.

But they might be reassigned in future years to a different plan, if their current Part D plan's premium later exceeds the benchmark, a potential disruption for both individuals and plans.

In 2008, 9.4 million LIS beneficiaries were enrolled in Part D, according to CMS.

CMS estimates 850,000 fewer LIS members would have been moved to new Part D organizations for 2008 if the new benchmark method had been used.

However, 1.3 million enrollees would still have had to move to a new plan sponsor.

In practice, fewer LIS enrollees were moved this year because CMS had a demonstration project under way to test weighting methods. Part of the demonstration allowed plans to keep current LIS enrollees if premiums exceeded the benchmark by a "de minimis" amount ($1). That demonstration will not be continued for 2009.

Nonetheless, due to premium increases, some of the largest Part D sponsors reported substantial attrition in LIS membership this year. UnitedHealth lost about 600,000 members and Humana, approximately 290,000, primarily due to reassignment of LIS enrollees ² ('The Pink Sheet' Feb. 25, 2008, In Brief).

A proposed rule published by CMS in January to address low-income enrollee shifts retained the requirement that weighting reflect total Part D enrollment (³ (Also see "Part D Enrollment, Formularies And Other Medicare Drug Coverage In Brief" - Pink Sheet, 14 Jan, 2008.), p. 27).

However, commenters persuaded the agency to focus weighting calculations solely on LIS enrollment.

The new calculation method is expected to raise the benchmarks, which in turn, is expected to reduce LIS reassignments.

The approach downplays the impact of enrollment in Medicare Advantage drug plans, which typically have fewer LIS beneficiaries, and gives more weight to premiums in stand-alone prescription drug plans.

Drug-only plans tend to get the majority of LIS assignments. They also typically have higher drug premiums than MA-PDs, which can lower their drug premiums through rebates from other services.

Medicare Costs To Increase By $90 Million

With higher premiums, the cost of the Part D benefit to Medicare will increase by $90 million in 2009 under the rule, CMS estimates.

Over the next 10 fiscal years, 2009 through 2018, Medicare's Part D costs are expected to increase by $1.68 billion, the rule adds.

To the agency, greater stability is worth the cost. "Although there is no quantifiable monetary value to CMS to reducing reassignments, we feel this benefit is important as it will increase program stability and continuity of care," the agency states. "The rule supports pharmacy and formulary consistency for the beneficiary."

- Cathy Kelly ([email protected])