Medicare Part D Comes Of Age: Most Beneficiaries Now In Fully Integrated Plans
Executive Summary
Part D has reached a significant milestone: for the first time, a majority of beneficiaries in the outpatient drug program are also enrolled in fully integrated Medicare Advantage plans. That opens up opportunities to learn more about value-based designs and longer-term outcomes.
The US Medicare Part D program has reached a significant milestone more than 15 years after it debuted: for the first time, a majority of beneficiaries in the outpatient drug program are also enrolled in fully integrated Medicare Advantage plans.
That development was noted during an update presentation on the Part D program during a Medicare Payment Advisory Commission meeting last month.
“In 2021, Part D’s enrollment of about 48 million and was split pretty evenly between stand-alone prescription drug plans and Medicare Advantage drug plans, which is a dramatic shift from the start of the program,” MedPAC’s Rachel Schmidt said.
Of note, beneficiaries in the low-income subsidy side of the program have migrated into MA more quickly than beneficiaries who do not get the subsidies. Only 14% of LIS beneficiaries were in MA plans in 2007, but as of 2021 53% are. For non-LIS recipients, the share has grown from 30% to an even 50% in 2021.
That detail was highlighted by Commission Chair Michael Chernew (Harvard) in closing remarks on the update session. It “struck me ... that the program is increasingly becoming a Medicare Advantage program,” he said.
The transition from stand-alone Part D plans – and, by extension, the traditional fee-for-service Medicare – into fully integrated MA plans was a key goal for insurers who entered the Part D program when it launched in 2006.
Companies like Humana Inc. came in with aggressively low premiums in hopes of capturing as large a share of patients as possible, with the idea that many could be migrated into more lucrative MA plans. (Also see "Playing Offense in Part D: Three Aggressive Medicare Strategies Demand Pharma Attention" - Pink Sheet, 1 Dec, 2005.)
For the pharmaceutical industry, increased enrollment in MA plans has a salutary effect of somewhat sheltering drug spending from attention as a stand-alone, siloed cost line. MA plans have more incentives to consider offsetting savings from use of prescription drugs than stand-alone plans, and also more interest in long-term benefits – though there are significant levels of churn among MA plan enrollees.
For MedPAC’s Chernew, it also means considering some of the different structures in MA while monitoring the health of Part D – including things like a value-based insurance design (VBID) model. (Also see "Medicare Value-Based Model May Provide Test For Biosimilars – At Some Point" - Pink Sheet, 23 Aug, 2016.)
“There’s some unique things going on in Medicare Advantage, some different incentives in Medicare Advantage, both in terms of how they manage the interplay of formulary, and there’s a VBID demo in Medicare Advantage that allows them to do some really interesting things for chronic care medications, for example,” Chernew observed. “So I think going forward, that’s just a useful thing to keep our eye on.”
Enthusiasm for the growth of Medicare Advantage has become a somewhat surprising point of bipartisan agreement in successive presidencies. The Biden CMS team appears to be continuing that trend.
Republicans can typically be counted on to support the MA program as a move towards privatization in the largest government run health care program in the US. But Democratic administrations have embraced it as well – reflecting in part enthusiasm among beneficiaries for many of the added benefits offered by MA plans that are not part of the fee-for-service program.
Center for Medicare Director Meena Seshamani talked about her commitment to MA and the potential to learn lessons for the overall program during an interview as part of the Prevision Policy/Friends of Cancer Research Biopharma Congress.
“I see a huge opportunity for partnership with Medicare Advantage,” Seshamani said. “We want to understand better how care innovations are changing outcomes and costs, so that we can further drive the value of the Medicare dollar and improve the health of our beneficiaries.”
“We would love to hear more about what plans have learned from offering [value-based] arrangements,” she continued. “Where there are opportunities to leverage lessons learned across our programs so we can all move forward and drive together and row in the same direction to really achieve that shared vision.”
“Another example is with supplemental benefits: meals, transportation, in-home support services. We want to learn how those are working, what is the take up, how are beneficiaries using them, what are the outcomes. That could inform a lot of what we’re doing. We would love to hear how plans are working to keep their members healthy and how they are thinking about innovation in the drug space.”