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Medicare Says Obamacare Provided $5.7 Billion in Drug Savings; Free Preventive Service to 34 Million

Detailed reports shows state-by-state activity; emphasizes donut hole reduction, free preventive services, holding down costs, stopping fraud

Feb. 7, 2013 – A detailed report of the savings and benefits enjoyed by senior citizens in Medicare, since the passage of the Affordable Care Act (Obamacare), was released today by the Centers for Medicare and Medicaid Services. It highlights the $5.7 billion seniors saved by the shrinkage of the drug programs “donut hole,” the 34 million older Americans who have used a free preventive health service, program costs control and fight against fraud.

This report goes into detail on how the savings and benefits were used and include state-by-state figures on savings and usage.

Since the law’s enactment, 6.1 million Americans with Medicare who reached the Part D coverage gap also known as the “donut hole,” have saved over $5.7 billion on prescription drugs.  Drug savings of $2.5 billion in 2012 are higher than the $2.3 billion in savings for 2011. 

In 2012, people with Medicare in the “donut hole” received a 50 percent discount on covered brand name drugs and 14 percent discount on generic drugs.  As a result of the Affordable Care Act, coverage for both brand name and generic drugs will continue to increase over time until the coverage gap is closed. 

The Affordable Care Act also removed barriers for people with Medicare to get preventive services, many of which previously required cost-sharing for patients.   In 2012, many recommended preventive services were offered to people with Medicare, with no deductibles or co-pays, meaning that cost is no longer a barrier for seniors and people with disabilities who want to stay healthy by detecting and treating health problems early.  Use of preventive services has expanded among people with Medicare. 

In 2012 alone, an estimated 34.1 million people with Medicare benefited from Medicare’s coverage of preventive services with no cost-sharing.

Under the Affordable Care Act, the report says, Medicare program also performed well in several other areas in 2012: 

  • Compared to 2011, people with Medicare continued to pay moderate premiums for Medicare Part B benefits, which cover outpatient care, doctors' services, lab tests, durable medical supplies, and other services. 

  • Those who enrolled in Medicare Advantage and prescription drug plans paid average premiums lower than what they paid in 2010, and they had access to a wide range of plan choices. 

  • New techniques were implemented to detect, prevent and fight health care fraud.

Big savings for millions of seniors in donut hold

The Affordable Care Act makes prescription drug coverage (Part D) for people with Medicare more affordable  by gradually closing the gap in drug coverage known as the "donut hole." For many people enrolled in Medicare Part D, the “donut hole” occurs after they and their plan spend a certain amount of money for covered drugs, but before they hit catastrophic coverage in which they are only responsible for a small percent of their drug costs. Prior to the Affordable Care Act, an individual in the “donut hole” had to pay the full costs of prescription drugs.

The Affordable Care Act is closing the “donut hole” over time, by first providing a one-time $250 check for those that reached the “donut hole” in 2010, then by providing discounts on brand-name drugs for those in the “donut hole” beginning in 2011, and additional savings each year until the coverage gap is closed in 2020. 

People with Medicare in the “donut hole” receive the discounts when they purchase prescription drugs at a pharmacy or order them through the mail, until they reach the catastrophic coverage phase.  Since its enactment in 2010, the law has saved 6.1 million seniors and people with disabilities more than $5.7 billion on brand-name prescription drugs. 

The HHS Assistant Secretary for Planning and Evaluation projected average savings per Medicare beneficiary to be approximately $5,000 from enactment through 2022, while those with high prescription drug spending are projected to save much more – over $18,000. These projections, in addition to prescription drug plan data on 2012 spending, demonstrate that those with high drug costs are seeing considerable savings thanks to the Affordable Care Act.

Savings in both brand-name and generic drugs

In 2012, more than 3.5 million seniors and people with disabilities who reached the Medicare Part D coverage gap received discounts on brand- name prescription drugs.  These individuals with Medicare received more than $2.5 billion in discounts, or an average of $706 per beneficiary.  Savings for covered generic drugs while in the “donut hole” in 2012 totaled $105 million for 2.8 million beneficiaries.  

In 2012, coverage gap discounts allowed seniors and people with disabilities to save money on a wide variety of drugs, including:

  • Blood Sugar Lowering Drugs:  $435,794,413 

  • Asthma and Other Lung Related (non-cancer) Disease Drugs: $297,234,514

  • Triglyceride and Cholesterol Lowering Drugs: $240,495,663  

  • Drugs Used to Lower Blood Pressure: $138,497,053

  • Anti-dementia Drugs:  $120,878,582

  • Drugs Used to Treat Ulcers:  $101,888,578 

  • Cancer Drugs:  $97,263,505

  • Anti-depression Drugs:  $85,047,907 

  • Autoimmune Disease Anti-inflammatory Drugs: $56,715,485

  • Psychiatric Drugs: $56,295,844

  • All Other Drug Therapeutic Uses: $872,688,178

Most of the savings are on drugs for chronic conditions, suggesting that people with Medicare who must continuously take medications are benefitting most from the help provided by the Affordable Care Act.

Drugs managing chronic conditions such as high blood sugar, high blood pressure and high cholesterol accounted for almost 33 percent of savings and may have helped patients avoid hospitalization. About 11 percent of the savings were for drugs treating mental illness, which were designed to help people with Medicare maintain healthy and active lives.

In 2013, people with Medicare in the coverage gap are saving 52.5 percent on brand‐names drugs and 21 percent on generics. These savings will increase each year until the coverage gap is closed in 2020.  

The schedule below illustrates how the coverage gap will be closed, with information on drug savings for those in the coverage gap.

 State-by-state savings from discounts in Donut Hole

Preventive Services  help 34.1 million keep close tabs on their health

By making certain preventive services available with no cost-sharing obligations, the Affordable Care Act is helping Americans take charge of their own health.  Americans can now better afford to work with health care professionals to prevent disease, detect problems early when treatment works best, and monitor health conditions. 

In the Medicare program, the Affordable Care Act eliminated coinsurance and the Part B deductible for recommended preventive services, including many cancer screenings and other important benefits. 

For example, before the law’s passage, a person with Medicare could pay as much as $160 in cost-sharing for some colorectal cancer screenings.  In addition to covering these preventive services with no out-of-pocket costs for people with Medicare, the law also added another important new preventive service — an Annual Wellness Visit with a health professional. 

This Visit complements the "Welcome to Medicare" Visit which allows people joining Medicare to evaluate their current health conditions, prescriptions, medical and family history and risk factors, and make a plan for appropriate preventive care with their primary care professional.

In addition to the Annual Wellness Visit, Medicare has added coverage of new preventive services through its National Coverage Determination process which are exempt from both the Part B deductible and coinsurance/copayment since enactment of the Affordable Care Act including, for example, annual depression screenings.

Traditional Medicare

Since becoming available without cost-sharing in 2011, over 30.5 million people with traditional Medicare (79.5 percent) have taken advantage of one or more free preventive services.  That includes 2,951,704 African Americans (73.3 percent), 638,512 Hispanic persons (73.9 percent), 135,803 American Indians (69.7 percent), and 583,540 Asian‐Americans (80.9 percent).  Last year alone, nearly 26.1 million seniors and people with disabilities with traditional Medicare (about 73.5 percent), used at least one free preventive service. 

The tables below present the cumulative number of unique enrollees in traditional (Part B) Medicare who used free preventive services in 2011 and 2012.

Medicare Advantage (Part C) Program

In 2012, all Medicare contracting health insurance plans (or “Medicare Advantage” plans) that serve people with Medicare offered recommended preventive services without cost-sharing.  In 2012, about 10.9 million Americans were enrolled in a non-employer Medicare Advantage plan that waived cost‐sharing for recommended preventive services.  Assuming that in 2012, people in these plans utilized preventive services at the same rate as those in traditional Medicare, an estimated 8 million people in a non-employer Medicare Advantage plans benefited from Medicare’s coverage of preventive services with no cost-sharing.

Free Preventive Services use by state

 Premiums remain steady for people with Medicare

People with Medicare can be assured they are part of a program that strives to deliver better benefits while curbing costs.  Most seniors and people with disabilities will pay the standard Medicare Part B premium of $104.90 per month in 2013, approximately $4 lower than the amount projected in early 2012.  Part B benefits include certain doctors’ services, outpatient care, medical supplies, and preventive services.  Premiums for Part B have gone up slowly over the past five years – an average of less than 2 percent per year.

For the few people with Medicare who are affected, the 2013 Part A premium is $441, down from $451 in 2012.  Approximately 1.3 percent of people with Medicare pay a premium for Medicare Part A services.  Beneficiaries who do not qualify for premium-free Part A services include those who have not paid Medicare payroll taxes for 40 quarters of employment or who are not are married to a person who qualifies for premium-free Part A services.  Individuals who have worked between 30 and 39 quarters of coverage are eligible to pay a reduced premium.  The Part A benefit covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care.

Using authority granted by the Affordable Care Act, CMS continues to protect people enrolled in Medicare Advantage plans from significant increases in costs or cuts in benefits.  Access to supplemental benefits remains steady, and beneficiaries’ average out-of-pocket spending remains constant.  The average projected premium for 2013 increased by only $1.47 from last year, averaging to $32.59; 2013 projected premiums are 10 percent below 2010 premiums.

Not only does access to Medicare Advantage remain strong, as 99.6 percent of Medicare beneficiaries have access to a Medicare Advantage plan in 2013, people with Medicare have access to a wide range of high-quality plan choices, with more four and five star plans than were previously available.  On average, there are 28 non-employer Medicare Advantage plans to choose from in nearly every county across the country. 

The average premium for prescription drug plans will remain nearly the same in 2013. Based on plans’ projections, the average 2013 monthly premium for basic prescription drug coverage is expected to be $30, while average premium for 2012 was $29.67.  New tools from the health reform law and slow growth in Medicare drug spending have kept the cost of prescription drug coverage from growing.

 Obamacare helping crack down on fraud

Seniors and people with disabilities in Medicare are benefitting from a more secure program. The Affordable Care Act contains new tools and enhanced authority to crack down on criminals who are looking to defraud Medicare. These provisions, many of which have been in effect since 2010, are protecting seniors and taxpayers from fraudsters. As a result of those efforts, we recovered record amounts of fraudulent payments, totaling $10.7 billion from 2009 to 2011.

In 2012, the Affordable Care Act continued to make a significant impact in the fight against fraud by:

  • Increasing the federal sentencing guidelines for health care fraud offenses by 20‐50 percent for crimes that involve more than $1 million in losses. The law establishes penalties for obstructing a fraud investigation and makes it easier for the government to recapture any funds acquired through fraudulent practices.

  • Stopping bad actors from entering the system, by making categories of providers and suppliers who have historically posed a higher risk of fraud or abuse undergo a higher level of scrutiny than others before enrolling or re‐enrolling in the Medicare, Medicaid, or the Children’s Health Insurance Program (CHIP). From March 2011 through the end of 2012, over 400,000 providers and suppliers have been subject to the new screening requirements. Almost 150,000 providers and suppliers lost the ability to bill the Medicare program due to the Affordable Care Act requirements and other proactive initiatives.

  • Fostering better coordination among states, CMS, and law enforcement partners at the Office of Inspector General and Department of Justice. New rules authorize CMS to suspend Medicare payments to providers or suppliers during the investigation of a credible allegation of fraud. CMS suspended or took other administrative actions against 160 providers in three coordinated takedowns.

  • Providing an additional $350 million over 10 years to ramp up anti‐fraud efforts, including increasing scrutiny of claims before they are paid, investments in sophisticated data analytics, and more “feet on the street” law enforcement agents and others to fight fraud in the health care system.

  • Expanded funding for Senior Medicare Patrols – groups of senior citizen volunteers who educate and empower their peers to identify, prevent and report health care fraud. Additionally, to make spotting fraud easier for seniors, CMS redesigned the statement that informs beneficiaries about their claims for Medicare services, making it clearer which information to check and how to report potential fraud.

President Obama has made fraud prevention a cabinet-level priority with the creation of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) in 2009. This is a joint effort between HHS and DOJ to fight health care fraud by increasing coordination, intelligence sharing and training among investigators, agents, prosecutors, analysts, and policymakers.

A key component of HEAT are the Medicare Strike Force teams which are comprised of interagency teams of analysts, investigators, and prosecutors who can target emerging or migrating fraud schemes, including fraud by criminals masquerading as health care providers or suppliers.

This effort received a boost in 2012 with the formation of a ground-breaking new Healthcare Fraud Prevention Partnership between HHS, DOJ and private organizations designed to find and stop scams that cut across public and private payers. This partnership will help those on the front lines of industry anti-fraud efforts share their insights with investigators, prosecutors, policymakers, and others.

The Medicare Strike Force coordinated three major takedowns in 2012.  The largest action was in May 2012 when 107 individuals, including doctors, nurses and other licensed medical professionals, were charged in seven cities for their alleged participation in Medicare fraud schemes involving more than $452 million in alleged false billing. This coordinated takedown involved the highest amount of false Medicare billings in a single takedown in Strike Force history. HHS also suspended or took other administrative action against 52 providers, using authority under the Affordable Care Act to suspend payments until an investigation is complete.

The pdf version of the report is at: http://www.cms.gov/apps/files/MedicareReport2012.pdf 

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