|
E-mail this page to a friend!
Medicare Drug Program News
Medicare Part D Plans Owe Government $4 Billion from
First Year Experience
Drug costs lower that companies anticipated; more
generic drug use by senior citizens
 Oct. 5, 2007 – Insurance companies that sponsored
Medicare Part D drug plans in the first year of the program, 2006, owe
$4 billion to the Centers for Medicare & Medicaid Services due to
lower-than-expected drug costs for that year. Actual drug costs for
almost all Part D plans were below expected levels in their 2006 bids,
said the CMS announcement today.
These repayments result from the payment
reconciliation that CMS has completed for 2006, including the
application of risk sharing created under the Medicare Modernization Act
(MMA).
A number of factors led to this lower spending,
according to CMS, including that 2006 marked the first time that plans
were bidding on the new Part D program and the there were higher levels
of generic drug utilization in Part D than anticipated.
Plans submitted their bids for the 2006 contracting
year in June 2005. At the time, there was limited information available
with respect to the costs associated with beneficiary utilization in the
new prescription drug benefit or the number of beneficiaries who would
enroll, the agency explained.
“The 2006 bids, despite being developed based on
the plans’ best expectations and having been extensively reviewed by the
CMS Office of the Actuary, were nevertheless somewhat uncertain
predictions of what would actually happen when the drug benefit began in
2006,” CMS stated in a news release.
“Part D payments to plans are designed to be
adjusted for the actual experience of the Part D program.
“Under the MMA, CMS is required to pay the plan
sponsors prospectively based on their bids, and can only complete a
final reconciliation of accounts after the end of the calendar year.
“Final payment reconciliation involves several
different activities. For example, monthly subsidies paid by Medicare
for low-income beneficiaries and for individuals who incur catastrophic
spending are paid on a prospective basis based on estimates in each
plan’s bid. After the end of the contracting year, when all the claims
data are available, the prospective payments are compared to actual
incurred costs and other related data, and appropriate adjustments are
made to the plan payments.
“In addition, monthly premium subsidy payments to
the plans are adjusted at the end of the year to reflect updated data
about beneficiary health status and enrollment.
“By statute, risk sharing limits the unanticipated
losses or unexpected gains by Part D plans.
“For the first two years of the Part D program, if
a plan’s drug spending is 2.5 percent or more higher than projected,
Medicare makes additional payments to cover a portion of the
unanticipated costs.
“If drug spending is 2.5 percent or more below the
levels projected in a Part D plan’s bid, Medicare recoups a portion of
the unanticipated cost savings.
“These risk corridors, which apply during the first
two years of the Part D program, reflect the intent to not only mitigate
plan risk through additional reinsurance, but also to assure that during
the initial years of starting the new benefit, taxpayers would share
more fully in any unanticipated savings.”
CMS says plans can appeal the final reconciliation
calculation by contacting StrategicHealthSolutions, LLC by October 22,
2007.
CMS says it expects that, as plans have further
experience with the Part D program, their bid submissions will more
accurately anticipate their actual costs to provide prescription drug
coverage.
The agency points out that the 2007 bid submissions
were significantly lower than those submitted in 2006 and were a
reflection of the actual 2006 Part D drug program experience.
Accordingly, CMS says it anticipates that amounts collected from or paid
to plans in future years as a result of final reconciliation and risk
sharing will be significantly lower than the reconciliation for the 2006
plan year.
“Beneficiaries in the Part D program continue to
enjoy excellent value and consumer choice, due in large part to strong
competitive bidding by plans,” the CMS announcement said.
“As previously reported, the actual average premium
paid by beneficiaries for standard Part D coverage in 2008 is expected
to be nearly 40 percent lower than originally projected when the benefit
was established in 2003.
“Further, the program is 30 percent less expensive
overall for the first 10 years than originally estimated. CMS recently
launched the 2008 national enrollment campaign.
“Working with State health insurance assistance
programs (SHIPs) and other partners, this year's campaign is targeted
toward beneficiaries with limited means who are eligible for additional
assistance. The 2006 plan reconciliation, the 2008 enrollment campaign,
and all other parts of the agency’s efforts related to Part D are
focused on fine-tuning the program to assure that it continues to
deliver high value and lower costs to seniors and taxpayers.”
|
Nursing Home Abuse, Medical Malpractice? Contact a lawyer.
click here
|
|
Click to More Senior News on the
Front Page
Copyright: SeniorJournal.com |
