Posted on 03/05/2005 10:42:18 PM PST by neverdem
WASHINGTON, March 5 - The new Medicare drug benefit passed a major milestone in recent weeks as a substantial number of big insurance companies said they would offer prescription drug coverage to Medicare beneficiaries next year, defying the predictions of many industry experts.
Some companies intend to offer the new benefit nationwide. Others will offer it in certain states or regions. It is too soon to know how many of the 41 million Medicare beneficiaries will enroll. But it is increasingly clear that they will at least have access to drug coverage offered by commercial insurers, Blue Cross and Blue Shield plans, and pharmacy benefit managers.
John K. Gorman, a former Medicare official who is now a health care consultant, said: "It seems as if the dam broke in January. Ninety days ago everybody was on the fence. In January, many insurers and pharmacy benefit managers completed their feasibility studies, and green lights started popping off all over the country. We now see widespread interest in offering a prescription drug plan to Medicare beneficiaries."
Companies gave several reasons for moving aggressively to stake out positions in the Medicare market. They see a business opportunity, with the aging of the population. They say that heavy federal subsidies will minimize the financial risks, and they do not want to cede the market to their competitors. Moreover, some companies, having lobbied for the law, said they felt an obligation to help make it work.
In 2000, however, when the legislation began moving through Congress, Charles N. Kahn III, who was then president of the Health Insurance Association of America, said: "Private drug insurance policies are doomed from the start. The idea sounds good, but it cannot succeed in the real world."
Insurers say they now find the risk acceptable because the government will protect them against large financial losses, at least in the first years of the program.
Under the law, the government offers subsidies to insurers, pays more for sicker patients and pays still more if the claims significantly exceed what the insurer expected.
Feb. 18 was the deadline for companies to notify the federal government of their intentions. The government has not disclosed the results, but executives at many companies described their thinking in interviews this week.
Aetna said it intended to offer prescription drug plans to individual Medicare beneficiaries and to employers, for their retirees, in every state. Medco Health Solutions, which manages drug benefits for many employers and insurers, said it would sponsor "a nationwide Medicare prescription drug plan."
Mac Crawford, chairman of Caremark Rx, another large pharmacy benefit manager, said his company would file an application to be a Medicare prescription drug plan in one or more regions.
The UnitedHealth Group, one of the nation's largest insurance companies, said it planned to "participate nationally" in the new program, but gave no details.
PacifiCare, which already operates a large health maintenance organization for Medicare beneficiaries, said it would offer drug coverage to people in the traditional fee-for-service Medicare program, as well as to members of its H.M.O. Howard G. Phanstiel, chairman of PacifiCare, said the free-standing drug plan would be available in "up to 21 states."
In addition, Blue Cross and Blue Shield plans in Florida, Michigan, New Jersey and Pennsylvania said they had informed the federal government of their intention to offer drug coverage. Blue Cross and Blue Shield plans, which tend to operate autonomously, have formed a consortium to run a prescription drug plan for Medicare beneficiaries in seven states: Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota and Wyoming.
"We are moving full steam ahead," said Larry L. Gauper, vice president of Blue Cross and Blue Shield of North Dakota. "We are mindful of competitive pressures. We want to be in this market."
The participation of private plans, while necessary for the success of the new law, does not guarantee that beneficiaries will be satisfied. They may be baffled by a confusing array of options, disappointed with the savings or dismayed by the standard benefit, which requires them to pay all drug costs from $2,250 to $5,100 a year. Likewise, they may find that some drugs are not covered.
Insurers also face daunting challenges. They have to develop and market products, establish lists of preferred drugs, enroll and educate beneficiaries, and move through a thicket of federal regulation.
Companies planning to offer drug benefits must file formal applications by March 23. Qualified applicants will be required to submit bids by June 6. The government says it will award contracts by early September.
The new law relies heavily on competing private plans to deliver the Medicare drug benefit. If too few plans participate, the government can intervene. But the Bush administration and business groups want to avoid that at all costs because they do not want the government to manage the benefit, set prices or decide which drugs are covered.
"This may not be the best book of business we've ever seen," said Mr. Crawford of Caremark, "but we pledged to the administration that we would support it. We are very supportive of what the administration and Congress are trying to do."
AARP said it was considering whether to offer a Medicare drug plan. As a trusted advocate for older Americans, it could attract many customers. UnitedHealth, which runs a mail-order pharmacy service for AARP, would be a potential partner.
For years, experts said they doubted that insurers would accept the risk of providing drug-only coverage to elderly and disabled people, because those with the highest costs would be the most likely to enroll.
In early 2003, Thomas A. Scully, who was then administrator of the Centers for Medicare and Medicaid Services, said that stand-alone drug coverage "does not exist in nature" and would probably not work in practice. But insurers are willing to try it.
"It's a reasonable risk for a new line of business," said Robert E. Meehan, vice president of Horizon Blue Cross and Blue Shield of New Jersey. "In the last eight weeks, some of the early naysayers have come around and said they will be involved in the new program. We could have five well-known providers offering drug coverage to Medicare beneficiaries in New Jersey."
One reason for the keen interest, he said, is that "there's a lot of money at stake." The Bush administration estimates that Medicare payments to private plans for the drug benefit will total $59 billion in 2006 and will double in five years.
"The demographics are positive," Mr. Meehan said. "Lots of people are coming into Medicare. But seniors don't like to switch insurance coverage. If our competitors pick up these people, it might be hard to persuade them to switch to our plan."
President Bush's commitment is also a factor. "We have a strong sense that he wants to make this work," Mr. Meehan said. "If Bush had not been re-elected, we may have re-evaluated our decision."
Dr. John W. Rowe, Aetna's chairman, said the government still faced a critical decision that could determine how much access people have to the drug benefit. Some companies want to offer the benefit mainly to employers, for their retirees. But Dr. Rowe said, "It's essential that the government require intensive marketing to individuals as well, so they will have the broadest possible choice of prescription drug plans."
If companies sell drug insurance just to employer groups, they could gain an unfair advantage by skimming off the low-cost business, Dr. Rowe said in an interview. "Marketing to individual Medicare beneficiaries is clearly more expensive than marketing to a group of retirees," he said. "And the individuals tend to be higher users of health care, including prescription drugs."
They'll be sorry. I saw a date for everyone to get into the plan - but when are they allowed to jump back out - is this an annual commitment or can they drop at any time they feel it's gone south?
FReepmail me if you want on or off my health and science ping list.
Check this out.
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
Well, well, well... whadaya know about that? And here everybody thought this was all wrong and Bush was a dummy... whadaya know about that... SHAZZAM ANDY!!!
What do you think, Hank?
My dad's prescription plan he received at retirement told him he'll be dropped as of 1/1/06; a lot of retirees who live in his neighborhood received the same kind of notice.
I've never liked this plan and feel we're well on our way to socialized health care.
The Dummy, again, ain't so dumb.
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