Medicare: Major Prescription Drug Provisions of Selected Bills

Order Code RL31496 Report for Congress Received through the CRS Web Medicare: Major Prescription Drug Provisions of Selected Bills Updated August 14, 2002 Jennifer O’Sullivan Specialist in Social Legislation Domestic Social Policy Division Congressional Research Service ˜ The Library of Congress Medicare: Major Prescription Drug Provisions of Selected Bills Summary Medicare, the nationwide health insurance program for the aged and disabled, does not cover most outpatient prescription drugs. The absence of an adequate prescription drug benefit has been of concern to policymakers since the enactment of Medicare in 1965. On several occasions, the Congress has considered providing coverage for at least a portion of beneficiaries’ drug costs. The issue has again received attention this year. There are a number of issues driving the prescription drug debate. One of the key concerns in designing a drug benefit is the potential cost and how costs would increase over time. Another issue is the appropriate role of both the federal government and the private sector in assuming the financial risk of coverage and administering the benefit. Some observers suggest that a single uniform drug benefit should be added directly to Medicare’s other benefits. Others recommend offering benefits through private plans which could offer different benefit packages provided certain minimum standards were met. A further consideration is whether a major new benefit should be added until structural reforms are made to the Medicare program as a whole. On June 28, 2002, the House passed the Medicare Modernization and Prescription Drug Act of 2002 (H.R. 4954). Under the bill, a new optional benefit would be established, effective January 1, 2005. The program would rely on private plans to provide drug coverage and to bear some of the financial risk for drug costs; federal subsidies would be provided to encourage participation. Coverage would be provided through prescription drug plans (PDPs) or Medicare+Choice (M+C) plans. Beneficiaries could purchase either a standard plan or an actuarially equivalent plan. Low-income subsidies would be provided for persons with incomes below 175% of poverty. A new Medicare Benefits Administration (MBA) would be established within the Department of Health and Human Services (HHS) to administer the benefit and the M+C program. In July 2002, the Senate considered and passed the Greater Access to Affordable Pharmaceuticals Act (S. 812, Schumer et al). Most of the debate on that measure was devoted to consideration of several Medicare prescription drug amendments; however, none of these amendments was able to garner the necessary votes. Several key issues drove the debate. These included whether the benefit should be administered as part of the current Medicare program or by private entities, the degree of financial risk that should be assumed by the federal government, and what the benefit structure should look like and whether it should be the same nationwide. A number of Senators have indicated their interest in revisiting the prescription drug issue when the Congress reconvenes in September. This report will be updated to reflect any further legislative action. Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Overview of Major Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Scope of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Private vs. Public Sector Responsibility . . . . . . . . . . . . . . . . . . . . . . . . 3 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Low-Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Summary of Major Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Side-by-Side Comparison of Major Medicare Drug Provisions of Selected Bills . 7 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Program Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Administration; Financial Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Pricing; Cost Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Low-Income Subsidies for Part D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Relationship to Other Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Drug Card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Medicare: Major Prescription Drug Provisions of Selected Bills Introduction Medicare, the nationwide health insurance program for the aged and disabled, does not cover most outpatient prescription drugs. The absence of an adequate prescription drug benefit has been of concern to policymakers since the enactment of Medicare in 1965. On several occasions, the Congress has considered providing coverage for at least a portion of beneficiaries’ drug costs. The issue has again received attention this year. On June 28, 2002, the House passed the Medicare Modernization and Prescription Drug Act of 2002 (H.R. 4954) by a vote of 221-208. In July 2002, the Senate considered and passed the Greater Access to Affordable Pharmaceuticals Act (S. 812, Schumer et al). Most of the debate on that measure was devoted to consideration of several Medicare prescription drug amendments; however none of these amendments was able to garner the necessary votes. There are a number of issues driving the prescription drug debate. One of the key concerns in designing a drug benefit is the potential cost and how costs would increase over time. Another issue is the appropriate role of both the federal government and the private sector in assuming the financial risk of coverage and administering the benefit. Some observers suggest that a single uniform drug benefit should be added directly to Medicare’s other benefits. Others recommend offering benefits through private plans which could offer different benefit packages provided certain minimum standards were met. A further consideration is whether a major new benefit should be added until structural reforms are made to the Medicare program as a whole.1 It is generally agreed that if Congress were to enact a drug benefit this year, it would take several years before the program could actually be implemented. As an interim measure, President Bush announced June 14, 2001, the creation of a Medicare Prescription Drug Discount program. This program would provide for the endorsement by Medicare of qualified privately-administered prescription drug discount cards. Beneficiaries could obtain these cards either free or for a nominal enrollment charge; the card would provide access to discounts on prescription drugs. While this plan would not establish a Medicare drug benefit, it was intended to give seniors access to similar kinds of discounts as are available to the under age 65 1 For a discussion of the major issues that would need to be addressed as Congress considers policy options, see: CRS Report RL30819, Medicare Prescription Drug Coverage for Beneficiaries: Background and Issues, by Jennifer O’Sullivan. CRS-2 population under private insurance plans. However, to date, implementation of the card program has been held up by court action.2 Legislation A number of bills have been introduced in the 107th Congress which would establish a prescription drug benefit for Medicare beneficiaries. Some measures add a new benefit to the Medicare program itself while others would provide the benefit through private entities. Some other bills focus on the prices seniors pay for drugs. As of this writing, a few measures are receiving the most attention. The first is the House-passed bill, the Medicare Modernization and Prescription Drug Act of 2002 (H.R. 4954). The second bill is the Medicare Rx Drug Benefit and Discount Act of 2002 (H.R.5019); this measure is commonly referred to as the House Democratic bill. The rule governing debate on H.R. 4954 did not allow for consideration of the Democratic bill. This was because the measure exceeded the 10year (2003-2012) House-passed budget resolution figure of $350 billion for prescription drugs and Medicare modernization. On July 15, 2002, the Senate began consideration of drug legislation. The Senate used as the basis for the debate, the Greater Access to Affordable Pharmaceuticals Act of 2001 (S. 812 Schumer et al.), reported by the Senate Committee on Health, Education, Labor and Pensions (HELP) Committee on July 11, 2002. The Senate Finance Committee, which has jurisdiction over Medicare legislation, had not reported a Medicare drug bill; however, several Medicare measures were considered as amendments during the debate. These included the Medicare Outpatient Prescription Drug Act of 2002 (S.Amdt. 4309 to S. 812, Graham et al.), the Medicare Prescription Drug Cost Protection Act of 2002 (S.Amdt. 4345, also known as the Graham-Smith amendment), and the 21st Century Medicare Act (S. 2729, Grassley et al.), sometimes referred to as the “tripartisan bill.” The “tripartisan bill” has also been introduced as S. 2 and S.Amdt. 4310 to S. 812. All of the measures failed to garner the necessary 60 votes to override a budget point-of-order. There are major differences among the House and Senate bills in the scope of benefits, how the benefit would be administered, the degree of financial risk assumed by the federal government, and the portion of the Medicare population eligible for low-income assistance. These differences are outlined in the following section. Further details are provided in the side-by-side comparison. 2 For a discussion of the card program, see: 1) CRS Report RL31316, President Bush’s Proposed Medicare-Endorsed Drug Discount Card Program: Status and Issues, by M. Angeles Villarreal; and 2) CRS Congressional Distribution Memorandum, MedicareEndorsed Prescription Drug Card Assistance Initiative – Summary of Proposed Regulations, by Jennifer O’Sullivan, March 13, 2002. CRS-3 Overview of Major Proposals The major proposals under consideration contain a number of common themes. They all establish a new voluntary benefit for Medicare beneficiaries under a new Part D. They would have a limit on the amount of federal spending for the new benefit. Beneficiaries would be expected to assume specified costs of the new benefit in the form or premiums (or enrollment fees) and cost-sharing charges. The bills generally would pay most or all of these charges for the low-income Other individuals would have a limit on out-of-pocket costs (a “catastrophic limit”) once they reached a certain level of spending. There are, however, a number of significant differences among the bills. These include the definition and scope of benefits, the degree of reliance and financial risk placed on the private sector versus the public sector, the federal administrative structure, and implementation of low-income subsidies. Scope of Benefits. A key difference among proposals is the scope of benefits for the population not eligible for low-income assistance. (See low-income discussion, below.) Under the House Democratic bill, Graham amendment, and Graham-Smith amendment there would be one specific benefit available to all enrollees nationwide. Conversely, under the House-passed bill and the “tripartisan bill” there would be a minimum benefit level established. Under the House-passed bill and the “tripartisan bill”, the minimum benefit (referred to as “qualified coverage”) would be either specified “standard coverage” or alternative coverage, provided it was actuarially equivalent to standard coverage (i.e., had the same dollar value) and had the same limit on out-of-pocket spending. The scope of coverage offered under either a nationwide plan or “standard coverage” differs substantially by proposal. Under both the House-passed bill and the “tripartisan” bill, coverage would be provided for a portion of beneficiary costs after they met a deductible; once costs reached a certain threshold, no coverage would be provided until spending reached an out-of-pocket limit. This coverage gap has been labeled a “doughnut” by some. Under the House Democratic bill there would be no coverage gap. Under the Graham amendment, there would be no coverage gap; however, beneficiaries would pay the full negotiated price for drugs not on a plan’s formulary. The Graham-Smith amendment would provide primarily catastrophic protection for persons not eligible for low-income protection, though all beneficiaries would have a payment made in their behalf equal to 5% of negotiated prices for all formulary drugs up to the catastrophic limit. All of the proposals would expect the entities administering the benefit to negotiate prices for drugs. These negotiated prices would be available to beneficiaries, even if no payment was made under the new Part D. Private vs. Public Sector Responsibility. Virtually all proposals would place some measure of responsibility on the private sector for administration of a drug plan. It is the degree of reliance placed on the public versus the private sector that is one of the key areas of difference among the various proposals. CRS-4 The House-passed bill would provide access to a drug-only benefit through private insurance companies and other entities who wished to offer the benefit. A portion of the financial risk for the cost of covered benefits would be placed on the entities administering the benefit. In general, the private plans would be at risk for any costs in excess of federal subsidy payments and federal reinsurance payments. (Reinsurance payments are made to cover a portion of the costs paid by plans for individuals incurring high costs.) The Administrator of the new Medicare Benefits Administration would administer the program in a manner such that eligible individuals would be assured access to at least two plans. If necessary to ensure access, the Administrator would be authorized to provide financial incentives in addition to the federal subsidy and reinsurance payments. The “tripartisan bill” would also rely on private entities to provide benefits and require plans to assume some of the financial risk for the cost of covered benefits. In order to assure access, the Administrator of the new Medicare Competitive Agency would be authorized to provide financial incentives for an entity to establish a plan. Under the House Democratic bill, Graham amendment, and Graham-Smith amendment the new benefit would be administered at the federal level like other Medicare benefits and the federal government would bear most of the financial risk of coverage. The actual operation of the benefit would be through contracts with private entities such as pharmaceutical benefit managers (PBMs). PBMs currently administer the drug benefit, including negotiating price discounts, for many private insurance plans. Under these bills, a portion of the administrative fees for these entities would be put at risk; specifically, an adjustment would be made in administrative payments to ensure that entities complied with requirements relating to performance goals. Administration. Medicare is currently administered by the Centers for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services (HHS).3 Two of the proposals under discussion in this report would establish a new entity to administer the drug benefit at the federal level. Under the House-passed plan, a new Medicare Benefits Administration (MBA) would be established (outside of CMS, but within HHS) to administer the drug benefit and Medicare+Choice. Under S. 2729, the benefit would be administered by the new Medicare Competitive Agency (also outside of CMS, but within HHS). Under the House Democratic bill, Graham amendment, and Graham-Smith amendment the benefit would be administered by CMS; an advisory committee would be established to advise the Secretary on policies related to the drug benefit. Low-Income. Under current law, some low-income aged and disabled Medicare beneficiaries are also eligible for drug coverage under Medicaid. Those persons entitled to full Medicaid protection generally have prescription drug coverage. Some groups receive more limited Medicaid benefits. Qualified Medicare Beneficiaries (QMBs) are persons with incomes below poverty and resources below $4,000; these persons receive Medicaid assistance for Medicare cost-sharing and premium charges. Specified Low Income Beneficiaries (SLIMBs) meet the QMB 3 Prior to June 14, 2001, this agency was known as the Health Care Financing Administration (HCFA). CRS-5 definition except that their income limit is above the QMB level; the SLIMB limit is 120% of poverty. QMBs and SLIMBs only receive drug benefits if they are also entitled to full Medicaid coverage. Under a temporary program, the SLIMB level can be extended to certain persons under 135% of poverty who are not otherwise eligible for Medicaid. All of the major proposals discussed in this report would provide assistance to persons below 150% of poverty – in terms of premiums that would have to be paid for coverage and/or cost sharing once persons used benefits. Both House plans would provide for no, or very limited, beneficiary liability for covered services for this population group. The “tripartisan bill” would provide full premium subsidies for those under 135% of poverty, and sliding scale subsidies for those between 135% and 150% of poverty, provided these persons selected a plan with a premium at or below the national weighted average, or if no such plan was available in the area, with the lowest premium actually available. Under the “tripartisan bill” all persons could be subject to some cost-sharing charges. The Graham amendment would only provide premium assistance for persons between 135% and 150% of poverty. The Graham-Smith amendment would provide full coverage for persons below 200% of poverty. No assets tests would be imposed under either the Graham amendment or the Graham-Smith amendment. All of the bills would pick up some of the costs now paid by the states under Medicaid. The proposals differ in what portion of the costs of low-income subsidies would be paid under the current federal-state Medicaid program and what portion would be fully paid by the federal government. CRS-6 Summary of Major Proposals The following table is a side-by-side comparison of bills introduced in the 107th Congress that have received the most attention to date. These are the House-passed bill, the House Democratic bill, the “tripartisan bill,” the Graham amendment, and the Graham-Smith amendment. The summary is limited to the Medicare prescription drug provisions. Both House bills and the “tripartisan bill” contain additional Medicare provisions.4 The House Democratic bill also contains drug-related amendments to the Federal Food Drug and Cosmetic Act and the Public Health Service Act. The Graham amendment and the Graham-Smith amendment are limited to Medicare prescription drug provisions. The summary highlights the major features of the bills. The first items provide a broad overview (title and summary). This is followed by an overview of program design (beginning date, benefits, premiums, eligibility, and relationship to Medicare+Choice). The next section reviews administration and financial risk (federal administration, administration of benefit, establishment of plan/benefit, plan enrollment, federal payments to plans, assumption of financial risk, and access). The next items relate to pricing and cost controls (drug pricing and payment, access to negotiated prices, and cost controls/formularies). The next item discusses beneficiary protections. Then the low-income subsidy provisions are reviewed. This is followed by a discussion of the relationship between the new program and existing programs which supplement Medicare benefits (Medicaid, private plans, and Medigap). The last item discusses the drug card and the transitional low-income assistance program in the House-passed bill. 4 For a summary of the provisions of the House-passed bill, see CRS Report RL31462, Major Provisions of the Medicare Modernization and Prescription Drug Act of 2002, H.R. 4954, as Passed by the House, by Jennifer O’Sullivan, Hinda Ripps Chaikind, and Sibyl Tilson. CRS-7 Side-by-Side Comparison of Major Medicare Drug Provisions of Selected Bills In General Provisions Title Summary H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) Medicare Modernization and Prescription Drug Act of 2002 Effective January 1, 2005, a new optional benefit would be established under a new Part D. Beneficiaries could purchase either a “standard coverage” or an actuarially equivalent coverage. In 2005, the “standard plan” would have a $250 deductible, 20%costsharing for costs between $251 and $1,000, 50% cost-sharing for costs between $1,000 and $2,000, then no coverage until the beneficiary had out-of-pocket costs of $3,700 ($4,800 in total spending) when full co ver age wo uld b e provided. Low income subsidies would be provided for persons with incomes below 175% of poverty. Coverage would be provided through Medicare Rx Drug Benefit and Discount Act of 2002 21st Century Medicare Act Effective January 1, 2005, a new optional benefit would be established under a new Part D. A single benefit would be available nationwide. In 2005, there would be a $100 deductible, 20% coinsurance and a limit on out-of-pocket spending of $2,000 ($9,600 in total spending). Assistance would be provided for low-income persons with incomes below 175% of poverty. The program would be administered by the Secretary of Health and Human Services (HHS); the Secretary would enter into contracts with pharmacy contractors who would administer the program on a regional or national basis. Coverage would be provided through M+C plans for M+C Effective January 1, 2005, a new optional benefit would be established under a new part D. Beneficiaries could purchase either “standard coverage” or actuarially equivalent c o ver a ge. In 2 0 0 5 , “standard coverage” would have a $250 deductible, 50% cost-sharing for costs between $251 and $3,450, then no coverage until the beneficiary had out-ofpocket costs of $3,700 ($5,300 in total spending); and 10% cost-sharing thereafter. The bill would rely on private plans to provide coverage and to bear some of the financial risk for drug costs. Coverage would be provided through Medicare Prescription Drug Plans or Medicare+Choice (M+C) p la ns. Lo w income S.Amdt. 4309 (Graham et al.) Medicare Outpatient Prescription Drug Act of 2002 Effective January 1, 2005, a new optional benefit would be established under a new Part D. A single benefit would be available nationwide with no deductible. In 2005, enrollees would pay $10 for generic drugs, $40 for preferred brand name drugs, and the negotiated price for non-formulary drugs. There would be a $4,000 limit on out-ofpocket costs. Persons with incomes below 150% of poverty would receive assistance. The program would be administered by the Secretary of Health and Human Services (HHS); the Secretary would enter into contracts with eligible entities, which could include pharmacy benefit managers, health plans, and retail pharmacy S.Amdt. 4345 (Graham-Smith et al.) Medicare Prescription Drug Cost Protection Act of 2002 Effective January 1, 2005, a new optional benefit would be established under a new Part D. A single benefit would be available nationwide. All enrollees would have catastrophic coverage and access to negotiated prices, with the federa l government assuming 5% of the negotiated prices for drugs on the plan’s formulary. Once the beneficiary incurred costs equal to the catastrophic limit ($3,300 in 2005) they would pay the lesser of $10 or the negotiated price. Persons with incomes below 200% of poverty would have their costs paid in full, except for no minal copayment amounts. The program would be administered by the Secretary of Health and Human Services (HHS); CRS-8 Provisions H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) prescription drug plans ( P D P s ) o r Medicare+Choice (M+C) plans. The program would rely on private plans to provide coverage and to bear some of the financial risk for drug costs; federal subsid ies would be provided to encourage participation. A new Medicare Benefits Administration (MBA) would be established within the Department of Hea l t h a n d Human Services (HHS) to administer the benefit and the M+C program. enrollees. The federal government would assume financial risk except that a limited percentage of the administrative payment would be adjusted to ensure that the contractor pursued performance re quir e ments. T he Secretary would be required to negotiate contracts with drug manufacturers that specified the maximum prices that could be charged to program enrollees. subsidies would be provided for persons with incomes below 150% of poverty. A new Medicare Co mp etitive Agency would be established within the Department of H e a l t h and Hu ma n Services (HHS) to administer Part D and the Medicare+Choice (M+C) program. H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) The program would begin January 1, 2005. The program would begin January 1, 2005. The program would begin January 1, 2005. S.Amdt. 4309 (Graham et al.) delivery systems. The eligible entities would administer the benefit on a regional basis. Coverage would be provided through M+C plans for M+C enrollees. The federal government would assume financial risk, but a percentage of the management payments could be tied to performance requirements of the contracted entity. S.Amdt. 4345 (Graham-Smith et al.) the Secretary would enter into contracts with eligible entities, which could include pharmacy benefit managers, health plans, and retail pharmacy delivery systems. The eligible entities would administer the benefit on a regional basis. Coverage would be provided through M+C plans for M+C enrollees. The federal government would assume financial risk, but a percentage of the management payments could be tied to performance requirements of the contracted entity. S.Amdt. 4309 (Graham et al.) The program would be operational from January 1, 2005-December 31, 2010. The program would continue after that date, if legislation was enacted prior to January 1, 2011, which stated that savings were achieved equal to or greater than the difference between the full cost of S.Amdt. 4345 (Graham-Smith et al.) The program would begin January 1, 2005. Program Design Provisions Beginning Date; ending Date CRS-9 Provisions Benefits H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) “Qualified coverage” would be either “standard coverage” or “actuarially equivalent coverage.” In 2005, “standard coverage” would be defined as having a $250 deductible, 20% cost-sharing for drug costs between $251 and $1,000, 50% cost-sharing for drug costs between $1,001 and the initial coverage limit of $2,000, and then no coverage until the beneficiary had out-ofpocket costs of $3,700 ($4,800 in total spending); once the beneficiary reached the $3,700 catastrophic limit full co ver age wo uld b e provided. The dollar a m o u n t s wo u l d b e increased in future years by the percentage increase in the average per capita expenditures for covered drugs for the year ending the previous July. Out-ofpocket costs counting toward the limit would include costs paid by the There would be a single nationwide benefit. In 2005, there would be a $100 deductible, 20% coinsurance and a limit on out-of-pocket spending (including cost-sharing for drugs covered under Part B) of $2,000 ($9,600 in to tal sp end ing) . I n addition, once an enrollee met the stop-loss limit, they would not have to pay any cost-sharing for drugs covered under Part B. These dollar amounts would be increased in future years by the p e r c en t a g e i n c r e a s e (projected in advance by the Secretary, for the year involved) in per capita program expenditures. Coinsurance would be applied differently for p r efer r ed and nonpreferred medicines. For p r e f e r r e d med ic ines coinsurance would equal 20% or a lower percentage established to encourage appropriate use of “Qualified coverage” would be either “standard coverage” or “actuarially equivalent coverage.” In 2005, “standard coverage” would be defined as having a $250 deductible, 50% cost-sharing for drug costs between $251 and the initial coverage limit of $3,450, then no c o v e r a ge until t h e beneficiary had out-ofpocket costs of $3,700 ($5,300 in total spending); and 10% cost-sharing thereafter. These amounts would be increased in future years by the percentage increase in average per capita expenditures for covered drugs for the year ending the previous July. Out-ofpocket costs counting toward the limit would include costs paid by the individual (or by another individual such as a family member), paid on behalf of a low-income individual under the S.Amdt. 4309 (Graham et al.) this Act over the October 1, 2004-September 30, 2012, period and the full cost of this Act over this period with the December 31, 2010 termination date. There would be a single nationwide benefit with no deductible. Each drug would fall into one of three classes: generic, preferred brand name, and nonformulary. In 2005, enrollees would pay $10 for each prescription filled with a generic drug and $40 for each prescription filled with a preferred brand name drug. Beneficiaries would pay the negotiated price for non-formulary drugs, except that non-formulary drugs deemed medically necessary would be treated as preferred brand-name drugs. An enrollee would not pay for any prescriptions once the enrollee incurred out-ofpocket costs for the year of $4,000 (regardless of who paid the costs). For each year after 2005, the copayments would be increased by the annual increase in prices (reflecting both price S.Amdt. 4345 (Graham-Smith et al.) There would be a single nationwide benefit. Until beneficiaries reached the catastrophic limit they would pay coinsurance equal to: 1) 95% of the negotiated price for formulary drugs; and 2) the negotiated price for non-formulary drugs. Non-formulary drugs deemed medically necessary would be treated as brand name drugs on the formulary. Once the beneficiary reached the catastrophic limit ($3,300 in 2005) they would pay the lesser of $10 or the negotiated price for each prescription whether or not it was on the formulary. Costs counting toward the catastrophic limit would include only coinsurance charges paid by the individual (or by another individual such as a family member on behalf of the individual), Medicaid, or a state pharmacy assistance program. Any costs for CRS-10 Provisions H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) individual (or by another individual such as a family member), paid on behalf of a low-income individual under the subsidy provisions, or paid under Medicaid. Any costs for which the individual was reimbursed by insurance or by another third-party payment arrangement could not be counted. Plans could offer more generous drug coverage, if approved by the MBA Administrator. preferred medicines. For nonpreferred medicines the coinsurance would be 20% of the price for the lowest cost preferred medicine within the same therapeutic class plus an amount equal to the amount by which the price of the nonpreferred drug exceeded the lowest price preferred drug. The extra payments for nonpreferred drugs would not be considered countable costsharing for purposes of meeting the deductible or stop-loss limit. subsidy provisions, or paid under Medicaid. Any costs for which the individual was reimbursed by insurance or otherwise could not be counted. Entities could offer more generous drug coverage, if approved by the Administrator, but only if they also offered a plan providing required coverage. S.Amdt. 4309 (Graham et al.) inflation and changes in therapeutic mix) as determined b y the Secretary for the year ending the previous July; this amount would be further adjusted to reflect relative changes in the composition of drug spending among generic and preferred brand name drugs to ensure that the percentage beneficiaries were required to pay was the same as the percentage required the preceding year. For each year after 2005, the out-of-pocket limit would be increased by the percentage increase in average per capita program expenditures for the year ending the previous July. An eligible entity could charge lower copayments if such reduction was tied to performance requirements and would not increase overall program costs. For formulary drugs (generic and preferred brand name drugs), the enrollee would pay the negotiated price minus $5 if such amount was less than the respective copayment. S.Amdt. 4345 (Graham-Smith et al.) which the individual was reimbursed by insurance or otherwise could not be counted. For each year after 2005, the out-ofpocket limit and the copayment amount would be increased by the percentage increase in average per capita program expenditures for the year ending the previous July. An entity could reduce the coinsurance or copayment required if such reduction was tied to performance requirements and would not increase overall program costs. CRS-11 Provisions H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) Premiums The plan sponsor would establish the premium amo unt, sub j e c t to approval by the Administrator. The premium for a prescription drug plan could not vary among individuals enrolled in the plan in the same service area, unless the individuals were subject to penalties for late enrollment. Premiums would be paid to the plans. However, PDP sponsors would be required to permit each enrollee to pay premiums through withholding from social security checks in the same manner Part B premium payments are withheld or through an electronic funds transfer. Premiums would be set at $25 per month for 2005. This amount would be increased in future years by the percentage increase, (projected in advance by the Secretary, for the year involved) in per capita program expenditures. Enrollees would pay premiums through withholding from social security checks in the same manner Part B premium payments are withheld. Late enrollment penalties, calculated in the same manner as such penalties are calculated for Part B, would be applied to persons who did not enroll during their initial enrollment period or during a special enrollment period established due to involuntary loss of other drug coverage. Monthly premiums would be uniform for all eligible beneficiaries in a plan, except that persons delaying Part D enrollment without other creditable drug coverage would be subject to higher premiums. If the plan’s monthly approved premium for standard coverage was equal to the national monthly weighted average premium for such coverage, the beneficiary would pay: 1) 57% of the monthly national average. If the plan’s monthly approved premium was less than the national average the beneficiary would pay: 1) 57% of the monthly national average, minus, 2) the difference between the national average and the plan’s premium. If the plan’s monthly premium was greater than the national average, the beneficiary would pay: 1) 57% of the monthly national average, plus 2) the difference between the national average and the plan’s p r e mium. P r emiums S.Amdt. 4309 (Graham et al.) Premiums would be set at $25 per month for 2005. This amount would be increased in future years by the percentage increase, (projected in advance by the Secretary, for the year involved) in average per capita program expenditures. Enrollees would pay premiums through withholding from social security checks in the same manner Part B premium payments are withheld. Late enrollment penalties would be applied to premiums for persons who did not enroll during their initial enrollment period or during a special enrollment period established due to involuntary loss of other drug coverage. S.Amdt. 4345 (Graham-Smith et al.) There would be no premiums. There would be an annual enrollment fee. In 2005 it would be $25; this amount would be increased in future years by the percentage increase in average per capita program payments for the year ending the previous July. Unless they elected direct payment, enrollees would pay enrollment fees through withholding from social security checks in the same manner Part B premium payments are withheld. CRS-12 Provisions Eligibility H. R. 4954 All beneficiaries enrolled in Medicare Part A or Part B could elect to enroll in Part D through enrollment in a M+C plan with prescription drug coverage or in a PDP. The Administrator of the new MBA would establish an enrollment process. An initial election period would be established. For current beneficiaries this would be the 6-month period beginning November 2004; for future beneficiaries it would be the same 7-month period applicable for initial Part B enrollment. Special election periods would apply for persons who involuntarily lose other drug coverage. Persons electing coverage at the first opportunity and maintaining continuous co ver age would b e guaranteed the protection of community rating; otherwise they could be subject to late enrollment penalties. H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) All beneficiaries enrolled in Medicare Part A or eligible to enroll in Part B could elect to enroll in Part D. An initial enrollment period would be established. For current beneficiaries this would be the 7-month period beginning August 1, 2004; for future beneficiaries it would be the same 7month period applicable fo r i n i t i a l P ar t B enrollment. Special enrollment periods would apply for persons who involuntarily lost other drug coverage (including coverage offered by former employers); these persons would not be subject to late enrollment penalties. would be collected in the same manner as Part B premiums. All beneficiaries enrolled in Medicare Parts A and B could elect to enroll in Part D. The Administrator would establish an enrollment process which would be similar to that for Part B. An initial open enrollment period would be established. For current beneficiaries, this would be the 8-month period beginning April 1, 2004. Eligible beneficiaries with creditable drug coverage could elect to continue to receive such coverage, not enroll in Part D, and subsequently enroll in Part D without penalty if they involuntarily lost their other coverage; special enrollment periods would apply for this group. S.Amdt. 4309 (Graham et al.) S.Amdt. 4345 (Graham-Smith et al.) All individuals enrolled in Part A or Part B could elect to enroll in Part D. The Secretary would establish an enrollment process. An initial enrollment period would be established. For current beneficiaries, this would be a period of time d e te r mined by the Secretary before January 1, 2005, so that Part D coverage was effective as of such date. For future beneficiaries, the enrollment procedures would be similar to those used for Part B. Eligible beneficiaries with creditable drug coverage could elect to continue to receive such coverage, not enroll in Part D, and subsequently enroll in Part D without penalty if they involuntarily lost their other coverage; special enrollment periods would apply for this group. All individuals enrolled in Part A or Part B could elect to enroll in Part D. The Secretary would establish a process through which an eligible beneficiary could elect to enroll at any time, terminate enrollment at any time and reenroll at any time. The Secretary would establish an open enrollment period of at least 5 months so indivuals who are or will be eligible by January 1, 2005, would be permitted to enroll prior to that date and have coverage begin on that date. CRS-13 Provisions Relationship Medicare+Choice to H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) An M+C enrollee would obtain benefits through the M+C plan if the plan provided qualified drug coverage. An M+C plan could not offer drug coverage (other than that already required under Medicare) unless the coverage was at least qualified prescription drug coverage. M+C organizations would be required offer plans with drug coverage that was at least actuarially equivalent to Part D benefits. An M+C enrollee would be required to obtain Part D drug benefits through the plan. An M+C enrollee would obtain benefits through the M+C plan if the plan provided qualified drug coverage. An M+C plan offering drug coverage would have to make a p lan o ffer ing o n l y standard coverage available to each Part D enrollee. An organization could also offer additional qualified drug coverage. Drug coverage could not be offered to an enrollee unless the enrollee was enrolled in Part D. S.Amdt. 4309 (Graham et al.) M+C organizations would be required to offer Part D drug benefits. M+C enrollees would receive coverage through their M+C plan. S.Amdt. 4345 (Graham-Smith et al.) M+C organizations would be required to offer Part D drug benefits. M+C enrollees would receive coverage through their M+C plan. CRS-14 Administration; Financial Risk Provisions The Administrator of the new Medicare Competitive Agency, within HHS, would administer Part D and the M+C program. (CMS, would retain responsibility for the traditional fee-for-service program.) A Medicare Competitive Policy Advisory Board would be established within the Agency. S.Amdt. 4309 (Graham et al.) The Secretary (through CMS) would administer the benefit. A newly created Medicare Prescription Drug Advisory Co mmittee would advise the Secretary. The Secretary could contract with M e d i c a r e C o ns u me r Coalitions (nonprofit entities whose board members were primarily Medicare beneficiaries) to co nd uct info r matio n activities. S.Amdt. 4345 (Graham-Smith et al.) The Secretary (through CMS) would administer the benefit. A newly created Medicare Prescription Drug Adviso ry Committee would advise the Secretary. The Secretary could contract with M e d i c a r e C o n s u me r Coalitions (nonprofit entities whose board members were primarily Medicare beneficiaries) to co nd uct info r matio n activities. The benefit would be administered by an M+C plan or a Medicare Prescription Drug Plan offered by an entity in the geographic area. Entities eligible to offer plans would be entities the Administrator deemed appropriate to provide benefits including a pharmaceutical benefit management company, wholesaler or retail p h a r ma c i s t d e l i v e r y system; an insurer, another entity, or any combination of entities. In general, The benefit would be administered by M+C plans or by eligible entities serving on a regional basis. The benefit could be administered on a partial regional basis, if determined appropriate by the Secretary; however the area could never be smaller than a state. An entity could submit a single bid to provide coverage in multiple regions. The Secretary would determine regions and assure that there were at least 10 in the U.S. The benefit would be administered by M+C plans or by eligible entities serving on a regional basis. The benefit could be administered on a partial regional basis, if determined appropriate by the Secretary; however the area could never be smaller than a state. An entity could submit a single bid to provide coverage in multiple regions. The Secretary would establish regions and assure that there were at least 10 in the U.S. H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) Federal Administration The new MBA, within HHS, would administer the new Part D drug benefit and the M+C program. (The Centers for Medicare and Medicaid Services (CMS), would retain responsibility for the traditional fee-for-service program.) A Medicare Policy Advisory Board would be established within the MBA. The Secretary (through CMS) would administer the benefit. A newly created Medicare Prescription Medicine Advisory Co mmittee would advise the Secretary. Administration of benefit The benefit would be administered by a M+C plan or PDP. A PDP plan sponsor would be an entity certified under Part D as meeting the Part D standards and requirements. In general, a PDP sponsor would have to be licensed under state law as a risk bearing entity eligible to offer health benefits or health insurance coverage in each state in which it offered a prescription drug plan. The benefit would be administered by pharmacy contractors serving on a regional or national basis. The benefit could be administered on a partial regional basis, if determined appropriate by the Secretary. The Secretary would determine regions and assure that there were at least 10 in the U.S. Coverage would be provided through M+C plans for M+C enrollees. Contractors would be required to meet Part D requirements. They would CRS-15 Provisions Submission of bids H. R. 4954 Each PDP sponsor would be required to submit to the MBA Administrator inf o r matio n o n the qualified drug coverage to be provided including the premium. The Administrator could not approve the premium unless it accurately reflected: 1) the value of benefits provided; and 2) the 67% federal subsidy for standard benefits. PDP plan sponsors would be required to enter into a contr a c t with the Administrator; the contract H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) be authorized to enter into participation agreements with pharmacies that comply with program requirements. entities would have to be licensed under state law as risk bearing entities. The Secretary would enter into contracts with pharmacy contractors to administer the benefit. The Secretary would accept competitive bids from entities. The bid would include: a proposal for the estimated drug prices and projected annual increases in prices, a statement regarding what it would charge the Secretary to administer the benefit, a description of access to pharmacy services, a detailed description of performance The Administrator would enter into contracts with eligible entities; contracts could cover more than one plan. Entities would submit bids containing information on the plan including the monthly premium. T he Administrator could not approve the premium unless it accurately reflected the actuarial value of the benefits and reinsurance subsidies. The Administrator would have the same authority to negotiate the terms and The Administrator would be required to establish by April 15, 2004, and periodicall y review, service areas in which plans could offer benefits. The area covered by a plan would be either 1 entire service area established by the Administrator or the entire country. Plans could submit multiple bids for multiple service areas. S.Amdt. 4309 (Graham et al.) Entities would be required to meet Part D requirements. They would be authorized to enter into participation agreements with pharmacies that comply with program requirements. S.Amdt. 4345 (Graham-Smith et al.) Entities would be required to meet Part D requirements. They would be authorized to negotiate and enter into participation agreements with pharmacies that comply wi t h p r o gr a m requirements. The Secretary would enter into contracts with eligible entities to administer the benefit; entities would include pharmacy benefit management companies, retail pharmacy delivery systems, health plans or insurers, states, or any other entity or combination of entities. The Secretary would accept competitive bids from entities. The bid would include: a proposal for estimated drug prices and projected annual increases in prices, a statement regarding what it The Secretary would enter into contracts with eligible entities to administer the benefit; entities would include pharmacy benefit management companies, retail pharmacy delivery systems, health plans or insurers, states, or any other entity or combination of entities. The Secretary would accept competitive bids from entities. The bid would include: a proposal for estimated negotiated drug prices and projected annual increases in prices, a statement regarding what CRS-16 Provisions Plan enrollment H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) could cover more than one plan. The Administrator would have the same authority to negotiate the terms and conditions of the plans as the Director of the Office of Personnel Management has with respect to Federal Employee Health Benefits (FEHB) plans. requirements, and a d eta i l e d d e s c r ip tio n standards the entity would use in selecting preferred medications. The Secretary would award, on a competitive basis contracts for 2-5 year terms. At least two co ntr acts would be awarded per area unless only one entity submitted a bid meeting minimum standards. The Secretary would co nsider the comparative merits of each bid. conditions of the plans as the Director of the Office of Personnel Management has with respect to Federal Employee Health Benefits (FEHB) plans. The Administrator would approve at least two contracts to offer a Medicare prescription plan in an area. Contracts would be awarded for 1year. Beneficiaries would enroll a M + C p l a n wi t h prescription drug coverage or in a PDP. Each individual would select (and could change the selection on a periodic basis) the pharmacy contractor to administer the benefit for such individual. Eligible beneficiaries not enrolled in a Medicare+Choice plan would make an election to enroll in a Medicare Prescription Drug Plan and could make an annual election to change plans. A Part D enrollee who failed to enroll in a plan would be enrolled in the plan with the lowest monthly premium available in the area. S.Amdt. 4309 (Graham et al.) would charge the Secretary to administer the benefit, a description of access to pharmacy services, a description of performance requirements, and a description of standards the entity would use in modifying the formulary. The Secretary would award, on a competitive basis contracts for 2-5 year terms. At least two contr acts would be awarded per area unless only one entity submitted a bid meeting minimum standards. The Secretary would co nsider the comparative merits of each bid. Eligible beneficiaries not enrolled in a M+C plan would make an annual election to enroll in a Medicare Prescription Drug Plan. A default option would be selected by the Secretary for enrollees that failed to select an entity. S.Amdt. 4345 (Graham-Smith et al.) it would charge the Secretary to administer the benefit, a description of access to pharmacy services, a description of performance requirements, and a description of standards the entity would use in modifying the formulary. The Secretary would award, on a competitive basis contracts for 2-5 year terms. At least two co ntr acts would be awarded per area unless only one entity submitted a bid meeting minimum standards. The Secretary would co nsider the comparative merits of each bid. Eligible beneficiaries not enrolled in a M+C plan would make an annual election to enroll in a Medicare Prescription Drug Plan. A default option would be selected by the Secretary for enrollees that failed to select an entity. CRS-17 Provisions Federal payments to plans H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) The federal government would pay direct subsidies and reinsurance payments to PDPs, M+C plans, and qualified retiree plans which would equal 67% of the value of standard coverage. Direct subsidies would be equal to 37% of the value of standard coverage provided under the plan. Reinsurance payments would be equal to 30% of the value of standard coverage. Reinsurance payments would be provided for: 1) 30% of an individual’s allowable drug costs between $1,001 and $2,000 (in 2005); and 2) 80% for costs over the outof-pocket limit ($3,700 in 2005). The Administrator would proportionately adjust payments so that total reinsurance payments for the year equaled 30% of total payments by qualifying plans for standard coverage during the year. The Administrator could adjust direct subsidy payments in order to avoid risk selection. The Secretary would pay each pharmacy contractor for the administration of benefit and for the negotiated prices (less cost-sharing, plus a reasonable dispensing fee) for prescription drugs used by enrollees. The Secretary would include in the contract with a pharmacy co ntractor incentives for cost and utilization management and quality improvement; the contract could provide financial incentives to encourage greater program savings. The Secretary wo u l d p r o v i d e f o r performance standards for contractors which could include monetary bonuses if the standards were met and penalties if they were not met. The federal government would pay reinsurance payments to eligible entities, M+C plans, and qualified retiree plans which would equal 30% of the value of standard coverage. Reinsurance payments would be provided for: 1) 50% of an individual’s allowable drug costs between $2,001 and $3,450 (in 2005); and 2) 80% for costs over the out-of-pocket limit ($3,700 in 2005). The Administrator would proportionately adjust payments so that total reinsurance payments for the year equaled 30% of t o t a l payments b y qualifying plans for standard coverage during the year. S.Amdt. 4309 (Graham et al.) The Secretary would pay each eligible entity for the management of the benefit and for the negotiated price (less cost sharing) of prescription drugs used by enrollees. A percentage of the management payment (as determined by the Secretary) would be tied to the entity’s performance, including controlling costs, providing quality clinical care, and providing quality service. The Secretary could reduce payments to reflect rebates and price concessions obtained by the entity from manufacturers. Agr eements between eligible entities and participating pharmacies would provide for payment of a reasonable dispensing fee. S.Amdt. 4345 (Graham-Smith et al.) The Secretary would pay each eligible entity for the management of the benefit and for the negotiated price (less cost sharing) of prescription drugs used by enrollees. A percentage of the management payment (as determined by the Secretary) would be tied to the entity’s performance, including controlling costs, providing quality clinical care, and providing quality service. The Secretary could reduce payments to reflect rebates and price concessions obtained by the entity from manufacturers. Agreements b etween eligible entities and participating pharmacies would provide for payment of a reasonable dispensing fee. CRS-18 Provisions H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) Assumption of financial risk Plans would be required to assume full financial risk on a prospective basis for covered benefits except: 1) as covered by federal direct subsidy payments or reinsurance payments for high cost enrollees; or 2) as covered by federal incentive payments to encourage plans to expand service areas for existing plans or establish new plans. The entity could obtain insurance or make other arrangements for the cost of coverage provided to enrollees. The federal government would assume financial risk for the cost of benefits except that a limited percentage (to be determined by the Secretary) of the administrative payment would be adjusted to ensure that the contractor pursues performance requirements; the Secretary could not establish a percentage that would jeopardize the ability of the contractor to administer the benefits in a quality manner. Entities would be required to assume a portion of financial risk. Entities would be permitted to obtain reinsurance for the portion of costs for which they were at risk. Access The Administrator would assure that all eligible individuals residing in the U.S. would have a choice of enrollment in at least two qualifying plan options (at least one of which was a PDP) in their area of residence. The requirement would not be satisfied if only one PDP sponsor or M+C organization offered all the qualifying plans in the area. If necessary to ensure such access, the Administrator would be The Secretary would develop procedures for the provision of Part D benefits to p er sons residing in areas not covered by a contract. The Secretary would also develop procedures to assure that beneficiaries residing in more than one area in a year were provided benefits throughout the year. In order to assure access, the Administrator would be authorized to provide financial incentives, including the partial underwriting of risk, for an entity to establish a plan; the assistance would be available only so long as, a n d to t h e e x t e n t necessary, to assure the guaranteed access. H o we ver , t h e Administrator could never provide for the full underwriting of financial risk for any entity, nor S.Amdt. 4309 (Graham et al.) The federal government would assume financial risk for the cost of benefits except that a percentage (to be determined by the Secretary) of the administrative payment would be adjusted to ensure that the contractor pursued performance requirements. T he percentage could be up to 100%. The Secretary could not establish a percentage that would jeopardize the ability of the contractor to administer the benefits in a quality manner. The Secretary would develop procedures for the provision of Part D b enefits to perso ns residing in areas not covered by a contract. The Secretary would also develop procedures to assure that beneficiaries residing in more than one area in a year were provided benefits throughout the year. S.Amdt. 4345 (Graham-Smith et al.) The federal government would assume financial risk for the cost of benefits except that a percentage (to be determined by the Secretary) of the administrative payment would be adjusted to ensure that the contractor pursued performance requirements. The percentage could be up to 100%. The Secretary could not establish a percentage that would jeopardize the ability of the contractor to administer the benefits in a quality manner. The Secretary would develop procedures for the provision of Part D benefits to p ersons residing in areas not covered by a contract. The Secretary would also develop procedures to assure that beneficiaries residing in more than one area in a year were provided benefits throughout the year. CRS-19 Provisions H. R. 4954 authorized to provide financial incentives, including the partial underwriting of risk, for a PDP sponsor to expand its service area under an existing prescription drug plan to adjoining or additional areas, or to establish such a plan, including offering such plan on a regional or nationwide basis. The assistance would be available only so long as, a n d t o t h e ext e n t necessary, to assure the guaranteed access. Ho we v e r , the Administrator could never provide for the full underwriting of financial risk for any PDP sponsor, nor could the Administrator provide for any assumption of financial risk for a public PDP sponsor offering a nationwide drug plan. Additionally, the Administrator would be directed to seek to maximize the assumption of financial risk by PDP sp o nso r s a nd M + C organizations. H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) could the Administrator provide for any assumption of financial risk for a public entity offering a nationwide drug plan. Additionally, the Administrator would be directed to seek to maximize the assumption of financial risk by the entity. S.Amdt. 4309 (Graham et al.) S.Amdt. 4345 (Graham-Smith et al.) CRS-20 Pricing; Cost Controls Provisions H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) Drug pricing and payment The PDP sponsor would determine payments and would be expected to negotiate discounts. The entity offering the drug plan would determine payments and would be expected to negotiate discounts. Access to negotiated prices Both standard coverage and actuarially equivalent coverage would have to provide beneficiaries access to negotiated prices (including applicable discounts) even when no benefits may be payable because the beneficiary had reached the initial coverage limit. The Secretary would be required to negotiate contracts with drug manufacturers that specify the maximum prices that may be charged to program enrollees. The Secretary would be required to take into account the goal of developing breakthrough medicines. The contract between the Secretary and the p har macy contracto r wo u l d r e q u i r e t h e contractor to negotiate contracts with manufacturers that provide for maximum prices that are lower than those negotiated by the Secretary, if applicable. The reduction would be passed on to beneficiaries and the Secretary would hold the contractor accountable for meeting performance requirements with respect to price reductions and limiting price increases. Both standard coverage and actuarially equivalent coverage would have to provide beneficiaries access to negotiated prices (including applicable discounts) even when no benefits may be payable because the beneficiary has reached the initial coverage limit. An entity offering a plan would be required to issue a card to the beneficiary to assure access to negotiated prices for which coverage is not otherwise provided under the plan. S.Amdt. 4309 (Graham et al.) The contracting entity’s bid would include a proposal for the estimated prices for covered drugs and projected annual increase in prices. The entity would be expected to negotiate prices. S.Amdt. 4345 (Graham-Smith et al.) The contracting entity’s bid would include a proposal for the estimated negotiated prices for covered drugs and projected annual increase in prices. The entity would be expected to negotiate prices. Plans would provide that beneficiaries would have access to negotiated prices Plans would have to provide beneficiaries access to negotiated prices (including applicable discounts) even when no benefits may be payable CRS-21 Provisions Cost controls/formularies H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) Plans would be allowed to have formularies restricting coverage to certain drugs. Plans electing to use a formulary would be required to establish a pharmaceutical and therapeutic committee (that included at least one practicing physician and one practicing pharmacist) to develop and revise the formulary. The formulary would be required to include drugs within all therapeutic categories and classes of covered drugs (although not necessarily for all drugs within such categories and classes). Plans could offer tiered cost-sharing for drugs included wit hi n a formulary and lower costsharing for preferred drugs in the formulary. An enrollee would have the right to appeal to obtain coverage for a drug not on the formulary if the prescribing physician determined that the formulary drug was not as effective for the individual or had adverse effects for the individual. P r e fe r r e d me d i c i n e s (which would have lower cost sharing) would be designated by the Secretary or the pharmacy contractor for a therapeutic class. Pharmacy contractors would be required to have in place procedures to treat, on a case-by-case basis, nonpreferred medicines as preferred medicines if the preferred medicine was determined not to be as effective for, or to have significant adverse effects on, the enrollee. The procedures would require that determinations be based on professional medical judgment, medical condition of the enrollee and medical evidence. Plans would be allowed to have formularies restricting coverage to certain drugs. Plans electing to use a formulary would be required to establish a pharmaceutical and therapeutic committee (that included at least one practicing physician and one practicing pharmacist) to develop and revise the formulary. The formulary would be required to include drugs within all therapeutic categories and classes of covered drugs (although not necessarily for all drugs within such categories and classes). Plans could offer tiered cost-sharing for drugs includ e d within a formulary and lower costsharing for preferred drugs in the formulary. An enrollee would have the right to appeal to obtain coverage for a drug not on the formulary if the prescribing physician determined that the formulary drug was not as effective for the individual or had adverse effects for the individual. If a plan The Secretary, directly or through contracts with pharmacy contractors, would employ mechanisms to provide services appropriately and efficiently; mechanisms could include: 1) price negotiations; 2) reduction in coinsurance below 20% for preferred medicines; 3) S.Amdt. 4309 (Graham et al.) Entities would be required to use cost control strategies that could include alternative methods of distribution (though beneficiaries would not be required to use such alternative me t h o d s ) , p r e f e r r e d p ha r ma c y n e t wo r ks, generic sub stitution, therapeutic interchange, d isease management programs, medication therapy management, and informing beneficiaries of price differences between generic and brand name drugs. S.Amdt. 4345 (Graham-Smith et al.) Entities would be required to use cost control strategies that could include alternative methods of distribution (though beneficiaries would not be required to use such alternative me t h o d s ) , p r e f e r r e d p h a r ma c y netwo r k s , generic substitution, therapeutic interchange, d isease management programs, medication therapy management, and informing beneficiaries of price differences between generic and brand name drugs. Entities would be required to establish formularies. There could not be a national formulary, nor could the Secretary require an entity to exclude a particular drug from the formulary. The formulary would be developed by a pharmacy and therapeutics committee in accordance with standards developed by the Secretary in consultation with the Medicare Prescription Drug Advisory Entities would be required to establish formularies. There could not be a national formulary, nor could the Secretary require an entity to exclude a particular drug from the formulary. The formulary would be developed by a pharmacy and therapeutics committee in accordance with standards developed by the Secretary in consultation with the Medicare Prescription Drug Advisory CRS-22 Provisions H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) me t h o d s t o r e d u c e medication errors and encourage appropriate use of medications; and 4) permitting pharmacy contractors, as approved by the Secretary, to make exceptions to the costsharing provisions for nonpreferred medicines, to secure best prices for enrollees. offered tiered cost-sharing for covered drugs, an enrollee would have the right to request that a nonpreferred drug be treated on terms applicable for a preferred drug if the prescribing physician determined that the preferred drug was not as effective for the individual or had adverse effects for the individual. Price negotiations would be conducted in such a manner so that: 1) there was at least one contract for a medicine in each therapeutic class; 2) if more than one medicine was available in a class, there were contracts for at least two medicines in the class unless determined clinically inappropriate; and 3) if more than two medicines were available in a class, there were contracts for at least two medicines in a class and a contract for a generic substitute, unless determined clinically inappropriate. Eligible entities would be required to have a costeffective drug utilization management program (including incentives to r e d u c e c o s t s wh e n appropriate). Entities could use other cost c o n t r o l me c h a n i s ms customarily used in employer-sponsored health plans. S.Amdt. 4309 (Graham et al.) Committee. The formulary would have to include: 1) all generic covered drugs, and 2) at least one but no more than two brand name drugs for each therapeutic class, unless the Secretary determined the limitation was clinically inappropriate for a given therapeutic class. Entities would have to have procedures to treat non-formulary drugs as preferred brand-name drugs if the preferred drug was determined not to be as effective for the enrollee in preventing or slowing the deterioration of, or improving or maintaining the health of the enrollee or to have a significant adverse effect for the enrollee. S.Amdt. 4345 (Graham-Smith et al.) Committee. The formulary would have to include: 1) all generic covered drugs, and 2) drugs for each therapeutic category and class though not necessarily all drugs in each category or class. Entities would have to have procedures to treat non-formulary drugs as brand-name drugs on the formulary if the formulary drug was determined not to be as effective for the enrollee in preventing or slowing the deterioration of, or improving or maintaining the health of the enrollee or to have a significant adverse effect for the enrollee. The Secretary could establish and provide incentives for pharmacies to participate in cost and drug utilization management programs and quality assurance measures and systems. CRS-23 Requirements Provisions Beneficiary protections H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) Plans would be required to comply with a number of beneficiary protection provisions including those related to: 1) communityrated premiums; 2) nondiscrimination; 3) information disclosure; 4) assuring the participation of a sufficient number of pharmacies; 5) issuance of a card so beneficiaries could assure access to negotiated prices when coverage is not otherwise available under the plan; 6) a cost and drug utilization management program including medicatio n the r a p y management and an electronic prescription drug program that provides for electronic transfer of prescriptions and provision of information to the prescribing health professional; and 7) provisions for hearing and resolving grievances and handling appeals. The Secretary would establish standards and programs for quality and other standards including those related to: 1) access (including 24-hour/7-day a week access, on-line review to evaluate for medicine therapy problems, and adherence of any preferred pharmacy network to minimum access standards); 2)assuring compliance of pharmacies with negotiated prices; 3) enrollee counseling; 4) education of providers, pharmacists, and enrollees; and 5) provision of cost data to the Secretary. Pharmacy contractors would be required to have in place procedures to ensure timely procedures for internal and external review of denials of coverage and other complaints. Eligible entities would be required to: 1) disclose information to beneficiaries on the plan; 2) secure the participation in the network of a sufficient number of pharmacies that dispense drugs directly to patients (other than by mail order) to ensure convenient access for beneficiaries; 3) have quality assurance measures, including a medica t i o n t he r apy management program, to reduce medical errors and adverse drug interactions; 4) assure that beneficiaries were informed at the time of purchase of any difference between the price of the prescribed drug and the lower priced generic drug; 5) provide procedures for resolving grievances and handling appeals; and 6) assure confidentiality of enrollee records. Entities could establish an optional pointof-service method of operation under which the plan provided access to S.Amdt. 4309 (Graham et al.) The Secretary could not award a contract to an entity unless the entity: 1) met quality and financial standards; 2) had in place drug utilization review procedures to ensure appropriate utilization of drugs and avoidance of adverse drug reactions; 3) had in place, effective with 2006, an electronic prescription program that provided for electronic transfer of prescriptions and provision of i n f o r ma t i o n t o t h e prescribing health professional; 4) ensured 24 hour/7-day a week access to drugs in emergencies; 5) ensured that pharmacies would not overcharge enrollees; 6) had procedures for determining if non-formulary drugs were medically necessary; 7) had an appeals process for enrollees; 8) had procedures to safeguard the privacy of medical records; and 9) had procedures to deter medical errors and ensure S.Amdt. 4345 (Graham-Smith et al.) The Secretary could not award a contract to an entity unless the entity: 1) met quality and financial standards; 2) had in place drug utilization review procedures to ensure appropriate utilization of drugs and avoidance of adverse drug reactions; 3) had in place, effective with 2006, an electronic prescription program that provided for electronic transfer of prescriptions and provision of i n f o r ma t i o n t o t h e prescribing health professional; 4) ensured 24 hour/7-day a week access to drugs in emergencies; 5) ensured that pharmacies would not overcharge enrollees; 6) had procedures for determining if non-formulary drugs were medically necessary; 7) had an appeals process for enrollees; 8) had procedures to safeguard the privacy of medical records; and 9) had procedures to deter medical errors and ensure CRS-24 Provisions H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) any or all pharmacies not participating in the network and could charge beneficiaries, through adjustments in copayments, additional costs associated with this option. S.Amdt. 4309 (Graham et al.) that contracted pharmacies had such procedures. S.Amdt. 4345 (Graham-Smith et al.) that contracted pharmacies had such procedures. S.Amdt. 4309 (Graham et al.) Persons meeting the definition of qualified Medicare beneficiaries (QMBs, i.e., persons with incomes below 100% of poverty), and persons meeting the QMB definition except that their incomes were between 100% and 135% of poverty, would have their Part D premiums and copayments paid by Medicaid. Enrollees between 135% and 150% of poverty would pay a reduced Part D premium, calculated on a sliding scale basis. In determining QMB qualification for payment of Part D premiums and copayments, asset S.Amdt. 4345 (Graham-Smith et al.) Persons whose income , as defined under the QMB program, was below 200% of poverty would have their Part D cost-sharing and enrollment fees paid by Medicaid. No assets requirements would be imposed. Beneficiaries would be subject to costsharing charges of $2 for generic drugs and $5 for brand name drugs. The cost-sharing charges for years after 2005 would be increased by the percentage increase in average per capita program expenditures for the year ending the previous July. Low-Income Subsidies for Part D Provisions Subsidies for Part D H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) Low-income persons would receive a premium subsidy (based on the value of standard coverage). Individuals with incomes at or below 150% of poverty (and assets below $4,000) would have a subsidy equal to 100% of the value of standard drug coverage provided under the plan. Individuals with incomes between 150% and 175% of poverty would have a sliding scale premium subsidy ranging from 100% of such value at 150% of poverty to 0% of such value at 175% of poverty. For both groups, beneficiary cost-sharing for spending up to the Persons meeting the definition of qualified Medicare beneficiaries (QMBs, persons with incomes below 100% of poverty and assets below $4,000), and persons meeting the QMB definition except that their incomes were between 100% and 150% of poverty, would have their P art D premiums, deductibles, and countable cost sharing paid by Medicaid. Persons meeting the QMB definition except that their incomes were between 150% and 175% of poverty would have their Part D deductibles and countable cost-sharing Persons with incomes below 135% of poverty and assets below $4,000 would have a full premium subsidy, provided the plan premium was at or below the national weighted average premium. If no such plan was available in the area, the subsidy would equal the premium for the lowest cost plan. In addition, these persons wo u l d h a v e : 1 ) a deductible equal to 5% of the amount otherwise applicable; 2) cost-sharing of 2.5% rather than 50% for costs below the initial coverage limit; 3) 50% cost-sharing for costs above the initial coverage limit and below the annual CRS-25 Provisions H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) initial coverage limit ($2,000 in 2005) would be reduced to an amount not to exceed $2 for a multiple source or generic drug and $5 for a non-preferred drug. No deductible would be imposed. PDPs could not charge individuals receiving cost-sharing subsidies more than $5 per prescription. PDPs could reduce to zero the costsharing otherwise applicable for generic drugs. paid by Medicaid; their Part D premiums would be reduced on a sliding scale basis ranging from 100% of the premium at 150% of poverty to 0% at 175% of poverty. out-of-pocket limit; and 4) zero cost sharing for costs above the out-of-pocket limit. Persons with incomes above 135% and below 150% of poverty would have a sliding scale premium ranging from 100% of the premium at 135% of poverty to 57% of poverty with no additional premium costs provided the plan premium was at or b elo w the na t i o n a l weighted average premium (or the lowest premium in the area if none was below the national weighted average). They would also have 50% cost-sharing for costs between the initial coverage limit and the annual out-of-pocket limit. Plans could waive or reduce otherwise applicable cost-sharing. S.Amdt. 4309 (Graham et al.) requirements would not apply. S.Amdt. 4345 (Graham-Smith et al.) CRS-26 Relationship to Other Coverage Provisions Relationship to Medicaid H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) States would be required to make eligibility determinations for lowincome subsidies; there would be a phase-in of the federal assumption of associated administrative costs. (Alternatively, the eligibility determinations could be made by the Social Security Administration.) There would also be a federal phase-in of the costs of premiums and cost-sharing subsidies for dual eligibles. States would be required to maintain Medicaid benefits as a wrap around to Medicare benefits for dual eligibles; states could require that these persons elect Part D drug coverage. Medicaid costs associated with paying Part D costsharing charges for persons with incomes above 100% of poverty would be paid by the federal government. States would be required to make eligibility determinations for lowincome subsidies; there would be a phase-in of federal assumption of associated administrative costs. There would also be a federal phase-in of a portion of the costs of premiums and cost-sharing subsidies for dual eligibles. Medicaid coverage would wrap around Part D benefits; states could require that these persons elect Part D drug coverage. If a state elected to use negotiated prices for a drug under its Medicaid program, the Medicaid rebate requirements would not apply for that drug. Further, the bill would e x e mp t a n y p r i c e s negotiated by a PDP, Medicare+Choice plan, or If a state elected to use negotiated prices for a drug under its Medicaid program, the Medicaid rebate requirements would not apply for that drug. Further, the bill would exempt any prices negotiated by a prescription drug plan, Medicare+Choice plan, or qualified retiree program from Medicaid’s determination of “best price” for purposes of the S.Amdt. 4309 (Graham et al.) The current federal-state matching rate would apply fo r M e d ic a id costs associated with paying Part D premiums and costsharing for those below 120% of poverty. The federal matching rate would be 100% for those between 120% and 150% of poverty. If a state elected to use negotiated prices for a drug under its Medicaid program, the Medicaid rebate requirements would not apply for that drug. Further, the bill would e x e mp t a n y p r i c e s negotiated by a prescription drug plan, Medicare+Choice plan, or qualified retiree program from Medicaid’s determination of “best price” for purposes of the Medicaid rebate program. S.Amdt. 4345 (Graham-Smith et al.) The current federal-state matching rate would apply fo r Medicaid costs associated with paying Part D cost-sharing and enrollment fees for those below 120% of poverty. An enhanced matching rate would apply for persons with incomes between 120% and 150% of poverty. This rate would be defined as the federal matching rate for the state’s Medicaid program plus 30% of the percentage point difference between this rate and 100%; in no case could the rate exceed 85%. The federal government would pay 100% of costs for persons between 150% and 200% of poverty. States would be required to make the eligibility determinations. If a state elected to use negotiated prices for a drug under its Medicaid program, the Medicaid rebate requirements would not apply for that drug. Further, the bill would CRS-27 Provisions H. R. 4954 The Secretary would make payments to retiree health plans offering coverage that was not less than Part D coverage. Payments would equal two-thirds of the estimated average per capita government contribution for Part D enrollees. Qualified prescription drug plans offered by employers to retirees would be eligible for reinsurance payments. At a minimum, qualified retiree coverage would have to meet the requirements for qualified prescription drug coverage. The Secretary would make payments to retiree health plans offering coverage that was not less than Part D coverage. Payments would equal two-thirds of the estimated average per capita government contribution for Part D enrollees. S.Amdt. 4345 (Graham-Smith et al.) e x e mp t a n y p r i c e s negotiated by a prescription drug plan, Medicare+Choice plan, or qualified retiree program from Medicaid’s determination of “best price” for purposes of the Medicaid rebate program. The Secretary would make payments to retiree health plans offering coverage that was not less than Part D coverage. Payments would equal three-fourths of the estimated average per capita government contribution for Part D enrollees. The bill would modify current requirements for standardized Medigap policies. Effective January 1, 2005, an appropriate number of such polices would have to provide coverage for medicines which complemented, but did not duplicate, Part D benefits. Effective January 1, 2005, no Medigap policy with drug coverage could be sold, issued, or renewed to a Part D enrollee. Beneficiaries could obtain Medigap coverage under new standardized policies designed to supplement the new enhanced fee-forservice coverage option under the bill; these policies could not offer coverage for drug costs. The three of the 10 standardized Medigap plans offering drug coverage would have to be revised to complement, not duplicate, Part D. The revised drug packages could not offer coverage for more than 90% of the Part D cost-sharing. Effective January 1, 2005, the issuance of any of the old standardized policies with drug coverage would be prohibited. The bill The three of the 10 standardized Medigap plans offering drug coverage would have to be revised to complement, not duplicate, Part D. The revised drug packages could not offer coverage for more than 90% of the Part D cost-sharing. Effective January 1, 2005, the issuance of any of the old standardized policies with drug coverage would be prohibited. The bill H.R. 5019 (Rangel et al.) qualified retiree program from Medicaid’s determination of “best price” for purposes of the Medicaid drug rebate program. Relationship to private plans Relationship to Medigap Qualified prescription drug plans offered by employers to retirees would be eligible for direct subsidies and reinsurance payments. At a minimum, qualified retiree coverage would have to meet the requirements for qualified prescription drug coverage. Effective January 1, 2005, the issuance of new Medigap policies with prescription drug coverage would be prohibited unless 1) the policies replaced another policy with drug coverage; or 2) policies met requirements for two new standardized policies for all Medicare services. The first new policy would have the following benefits (notwithstanding other provisions of law relating S. 2729 (Grassley et al.) Medicaid program. drug S.Amdt. 4309 (Graham et al.) rebate CRS-28 Provisions H. R. 4954 to core benefits): 1) coverage of 50% of the cost-sharing otherwise applicable (except coverage of 100% costsharing applicable for preventive benefits); 2) no coverage of the Part B deductible; 3) coverage of all hospital coinsurance for long stays (as in current core package); and 4) a limitation on annual outof-pocket costs of $4,000 in 2005 (increased in future years by an appropriate inflation adjustment as specified by the Secretary). The second new policy would have the same benefit structure as the first new policy, except that: 1) coverage would be provided for 75%, rather than 50%, of cost-sharing otherwise applicable; and 2) the limitation on out-ofpocket costs would be $2,000, rather than $4,000. Both policies could provide for coverage of Part D cost-sharing; however, neither policy could cover the Part D deductible. The bill would require plans to sell any of H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) S.Amdt. 4309 (Graham et al.) would guarantee issuance, during the period established by the Secretary for Part D enrollment, of the benefit package the Secretary determined most comparable to the old standardized drug policy held by the policyholder. S.Amdt. 4345 (Graham-Smith et al.) would guarantee issuance, during the period established by the Secretary for Part D enrollment, of the benefit package the Secretary determined most comparable to the old standardized drug policy held by the policyholder. CRS-29 Provisions H. R. 4954 H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) No provision No provision S.Amdt. 4309 (Graham et al.) S.Amdt. 4345 (Graham-Smith et al.) S.Amdt. 4309 (Graham et al.) No provision S.Amdt. 4345 (Graham-Smith et al.) No provision the Plans A through Plan G to individuals who enroll in Part D within 63 days and who were covered until then by Medigap policy H, I, or J. Drug Card Provisions Discount Program H. R. 4954 Drug Card The provision would require the Secretary to endorse prescription drug discount programs meeting certain requirements and to make available information on such programs to beneficiaries. The program: 1) would have to pass on to enrollees discounts on drugs, including discounts negotiated with manufacturers; 2)could not be limited to mail order drugs; 3) would have to provide pharmaceutical support services, such as education and counseling, and services to prevent adverse drug interactions; 4) would have to provide information to enrollees that the Secretary identified as b eing CRS-30 Provisions Transitional Low-Income Assistance Program H. R. 4954 necessary to provide for informed choice by b e neficiaries among endorsed programs; 5) would have to safeguard individually identifiable information in accordance with the Health Insurance Portability and accountability Act (HIPAA); and 6) would have to meet requirements the Secretary found necessary to participate in the transitional lowincome assistance program (see below). A beneficiary could only be enrolled in one endorsed program at a time. Annual enrollment fees could not exceed $25. The bill would provide for the implementation of a transitional prescription drug assistance program, until the Part D program was implemented, for Medicare beneficiaries with incomes under 175% of poverty who did not have drug coverage under Medicaid, Medigap, group health insurance, or federally-supported health care programs under the Department of Defense, H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) No provision No provision S.Amdt. 4309 (Graham et al.) No provision S.Amdt. 4345 (Graham-Smith et al.) No provision CRS-31 Provisions H. R. 4954 Veterans Administration, Federal Employees Health Benefits program, or the I nd ian Health Care Improvement Act. Individuals eligible for assistance would have to be enrolled under a prescription drug discount card program (or an alternative state program approved by the Secretary). Appropriations totaling $300 million in FY2003, $2.1 billion in FY2004, and $500 million in FY2005 would be available. Funds would be allotted among the states based on the proportion of Medicare beneficiaries with incomes below 175% of poverty. The assistance would be in the form of a discount in addition to that available under the discount card program. States could continue to provide assistance under their own pharmaceutical assistance programs. H.R. 5019 (Rangel et al.) S. 2729 (Grassley et al.) S.Amdt. 4309 (Graham et al.) S.Amdt. 4345 (Graham-Smith et al.)