Introduction to Medicare Part D
Medicare Part D, a program that offers outpatient prescription drug benefits, is a lifeline for older adults and individuals with long-term disabilities. These beneficiaries can enroll in private plans, including stand-alone prescription drug plans (PDPs) and Medicare Advantage prescription drug plans (MA-PDs). These plans supplement traditional Medicare and include drug coverage and other Medicare-covered benefits. This article will explore the enrollment and costs associated with Medicare Part D in 2023, using data from the Centers for Medicare & Medicaid Services (CMS).
The Rise of Medicare Advantage Drug Plans
The Part D drug coverage marketplace has substantially grown in Medicare Advantage drug plans. These plans have become increasingly popular due to their lower average premiums and deductibles compared to stand-alone PDPs. However, it is essential to note that while these lower premiums can make MA-PDs attractive to enrollees, they also come with limitations, such as restrictions on provider networks and utilization management that do not apply to traditional Medicare.
Medicare Part D Enrollment: A Closer Look
As of 2023, 50.5 million people with Medicare are enrolled in plans that provide the Medicare Part D drug benefit. These include stand-alone PDPs and MA-PDs, plans for specific populations like former employer or union retirees, and Medicare Advantage Special Needs Plans (SNPs). Interestingly, more than half of all Medicare Part D enrollees (56%, or 28.3 million) are enrolled in MA-PDs, reflecting a trend of declining enrollment in PDPs and increasing enrollment in MA-PDs.
The Big Players in Part D Enrollment
Part D enrollment is heavily concentrated in three national firms: UnitedHealth, CVS Health, and Humana. These firms cover nearly 6 in 10 Medicare beneficiaries enrolled in Part D in 2023. Besides Kaiser Permanente, which does not offer stand-alone PDPs, the top Part D plan sponsors offer PDPs and MA-PDs. However, for most firms, Part D enrollment is more concentrated in one market than the other.
The Role of the Part D Low-Income Subsidy
In 2023, 13.4 million Part D enrollees (27% of all Part D enrollees) will receive premium and cost-sharing assistance through the Part D Low-Income Subsidy (LIS) program. This program, or “Extra Help,” pays Part D premiums for eligible beneficiaries and reduces cost sharing. Consistent with overall Part D enrollment trends, LIS enrollment in PDPs has declined while increasing in MA-PDs.
Premiums and Deductibles: A Comparative Analysis
The average monthly premium for Part D drug coverage is four times more in PDPs than in MA-PDs. The enrollment-weighted average monthly premium for PDPs is $40 in 2023, substantially higher than the intermediate monthly portion of the premium for drug coverage in MA-PDs, which is $10. Similarly, the weighted average annual Part D deductible is seven times larger in PDPs than in MA-PDs.
Understanding Cost-Sharing Structures in Part D
Part D enrollees typically face no or low monthly copays for generic drugs but substantially higher copays or coinsurance for other medications. This is due to the typical five-tier formulary design in Part D, which includes tiers for preferred generics, generics, preferred brands, non-preferred drugs, and specialty drugs. Given the different cost-sharing structures adopted by MA-PDs and PDPs, comparing out-of-pocket costs that beneficiaries would face for different types of drugs across plan types can be challenging.
Understanding the nuances of Medicare Part D enrollment and costs is crucial for beneficiaries and policymakers alike. As the landscape of Medicare Part D continues to evolve, it is essential to stay informed about the latest trends and changes. This knowledge can help beneficiaries make informed decisions about their healthcare and help policymakers shape future healthcare policies.
What is Medicare Part D?
Medicare Part D is a program that provides outpatient prescription drug benefits to older adults and people with long-term disabilities who are enrolled in Medicare.
What is the difference between MA-PDs and PDPs?
MA-PDs are Medicare Advantage Prescription Drug plans with drug coverage and other Medicare-covered benefits. PDPs, or stand-alone prescription drug plans, supplement traditional Medicare and only provide drug coverage.
Which firms have the highest Part D enrollment?
The top three firms with the highest Part D enrollment are UnitedHealth, CVS Health, and Humana.
What is the Part D Low-Income Subsidy (LIS)?
The Part D Low-Income Subsidy (LIS), also known as “Extra Help,” is a program that provides premium and cost-sharing assistance to eligible Part D enrollees.
How much is the average monthly premium for Part D drug coverage?
The average monthly premium for Part D drug coverage is $40 for PDPs and $10 for MA-PDs in 2023.
What is the average annual Part D deductible?
The yearly Part D deductible is $411 for PDPs and $58 for MA-PDs in 2023.
What is a five-tier formulary design in Part D?
The five-tier formulary design in Part D includes tiers for preferred generics, generics, preferred brands, non-preferred drugs, and specialty drugs. The cost-sharing amounts vary for each level.
Source: Kaiser Family Foundation