Implementing Medicare Part D Could Get Ugly


This expert who hopes to help everybody adjust nevertheless expects big headaches come Jan. 1, 2006. However, e-prescribing could make the drug plan work.

Once Medicare’s new prescription drug benefit and revamped approach to managed care kick in next January, expect a bumpy transition for millions of beneficiaries and those who care for them. The new Health Policy Institute at the University of the Sciences in Philadelphia expects to provide a much-needed information resource to smooth the ride. The institute’s founding executive director, Richard Stefanacci, DO, recently spent a year at the Centers for Medicare and Medicaid Services as a CMS Health Policy Scholar, focusing on the Medicare Part D pharmacy benefit, especially regarding access issues for frail elders.

Stefanacci has long experience working with the elderly, having served as medical director for several nursing facilities as well as continuing care retirement communities. His experience in geriatrics includes more than a decade as a medical director in several roles, including a large primary care private practice, a full-risk provider group, a Medicare+Choice HMO, and currently a PACE (Program for All-inclusive Care) program in Philadelphia.

Stefanacci completed his clinical training in internal medicine and a fellowship in geriatrics at the University of Medicine and Dentistry of New Jersey, and holds master’s degrees in geriatric health and business administration. He is a fellow in both the American Geriatric Society and the College of Physicians of Philadelphia as well as an honorary lifetime member of the American Society of Consultant Pharmacists. Stefanacci spoke recently with Senior Contributing Editor Patrick Mullen.

MANAGED CARE: The Medicare reform bill replaces Medicare+Choice with Medicare Advantage. What important changes are likely in how Medicare deals with managed care plans?

RICHARD STEFANACCI: I see three significant changes coming from the Medicare Modernization Act. One is that for the first time, every Medicare beneficiary will have access to a managed care plan, in the form of new large regional PPOs or regional Medicare Advantage plans, supported with a $12 billion stabilization fund. Historically, few beneficiaries in rural areas had a plan available in their region. The second big change is Section 231 of the MMA, which calls for development of three types of specialized Medicare Advantage plans. Previously, managed care plans had to treat all Medicare beneficiaries in a geographic region. Now plans can choose to treat institutionalized seniors, dually- eligible beneficiaries, or those suffering from chronic illnesses. So we’ll see more specialized forms of managed care dealing with the elderly. The third change is that Medicare Advantage plans will be paid based on the diagnosis of their beneficiaries rather than receive the same payment for every member. A new kind of cherry picking will develop as plans identify disease states and patient characteristics they can best manage.

MC: How much interest do you see in developing any of the three types of specialized plans? Who would you expect to be major participants?

STEFANACCI: Among major players, United Healthcare has a product called Evercare, which had previously been a demonstration project, and they’re looking to ramp that up. They lobbied hard to include specialized plans in the bill. It’s run by geriatricians, has a nurse practitioner model, focuses on primary care and social work. I expect Blue Cross/Blue Shield plans that already have Medicaid and Medicare products to develop plans for dual eligibles. I also expect disease management companies to move from demonstration projects to take on greater risk with Medicare beneficiaries.

MC: While every Medicare beneficiary will have access to managed care, what factors will determine how widely accepted those plans become?

STEFANACCI: The big factor will be benefit design. Managed care plans will have an opportunity to smooth out the doughnut hole and some of the confusing nuances of the Part D benefit.

MC: The doughnut hole refers to the gap in Medicare drug coverage for beneficiaries who spend more than $2,250 but less than $3,600 a year on prescriptions.

STEFANACCI: Right. Under the law, most seniors will receive 75 percent coverage up to $2,250 per year for prescription drugs after paying a $35 monthly premium and meeting a $250 out-of-pocket deductible. Medicare then stops paying for drugs altogether until personal spending hits $3,600 per year. After that point, the program pays 95 percent of all costs. The second factor that will determine how big Medicare Advantage becomes is the competitive landscape in each part of the country. In areas like Philadelphia, where I practice, managed care is pretty entrenched in the Medicare market, so seniors already have a fair amount of choice. In more rural areas, enrollment will depend on how attractive a network looks compared to fee-for-service. I was medical director of a managed care plan for a few years. Obviously it’s easier to manage a plan in an urban area than a rural area. You have a wider provider network to choose from.

MC: Medicare’s new prescription drug benefit increases the federal government’s share of prescription drug spending in the United States to 28 percent from 3 percent? What are the implications of that?

STEFANACCI: Pharmaceutical companies anticipate that Medicare is going to be a 300-ton gorilla. Right now this is controlled by a clause in the MMA that precludes federal interference in pricing negotiations between drug manufacturers and pharmacies and prescription drug plans, or PDPs.

MC: In other words, Medicare cannot negotiate discounts.

STEFANACCI: Right. The drug companies’ concern is that as Medicare becomes a bigger purchaser, and costs are found to be difficult to control, the noninterference provision will be removed, and that Medicare will be the direct purchaser of drugs in the future.

MC: You expect Congress to look at Medicare drug spending and decide that there’s nothing else it can do?

STEFANACCI: Yes. Eventually, we’ll see something closer to the system used by the Department of Veterans Affairs. In fact, there’s a case to be made that the 2008 presidential election, barring further terrorist incidents, will be about Social Security and Medicare reform. How Medicare provides its drug benefit will be the main thrust of that debate. It will come to a head because the cost of the Medicare Part D drug benefit has been vastly underestimated.

MC: Should costs explode, then what?

STEFANACCI: There are four possibilities: significant tax increases, which is unlikely; benefit cuts across the whole Medicare program, which is probable; increased cost sharing; or reimbursement hits on providers, including drug companies. The combination of those four things will, hopefully, force us to take a hard look at the whole system and move toward more integrated care. The Medicare Modernization Act is the first time where we have a Medicare premium difference based on income. I think that’s a test of a concept that will be more widely applied.

MC: You recently spent a year at the Centers for Medicare and Medicaid Services. What was your impression of the agency’s performance?

STEFANACCI: I came to appreciate what that agency can do: It does a phenomenal job. The difficulty is that historically — with some exceptions, including when Tom Scully was administrator — CMS responds to the dictates of Congress rather than moving in any direction on its own. That’s certainly the case now. They’re putting into operation the strict letter of a law that was spelled out over a year ago. It’s striking that CMS, an organization that spends a billion dollars a day on health care — and that includes Saturdays and Sundays — employs fewer than 50 physicians, and not too many of them actively practice. To the agency’s credit, they make a concerted effort to get out and see what’s going on. CMS looks at the 20-year horizon. Unfortunately, looking 20 years out makes it tough for actions you take not to hurt patients now. We’ll see examples of that in the short run through implementation of MMA. Twenty years from now, we’ll look back on it as just a hiccup, but on January 1, 2006, a lot of individuals will face a lot of headaches.

MC: What will be the biggest headaches?

STEFANACCI: For physicians, transitioning patients from nonformulary medications to formulary medications. That will be especially true for dually eligible beneficiaries who historically have had an open formulary, albeit with some prior-authorization requirements. Suddenly, we’re moving to for-profit prescription drug plans that will operate under a fairly restrictive formulary system.

MC: When will the formularies be known?

STEFANACCI: Each plan will develop its own formulary and prior-authorization rules, details of which won’t be known until Sept. 2, when the plans are announced. The problem for physicians is that the enrollment period doesn’t start until Nov. 15, and runs until May 15, 2006. I did grand rounds at a large Philadelphia hospital recently, and asked how many people know what Medicare Part D is. Out of 75 people, three hands went up. The Kaiser Family Foundation surveyed seniors to find out how much they know about it. Not surprisingly, very few know a great deal. More of a concern was the next question: Where will you go for information? Physicians topped the list. The consensus is that 2006 will be a learning year for everybody.

MC: That’s a nice way of putting it. You’re also predicting formulary chaos for long-term-care facilities. Why?

STEFANACCI: In theory, a 120-bed facility could have 10 prescription drug plans, each with its own formulary. Today, the presence or absence of a state Medicaid formulary dictates what’s prescribed. Facilities will have to educate prescribers about what can be prescribed for each patient. Once a physician or nurse practitioner writes an order, the facility is responsible for delivering that medication in a timely manner. This will be difficult for facilities to deal with multiple formularies with multiple pharmacy providers.The system can work better with e-prescribing, but that won’t be in place by January 2006.

MC: How long until e-prescribing is the standard?

STEFANACCI: Hopefully, within two years we approach the tipping point. We’re approaching the tipping point. When people realize how cumbersome the Medicare Part D benefit will be without e-prescribing, that will help push it. I find it hard to believe how limited medicine in general is in innovation and technology. The real tipping point will come when incentives are aligned. Right now, physicians have few financial incentives to use e-prescribing or electronic medical records systems, because they don’t receive the benefits. Health plans or Medicare or the pharmacy provider get the savings. But fairly soon, as we get more into integrated systems, where the provider is the payer, we will see an explosion of innovation.

MC: You recently published a study funded by the American Society of Consultant Pharmacists called “The Cost of Being Excluded,” which looks at classes of drugs not covered by Medicare Part D. Which classes of drugs could be the biggest problem?

STEFANACCI: One is benzodiazepines, used to treat anxiety. I was surprised to find that over 12 percent of people in long-term-care were on benzodiazepines, principally lorazepam, the generic version of Ativan. That’s a huge number and most of them have been on it for some time. Typically, you need six months to wean patients who have been on them for a long time. So the real concern is that a state decides not to cover it and the covering physicians, who don’t really know the patients, get phone calls on January 1, a Sunday. They discontinue the Ativan or similar medication suddenly, put them on something inappropriate, and the person has withdrawal effects and winds up in the ER.

MC: Why was that particular class of drugs excluded?

STEFANACCI: It was an unintended consequence of the legislative process. In the final hours when congressional staffers were pulling the bill together, they lifted language from federal statutes that described which classes of drugs state Medicaid programs could, at their option, exclude from coverage. Instead of continuing to make these medications optional, MMA states that these medications may not be covered at all through Medicare Part D funds. Benzodiazepines are on the list of those medications excluded, even though in practice, almost every state covers them. No one looked at what was happening in reality. They just stuck this language in there. By the time anyone noticed, the bill was passed and it was too late. When the Congressional Budget Office scored what it would cost to add the coverage back in, it came out a little bit over $8 billion over 10 years. But CBO is mandated to score in a fairly crude manner, by multiplying the number of people using these drugs by the cost of the drug. Anybody who practices in any of these settings knows what will happen by excluding them: Instead of somebody getting a $10 generic Ativan script, they’ll get a $180 a month anti-psychotic. Instead of spending $8 billion, we’ll spend quite a bit more.

MC: In light of the Vioxx situation and others, how can the FDA improve its safety review process?

STEFANACCI: I think that just about every drug should have an opportunity to be out there. For some cancer patients and others, the risks of even highly toxic drugs are outweighed by the benefits. Every drug has significant risks. Aspirin for children resulting in Reye’s Syndrome is a major risk, Tylenol can be a risk for people with liver problems, Alka Seltzer is a risk if you’re on Coumadin. The key is to make sure patients, physicians, and prescribers know all the risks so that they can make an individual risk-benefit analysis. The FDA is moving toward this. Even Vioxx is an appropriate medication for some patients. Clearly, in patients who don’t have the GI problems and have high cardiac risk factors, the costs of taking Vioxx are probably much greater than its potential benefits. For other patients, the benefits can outweigh the risks.

MC: Is the era of the blockbuster drug over?

STEFANACCI: No, but blockbuster drugs will certainly be different. Historically, blockbuster drugs have typically been high-volume, fairly inexpensive drugs, prescribed by primary care physicians to treat chronic illnesses. Blockbuster drugs under development are more typically injectable, very expensive, for a small population, used during an acute phase of an illness. We’ll still see billion dollar drugs, but they won’t be the ones that are advertised on TV. They’ll be drugs that a few specialists utilize in their offices.

MC: You’re talking about biotech products?

STEFANACCI: Correct, although some drugs in the pipeline fall in the old camp. Sanofi Aventis has Acomplia, a new obesity medication that’s getting a lot of buzz. Among those excluded Medicare Part D medications are those used to treat weight-related problems, unless someone is diagnosed as being obese — short of that, no coverage.

MC: Is the Medicare Modernization Act good policy?

STEFANACCI: It was a politically driven piece of legislation that wasn’t thought out from a clinical or health policy standpoint. The excluded medications are just one small example of it. Good luck trying to figure out how those covered by both Medicare and Medicaid will be automatically enrolled in plans in less than six weeks. There are all kinds of nuances that haven’t been thought out that would have been different had a group of clinicians or health policy experts written this bill.

MC: One thing that was clearly thought out was the effective date. January 1, 2006 is well after the 2004 election.

STEFANACCI: Yes. This law takes effect January 1, a Sunday, and January 2 is a holiday. Who will be around to help those who fall through the cracks and don’t have a plan or have questions about the details of their plans?

MC: An answering machine.


MC: Thank you.

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