Featured Health Business Daily Story, Dec. 21, 2010

Part D Reform Provisions Will Likely Escape Republican Overhaul

Reprinted from MEDICARE PART D NEWS, monthly business, compliance and management news and strategies to help Part D plans increase enrollment, boost revenues and minimize their risks of CMS fines, penalties and repayments.

By Barbra Golub, Editor
December 2010Volume 5Issue 12

Although the general consensus seems to be that Republicans will attempt to dismantle parts of the health reform law with the gains they made in the November midterm elections, health care experts predict that the Part D provisions are unlikely to be affected.

Interest group politics will prevent any rollback on the gains in Part D enacted as part of the Affordable Care Act, John Gorman, CEO of Gorman Health Group, LLC tells PDN. The 50% discount in the coverage gap was part of the drug manufacturers’ deal with the White House, he says, “and they did a masterful job creating a new mini-market for themselves in the gap.”

Beginning in 2011, manufacturers will give beneficiaries a 50% discount on brand-name drugs in the coverage gap. The health reform law requires manufacturers, effective Jan. 1, 2011, to provide the discount to enrollees who do not receive low-income subsidies and have incomes above $85,000 per individual or $170,000 per couple.

Meanwhile, CMS will phase down the beneficiary coinsurance rate in the gap from 100% to 25% by 2020. This will be accomplished through the 50% manufacturers’ discount, along with federal subsidies of the cost of brand-name and generic drugs beginning in 2013, an increase in the share paid by the Part D plan and a reduction in the out-of-pocket amount that qualifies beneficiaries to reach catastrophic coverage from 2014 through 2019. By 2020, manufacturers will pay 50%, plans will pay 25% and beneficiaries will pay 25% (PDN 5/10, p. 3).

Seniors Will Fight For Discount

AARP will go to the mat for this discount, asserts Gorman. The advocacy group has been very supportive of the coverage gap discount program, even urging CMS to close a potential loophole in the language of the guidance that would encourage manufacturers to not enter into an agreement for the 2011 plan year and wait until later to participate. The discount in the gap is a huge benefit for Part D members, and they will not want to see it repealed. “The GOP won’t want to mess with that voter bloc heading into 2012” either, says Gorman, and risk losing the senior vote.

Despite assertions that the senior vote played a crucial role in the midterm elections, The Kaiser Foundation Family post-election poll found that not to be the case. “Despite pre-election speculation that seniors angry about health reform would show up at the poll in droves, health care voters are no more likely than other voters to be age 65 and older (24% versus 23%).”

According to poll results, voters say health care reform was a factor that influenced their vote, but not a dominant one. Health care ranked fourth among factors influencing voters at 17%, behind the economy and jobs (29%), voting against a particular party (25%) and specific candidate traits (21%).

Looking ahead, the poll said, Americans remain divided about what lawmakers should do about health reform, with 21% of the public favoring expansion of the law, 19% wanting to leave it as is, 25% wanting to repeal parts of the law and 24% wanting the entire law repealed.

Steve Arbaugh, principal of ATTAC Consulting Group, says he feels it is “way too early to tell what direction the Republicans will go and how many Democrats might go with them on changes to the health reform legislation.” He tells PDN that he doesn’t “see repeal happening [as] the power of veto would still be near impossible to override for the next two years.”

He describes what could happen as “fixes,” but not “wholesale repeal.” Arbaugh says he did not hear elimination of the coverage gap as a specific target point. “And it’s hard to go against the seniors at any time,” he argues.

In fact, some say the coverage gap wasn’t brought up during the campaign as a pro or a con. One health care attorney, who asked not to be identified by name, says Democrats lost a big opportunity to highlight this “huge benefit” to seniors and instead went on the defensive when Republicans highlighted aspects of the law that seniors fear, such as the Medicare cuts.

If the Republicans do attempt to change the current approach on the coverage gap reduction, its implementation “is very stretched out as it is, but there might be a push to try to stretch it further or to threshold the reduction in the gap at a lower level, which would reduce incentives for employers to shift to Part D as the option of choice for retiree drug coverage” through the Retiree Drug Subsidy. But this has “a longer term impact on outlay reduction than the Republicans seem to be focused on currently,” Arbaugh maintains.

Contact Gorman at (202) 364-8283 and Arbaugh at (734) 214-2990. View Kaiser’s poll results at www.kff.org/kaiserpolls/upload/8120-F.pdf.

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