Report to the President: Prescription Drug Coverage, Spending, Utilization, and Prices.. 2.3 Dynamic Patterns in Prescription Coverage

04/01/2000

Although the determinants of who has prescription benefits remain unclear, there is no question that drug coverage rates among Medicare beneficiaries have been rising. In 1992, 57 percent of beneficiaries had prescription coverage (Poisal, et al., 1999). By 1996 the rate was 68.8 percent (Poisal, et al., forthcoming). The movement of Medicare beneficiaries into HMO plans is one reason for the trend. Enrollment into Medicare risk plans increased 30 percent between 1995 and 1996 and HMO enrollees are more likely to have prescription coverage (94.6 percent) than those in any other private supplemental insurance plan. However, these prescription benefits are often inadequate.

From a policy standpoint the critical unanswered question is: Will the trends in prescription coverage of Medicare beneficiaries witnessed in the early and mid 1990s continue? There are no reliable data on prescription coverage rates since 1996. However, it appears unlikely that the trend maintained its steep upward course in the late 1990s. Recent reports show that large employers are scaling back retiree benefits (Hewitt Associates, 1999) that HMOs are not renewing Medicare risk contracts (Barents Group, 1999), and that some Medicare risk plans are dropping drug benefits, lowering payment caps, or imposing stiff premium surcharges for such coverage (Gold, 1999). This is such a volatile mix of factors, that any forecast of beneficiary drug coverage rates is fraught with uncertainty in both short-term and long-term projections.

This uncertainty has its roots in dynamic patterns of coverage that became evident in the mid 1990s. Profiles of typical Medicare supplemental insurance portfolios present a dynamic picture of beneficiaries gaining and losing prescription coverage, holding multiple plans, and changing plans during the year. Poisal et al., (forthcoming) found that nearly nine percent (over 3 million people) of the total non-institutionalized Medicare population switched plans at least once during 1996. This figure is slightly higher than the previous year’s estimate of eight percent (Davis, et al., 1999). However, both of these estimates understate the true degree of change. A month-to-month examination of supplemental insurance in 1996 by Stuart et al. (2000) shows that prescription coverage is often fragmented and non-continuous. They found that 18.9 percent (about 6.3 million people) of beneficiaries with full-year Medicare enrollment had drug benefits for only part of the year, averaging around six months of coverage. Having coverage at some point in the year may be a valuable benefit, but the continuity of that coverage is equally important.

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