Medicare Endorsed Prescription Drug Discount Card Program

Publication Date: August 2004

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Health

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Abstract:

On December 8, 2003, the President signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA, P.L. 108-173). This legislation provides for the implementation of a Medicare prescription drug program, effective January 1, 2006. In the interim, MMA requires the Secretary of Health and Human Services (HHS) to establish a temporary program to endorse prescription drug discount card programs meeting certain requirements. The purpose is to provide access to prescription drug discounts to persons who voluntarily enroll with a private card plan. Each card sponsor is to provide each enrollee with access to negotiated prices. The program will also provide up to $600 in transitional assistance in both 2004 and 2005 for low-income persons enrolled in endorsed card programs.

All Medicare beneficiaries, except those receiving Medicaid drug coverage, are eligible to enroll in a discount card program. Card enrollees with incomes below 135% of poverty are eligible for transitional assistance provided they do not have drug coverage under a group health plan. Not all persons eligible to enroll will actually enroll in the card program. Many persons who currently have access to discount prices through other sources will likely elect not to enroll in the temporary program. An individual can be enrolled in only one card program at a time. Sponsors may charge a uniform annual enrollment fee, not to exceed $30; the Centers for Medicare and Medicaid Services (CMS, the agency administering Medicare) will pay the fee for those receiving transitional assistance.

A card sponsor must be a nongovernmental single legal entity doing business in the U.S. A Medicare Advantage (MA)organization (i.e., a Medicare managed care plan) may apply to become an exclusive card sponsor by limiting enrollment to persons enrolled in its managed care plan; certain requirements otherwise applicable to card programs are waived for this group. At a minimum, card programs are required to offer a negotiated price for at least one drug in each of the 209 therapeutic categories identified by CMS on a list of medications frequently used by Medicare beneficiaries. The sponsor must contract with a sufficient number of pharmacies (other than mail-order) in its service area to ensure that access requirements are met.

Several issues have been raised since the program began operating June 1, 2004. All beneficiaries not enrolled in an MA plan have a choice of at least 34 national plans; in all but nine states, beneficiaries may also select from additional regional cards. CMS has placed on its website comparative information, by zip code, on plans available in the area and plan prices for drugs specified by a senior. Many observers have stated that beneficiaries are faced with too many confusing choices. While over 4 million persons have enrolled in the program, there is concern that many persons eligible for the $600 subsidy have not yet enrolled; special education efforts are being targeted toward this population group. Some observers have also suggested that discounts may not be that much when compared with other discounts available to seniors. Two recent studies suggest that these programs do provide savings when compared with retail prices and some other discount programs. This report will be updated as events warrant.