Medicare Part D at Ten Years: The 2015 Marketplace and Key Trends, 2006-2015

Since 2006, Medicare beneficiaries have had access through Medicare Part D to prescription drug coverage offered by private plans, either stand-alone prescription drug plans (PDPs) or Medicare Advantage prescription drug plans (MA-PD plans). Now in its tenth year, Part D has evolved due to changes in the private plan marketplace and the laws and regulations that govern the program. This report presents findings from an analysis of the Medicare Part D marketplace in 2015 and changes in features of the drug benefit offered by Part D plans since 2006. Key findings are summarized below.

Key Findings

Part D Enrollment and Plan Availability

In 2015, more than 39 million Medicare beneficiaries are enrolled in Medicare drug plans. Since 2006, the share of Medicare beneficiaries enrolled in a Part D plan has increased from 53 percent to 72 percent of all eligible Medicare beneficiaries.

• The majority (61 percent) of Part D enrollees are in PDPs, but enrollment in MA-PD plans is growing more rapidly. MA-PD plan enrollment accounts for two-thirds of the net increase in Part D enrollment from 2014 to 2015, and the share of MA-PD enrollment has grown over the past decade from 28 percent to 39 percent.
• In 2015, 6.6 million Medicare beneficiaries are enrolled in an employer-only Part D plan designed solely for retirees of a former employer. Enrollment in employer-only Part D plans has quadrupled since 2006.

The average Part D enrollee had a choice of 30 PDPs and 15 MA-PD plans in 2015.

• The average number of PDPs offered to enrollees has dropped from a high of 55 plans in 2007 to 30 plans in 2015. Between 2014 and 2015, the average number of PDPs offered to enrollees dropped from 35 to 30 plans, while the number of MA-PD plans per enrollee increased slightly from 14 to 15 plans.

In 2015, three Part D sponsors account for half of all Part D PDP and MA-PD enrollees.

• UnitedHealth, Humana, and CVS Health have enrolled half of all participants in Part D. This level of market concentration is relatively unchanged since 2006. UnitedHealth and Humana have topped enrollment since the program began, while enrollment in CVS Health has grown through acquisition of other plan sponsors. UnitedHealth, by itself, has maintained the top position for all ten years of the program, and in 2015 provides coverage to more than one in five PDP and MA-PD enrollees.

Part D Premiums

Average monthly PDP premiums have been essentially flat since 2010; MA-PD premiums have risen modestly in the past few years.

• PDP enrollees pay $37.02 per month, on average, in 2015, whereas enrollees in MA-PD plans pay only $17.29.The combined average for PDP and MA-PD plan enrollees is $30.02 in 2015.

Premiums for some of the most popular plans increased in 2015, while for others, premiums fell.

• Humana’s Walmart Rx PDP, which was new in 2014, raised its premiums by 24 percent (an average increase of about $3 per month) in 2015. By contrast, the SilverScript Choice PDP lowered its premium by 21 percent (an average decrease of about $6 per month) in 2015.

PDP premiums vary widely across plans and across regions.

• Premiums vary for plans with equivalent benefits, ranging from $12.60 to $101.40 per month for plans offering the basic Part D benefit.
• One source of variation is geographic differences. Average PDP premium for plans with the basic benefit are $16.97 in New Mexico and $36.90 in the Idaho/Utah region.

Part D Benefit Design and Cost Sharing

In 2015, most plans use five cost-sharing tiers: preferred and non-preferred tiers for generic drugs, preferred and non-preferred tiers for brand drugs, and a tier for specialty drugs.

• The vast majority of all Part D enrollees (80 percent of PDP enrollees and 91 percent of MA-PD enrollees) are in plans that use five cost-sharing tiers, a design that gained popularity starting in 2012.

Cost sharing for brand-name drugs has been relatively stable in recent years, but has risen substantially since the start of Part D; MA-PD plan enrollees generally pay somewhat higher cost sharing than PDP enrollees.

• Cost sharing for brands increased between 2006 and 2015 by about 36 percent for beneficiaries enrolled in PDPs and by nearly 70 percent for those in MA-PD plans. In the same period, cost sharing for generics decreased.
• On average, MA-PD plan enrollees pay somewhat higher cost sharing for their drugs than PDP enrollees, particularly for brand-name drugs. For example, median cost sharing for preferred and non-preferred brands in MA-PD plans is $45 and $95, respectively, compared to $38 and $80 in PDPs.
• Copayments for brand-name drugs are higher than those typically charged by large employer plans, while copayments for generics are lower.
• In 2015, many PDP enrollees are in plans that charge coinsurance instead of copayments: 28 percent of enrollees face copayments for preferred brand drugs and 63 percent for non-preferred brand drugs.

Nearly all Part D plans use specialty tiers for high-cost drugs and charge coinsurance of 25 percent to 33 percent during the benefit’s initial coverage period.

• Nearly half of all PDP enrollees and nearly three quarters of all MA-PD plan enrollees are in plans that charge the maximum 33 percent for these high-cost drugs.

The use of tiered pharmacy networks has grown rapidly in recent years and is now the norm in PDPs.

• The share of Part D stand-alone drug plans with tiered pharmacy networks grew from 7 percent in 2011 to 87 percent in 2015. Enrollees in these plans pay lower cost sharing if they use pharmacies offering preferred cost sharing and higher cost sharing if they use other pharmacies.

Low-Income Subsidy Program

• About 11.7 million Part D enrollees (30 percent) receive extra help through the Part D Low-Income Subsidy (LIS), a majority of whom (8 million) are enrolled in stand-alone PDPs. The subsidy reduces cost sharing and pays their drug plan premiums, as long as they enroll in PDPs designated as benchmark plans.
• In 2015, 15 percent of LIS beneficiaries enrolled in PDPs (1.2 million) are paying monthly premiums, and of this group, three-fourths are paying $10 or more per month. In addition, 381,000 LIS beneficiaries enrolled in MA-PD plans are paying premiums in 2015. CMS does not reassign these beneficiaries to a zero-premium PDP because they have actively selected the plan they are in.
• On average, LIS beneficiaries paying premiums for their PDPs pay $18.90 per month, well above the average in previous years.
• Part D Plan Performance Ratings

Nearly half of PDP enrollees are in plans with the highest star ratings (4 stars or more).

• Part D plan ratings in 2015 are up considerably from 2014 levels. The share of PDP enrollees in plans with at least four stars out of a maximum five stars rose from 5 percent in 2014 to 48 percent in 2015.

Discussion

Now in its tenth year of operation, the Part D program has experienced relative stability in recent years. The program has had consistently high levels of plan participation, offering dozens of plan choices for beneficiaries in each region and broad access to generic and brand-name drugs. While the Part D program has matured since 2006, the marketplace also changes every year. Plans can and do enter and drop out of the market annually, and enrollees can and do experience changes in premiums, cost sharing for their medications, which drugs are covered by their plan, and which pharmacies they can use without paying higher cost sharing.

Beneath the surface, there are trends that could pose cost and access challenges for Part D enrollees. At a time of heightened public concern about the cost of prescription drugs, median cost sharing for brand-name drugs has increased over the years and more plans impose coinsurance for brand tiers. Although premiums have been flat in recent years, the high cost of newly approved drugs and others in the pipeline could change that trend. In the absence of an absolute limit on out-of-pocket costs, Part D enrollees with high drug use could face growing out-of-pocket costs.