As the dust settles: initial confusion surrounding the Medicare Part D prescription drug program is fading as health plans reach out to seniors about benefits and cost savings.

After Florence Bryan of Winchester, Va., enrolled in Medicare when she retired in July 2005, the onslaught of prescription drug costs took a toll. "I had to go back to work part time because either you get your prescriptions or groceries--not both, she said. But her decision in December 2005 to sign up for Humana Inc.'s Medicare Advantage private fee-for-service plan that offers medical and new Medicare Part D prescription drug coverage helped change that. Now, just a few months into the program, Bryan said she's already seeing significant cost savings in her medication spending.

Bryan's not alone. While the Part D program, which went into effect earlier this year, has had some bumps in the road, a growing number of individuals are now fending value in it. Of the 43 million seniors and younger people with disabilities who are eligible to receive prescription drug coverage under Medicare Part D, about 27 million were enrolled in the plan by mid-March. That's on par for meeting or exceeding the Bush administration's projection that 29.3 million individuals will be enrolled in the program by the end of the year.

But there's still work to be done. Insurers are continuing efforts to reach out to seniors to educate them about Part D and lessen their confusion, while helping them recognize the cost savings to be achieved from the program.

Enrollment Trends

Although a significant portion of seniors were automatically enrolled or self-enrolled prior to the Jan. 1 start date, 2006 is seeing its share of activity. Since Jan. 1, the influx of beneficiaries who voluntarily enrolled in the program grew by 7.2 million. And the numbers continue to climb. The federal government said it's seeing an average of about 380,000 new enrollees joining the program each week.

Another projected enrollment surge is around the corner. Many health plans expect to see a number of seniors self-enroll in the program before the May 15 open-enrollment deadline. Seniors who miss the deadline face penalties to get into the program later. Not only will they have to wait until the next open-enrollment period from Nov. 15 to Dec. 31, with coverage kicking in on Jan. 1, 2007, but they also face a 1% increase in premium costs for every month they wait to join.

A New Day

Seniors' initial confusion about the program and various plan offerings, inundated phone lines for health plans and the Centers for Medicare and Medicaid Services, and enrollment glitches in CMS' computer system all resulted in a rocky start.

Data system issues continue to be ironed out. "We're trying to reconcile with data systems exactly where members are now, what plans they were in, how many times they changed health plans and where they are today in order to make sure their current plans know they are on their membership rolls and that the plans they've left have terminated them," said Jane Galvin, director of regulatory affairs for the Blue Cross Blue Shield Association. CMS has been working diligently to resolve those issues, she said, and it's improving the data hand-off among Medicare, drug plans, states and pharmacies.

Negative publicity about dual eligibles--individuals signed up automatically through Medicaid--touted numerous challenges, including seniors being charged higher co-pays or full prices for prescriptions. Karen Ignagni, president and chief executive officer of America's Health Insurance Plans, acknowledged some challenges but pointed out that most dual eligibles remained unscathed. According to a recent AHIP survey, 90% of seniors dually eligible for Medicare and Medicaid said they experienced no problems using the new benefit. More than six million dual eligibles have transitioned from Medicaid drug coverage to the new Medicare drug plans.

The pharmacy community voiced initial concerns, including more restrictions and additional time spent on the phone trying to find answers to various questions. But many believe most of those problems have diminished. In March, CMS Administrator Mark McClellan told participants at a pharmacist conference that problems with access to medications under the drug benefit have decreased, wait times at pharmacies are going down and more than 95% of beneficiaries are having a "smooth experience" the first time they go the pharmacy counter.

As the dust begins to settle, some industry experts are optimistic for what lies ahead. "The good news now is that a lot of claims are being paid and many people who before were without coverage now are finding value" said Robert Meehan, vice president of consumer and commercial markets for Horizon Blue Cross Blue Shield of New Jersey.

Proof is in the numbers. According to the AHIP survey, six out of 10 seniors who voluntarily signed up for the program said they were saving money, and more than eight out of 10 reported having no problems related to enrollment or usage of the new benefit. In fact, 65% of enrolled seniors said they would recommend that other seniors sign up for the program, vs. 8% who said they would not.

"The program is hitting the mark," said Ignagni. "Once seniors have signed up for the program, they're finding that it's meeting the test of any program, in that it's making a difference."

It's also beating initial projections. "It was first expected that enrollees would pay about $38 in premium, but now the average for many is only $25 or lower," Ignagni said. "And we continue to collaborate with communities of stakeholders, including pharmacist groups, beneficiary advocacy groups and physicians' groups, to make this program run even better."

Not everyone is optimistic. A number of seniors still are finding the program difficult and confusing. In a nationwide poll released in February, the Henry J. Kaiser Family Foundation found that retirees were almost twice as likely to say they viewed the benefit unfavorably as favorably. And of seniors not enrolled in the program, 29% said they do not plan to enroll, compared with 12% who plan to enroll.

"Any individual having a problem with the program is one too many" said Ignagni. She said health plans and AHIP now are focused on implementation issues.

Changing Course

"Because the new drug benefit is a complicated program, part of the challenge we and CMS have is to continue providing educational materials and help make it easier for seniors to understand" said Nancy Donaldson, vice president, strategic Medicare business development for Health Care Service Corp.

Since last year, health plans have been making Part D education a forefront issue. Efforts include everything from town hall meetings to mass mailings to educate seniors and their families about the new drug program.

Blue Cross Blue Shield of Michigan has taken its education on the road. Its "Medicare & More Tour" is touring the state with its Blues Cruiser, an extra-wide semi-truck complete with a presentation area, refreshment area filled with healthy snacks, information center and workstations for meeting one-on-one with Michigan residents. Visitors receive information about the Blues Plan's offerings and other information related to the new Medicare plans. The Blues Cruiser has made more than 30 stops across Michigan at local grocery stores, community sites, malls, and town and city events.

In August 2005, Humana Inc. launched its "Let's Talk" campaign. In addition to 10 information recreational vehicles that travel the United States, the program includes nearly 2,600 salespeople who staff kiosks in Wal-Mart and Sam's Club stores nationwide to educate customers about the drug program and sell plans.

Seniors aren't the only ones being targeted. The recent Kaiser survey found that caregivers had a big impact on a senior's decision-making process. While 35% of seniors said they've seen and heard about the plan through TM, radio and newspapers, 18% learned of the program from friends and families. Caregivers are part of Horizon Blue Cross Blue Shield's grassroots education efforts, many of which are focused on work sites, said Meehan.

Technology also plays a role in the education effort. "Because of the large number of people enrolling in the program, we've spent a fair amount of time looking at how we could leverage technology. It can't necessarily be a one-salesperson-one-member-at-a-time process," said Scott Latimer, Humana Inc.'s market president of senior products for central and north Florida. CMS' changes in some of its regulations also opened the door for people to enroll by telephone, he said. "Now enrollees can use a digital signature, which is a digitized voice recording, to signify their understanding of what they're buying." The result, he said, is shedding about seven days off enrollment process turnaround.

Many seniors are also turning to CMS' Web site. The site offers background on the drug program, a comparison of health plans, a personalized drug-spending calculator and online enrollment capabilities. As of mid-February, more than 2 million people enrolled in the program via www.medicare.gov.

But is all the information paying off? According to AHIP's Ignagni, two-thirds of enrolled seniors said their new benefits are worth the time and effort they spent evaluating the various drug plans, up from 57% of those surveyed in December 2005.

Fewer calls into CMS and health plans also indicate greater awareness. Since Oct. 1, 2005, Blue Cross Blue Shield of Michigan has received more than 210,000 inquiries at its pre-enrollment call center, often averaging 3,000 to 4,000 a day. But those calls have significantly decreased, said Mark Giroux, director of sales and marketing of the plan's federal programs business unit.

Now many of the questions are centered on specifics about plan offerings and the enrollment process, said Rob Tazioli, executive vice president and chief development officer of Connextions Health. The Florida-based company provides call-center fulfillment, information-technology services and sales--much of which is focused on Part D.

Best Foot Forward

In addition to working with CMS to make sure membership rolls are correctly reconciled, some health plans will continue to re-evaluate plan benefits and products, said Terri Swanson, vice president of Cigna's Senior Care. "We designed and priced plans to be competitive for the long haul. We created plans that deliver good value for seniors--not necessarily at the lowest premium but at a price that provides a good level of benefit." The more people are educated on the program and plan offerings, she said, the more they'll appreciate and understand it. As of February, Cigna had more than 165,000 individual and 150,000 employer-sponsored members receiving Part D benefits.

Beneficiaries will judge the success of the program based on affordability, access and their experience using the benefit, said AHIP's Ignagni. Health plans, she said, will need to continue focusing on maintaining affordable products and ensuring that beneficiaries' experiences will be positive. "They'll also need to take out as much administrative duplication as possible" she said.

Cost savings for beneficiaries can't be measured uniformly, said Galvin of the Blues Association. "This is a benefit like no other in Medicare, and it has to be accurately delivered at the point of sale. You can have three people standing at the pharmacy counter and the amount they pay differs depending on whether they're a dual eligible or low income. How the transaction happens and what the person pays for a drug depends on how they fit into an option depending on their category of membership" she said.

Forging Ahead

Despite its initial ups and downs, most in the industry believe the program is here to stay. "It would politically be unwise to do otherwise" said Michigan Blues' Giroux. "Many seniors need the coverage and Washington can't pull the plug on this. Seniors also vote, and Washington is watching that closely."

As a result, the program likely will continue to be political in nature, said Ignagni. "As we move into an election where control in both the House and Senate is at stake, we'll see Medicare being used as a political football." In its recent survey, AHIP found that about 46% of seniors believe that politicians continuing to describe the program negatively will affect seniors' willingness to sign up. "This is the most important expansion of benefits since 1965 and there's no debate in the medical community about the importance of prescription drugs. Politicians should carve out the areas in which they want to debate Medicare, such as improving the program and adding more benefits, and not try to undermine it" said Ignagni.

Political wrestling aside, indicators for Part D are good. "Just look at the number of competitors that have entered this market," said Giroux. "They wouldn't be doing it if they didn't feel optimistic about its future." At a recent AHIP meeting, however, Health and Human Services Secretary Mike Leavitt said that market forces have lowered prescription drug prices and will reduce the number of plans offered under the Medicare prescription drug benefit next year.

While various constituencies continue to remove the confusion and difficulty from the program, some believe changes won't happen overnight. "I think a lot of problems around the program will be resolved in about six months in terms of member satisfaction, and it may take about a year until seniors truly understand it" said Horizon's Meehan.

Key Points

* While some seniors are still unhappy with Medicare Part D, many now are starting to see savings in prescription drug spending.

* The Bush Administration projects 29.3 million individuals will be enrolled by the end of the year; about 27 million were enrolled in the plan by mid-March.

* Health plans are educating consumers about Part D through community seminars, on-site information vehicles, mass mailings and Web sites.

Learn More

Blue Cross Blue Shield Of Michigan

A.M. Best Company # 60081

Distribution: Internal sales force; agent/brokers Cigna HealthCare

A.M. Best Company # 68124 (Cigna Insurance Group)

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Horizon Healthcare Services Inc.

A.M. Best Company # 64022

Distribution: Brokers, benefit consultants, direct

Humana Health Plan Inc,

A.M. Best Company # 68898

Distribution: Agent/brokers, direct to employees, direct

For ratings and other financial strength information about these companies, visit www.ambest.com.

At a Glance: Medicare Part D

Assessing Savings

Seniors are saving, on average, $t,100 annually as a result of the prescription program.

The cost of Part D is projected to decrease by $7.6 billion in 2006 and by $30 billion over the next five years.

Source: U.S. Department of Health and Human Services

Beneficiaries enrolled in the program can save $2,300-$5,000 annually by switching from brand-name drugs to generics or other lower-cost alternatives.

Source: Consumers Union

Among the 29% of seniors who say they will not enroll in a Medicare drug plan, 51% believe it won't save them money and 34% said they don't take enough prescriptions to need a Medicare drug plan.

Source: Henry J. Kaiser Family Foundation Survey

Individual Savings

In a recent survey, 59% of self-enrolled seniors said Medicare Part D is saving them money. Individual savings in out-of-pocket costs every month were as follows:

[less than or equal to] $20     7%
$21-$50                         9%
$51-$100                        9%
$101-$200                       6%
Don't Know                     24%

Source: America's Health Insurance Plans

Enrollment Update

Eligible       43 Million
Signed Up *    27 Million

* As of March, 2006

Note: Table made from bar graph.

Source: centers for Medicare & Medicaid Services

Seniors' Reported Use
Of Information Resources

Percent of seniors who say they
have done each of the following for
information about the Medicare
drug benefit:

Talked to a pharmacist    27%
Talked to a doctor        26%
Talked to an
insurance agent           17%
Talked to a health
insurance counselor       17%
Called 1-800-MEDICARE     14%
Called a Medicare
drug plan                 14%
Attended a seminar        12%
Visited the Web site
Medicare.gov              10%
Compared different drug
plans on Medicare.gov      6%
Went to a
government office          4%

Note: Table made from bar graph.

Source: Kaiser Family Foundation Health Poll
Report Survey (conducted Feb. 2-7, 2006)