House of cards: seniors aren't grabbing up Medicare drug discount cards as enthusiastically as expected, but card sponsors, who are still seeing significant savings, think they know why.

In an online chatroom shared largely by senior citizens, Medicare discount drug cards are a topic of dispute. Some Medicare beneficiaries say they like the cards and have clear-cut savings from using them. Others are either confused or disenchanted by the offering.

Despite a slow but steady rise in national enrollment in the card program, the numbers are less than expected, with only slightly more than 4 million enrollees among the estimated 7.4 million seniors that government officials anticipated would be enrolled during the first several months of the program. The overwhelming choice of more than 70 different card offerings is adding to the confusion, in addition to initial less-than-favorable press about the program and anticipated savings, and technology challenges to a generation not overrun with online users who can easily access information from the Medicare Web site.

Although initial interest in the program was slow, card sponsors are touting savings for their cardholders from 10% to more than 60%. Card sponsors are making efforts to reach out to Medicare beneficiaries so more individuals can achieve savings, in addition to helping eligible low-income seniors receive the federal transitional assistance subsidy due to them under the program.

A Helping Hand

Last year's passage of the Medicare Prescription Drug, Improvement, and Modernization Act created the new drug card program that runs from June 1, 2004, until Medicare's prescription drug coverage--Medicare Part D-becomes effective Jan. 1, 2006. Medicare Part D is an approximately $535 billion Medicare plan that will urge seniors to join health maintenance organizations that offer drug plans. The current discount drug card program is open to all Medicare beneficiaries except those with outpatient drug coverage through Medicaid. Under the new Medicare law, low-income beneficiaries also will get another $600 a year to help pay for their prescriptions. Income thresholds for the subsidy are $12,560 a year for individuals and $16,862 for married couples.

Private industry has also gotten involved in the effort. Twenty-eight private companies offer discount prescription cards to Medicare beneficiaries. Card sponsors include health insurers, Medicare HMOs and pharmacy benefit managers. Seventeen of the 28 card sponsors are offering and marketing discount cards on a nationwide basis, and the remaining 11 sell cards statewide or regionally, according to U.S. Department of Health and Human Services filings. In addition, 43 HMOs and private health plans that already have Medicare recipients were granted HHS clearance to offer discount cards to their plan members.

The card program has come under some political scrutiny. Many U.S. Democratic lawmakers said the program is confusing and doesn't save seniors any money on their prescriptions. Senate Minority Leader Tom Daschle, D-S.D., and many of his fellow Democrats have denigrated the Medicare law as a giveaway to insurers and drug companies since its passage in December.

Enrollment Pitfalls

In the initial stage of the program, most card sponsors reported disappointing enrollment numbers with only about one-fourth of the 15.4 million U.S. Medicare beneficiaries eligible for the program enrolled in a card.

Three million of the slightly more than 4 million seniors enrolled in the first seven weeks were automatically enrolled by HMOs or through state assistance programs. In addition, 1 million of the current enrollees are low-income seniors eligible for the program's $600 transitional assistance.

Health and Human Services Secretary Tommy Thompson attributes the lag in enrollment to "window shopping," but card sponsors believe several factors are driving lower-than-expected numbers and negativity toward the program. For instance, some fear a deluge of initial negative publicity about the program and its expected savings may have had a hand in low enrollment numbers.

Many seniors took a "wait-and-see" approach after the Centers for Medicare & Medicaid Services--which administers the drug card program-announced during the first week of the program that individuals should not be in a hurry to select a card and should take their time in evaluating their options, said Mary Ann Wagner, president and consumer health adviser for the Pharmacy Care Alliance, a not-for-profit alliance between the National Association of Chain Drug Stores Inc., which represents 216 chain pharmacies operating more than 35,000 retail community pharmacies, and Express Scripts Inc., one of the nation's largest pharmacy benefit managers.

Additionally, many seniors aren't even aware of the program and the savings they can receive. In a recent Kaiser Family Foundation study, "Seniors, the Internet and Health Survey," only 38% of those age 65 or older said they are aware that the new Medicare law includes a prescription drug discount card for seniors.

Seniors who aren't technology savvy may also be contributing to lack of initial enthusiasm for the cards. In addition to a toll-free telephone line set up to answer questions, CMS created a section on the Medicare Web site (www.medicare.gov) so seniors can access a cost comparison of the various cards. Because most seniors don't log online, however, card sponsors fear they aren't getting the valuable information they need about the program. The Kaiser survey found that only 25% of seniors on Medicare have ever used the Internet or e-mail, and only 4% visited the Medicare Web site.

Initial technology glitches on the www.medicare.gov Web site added to the difficulties. "The system was not always available at the beginning and contained some erroneous pricing information," said Margaret Johnson, executive pharmacy director of Horizon Blue Cross Blue Shield in New Jersey. "While CMS was quick to address the issues, the Web site is complicated in its attempt to provide very detailed information to seniors." This may have turned away some seniors who may not have come back to give it another chance, she said.

Seniors are also trying to wade through a sea of different card choices. "There was a lot more interest in the private sector in offering cards than Congress or CMS anticipated, and although the private sector is a big believer in providing choice, I think in this case we outdid ourselves and there was too much choice, which can lead to confusion," said Dr. Daniel Lyons, senior vice president of government programs for Independence Blue Cross in Pennsylvania.

Lack of uniformity in pricing is alarming some seniors. Drug sponsors can change their list of discounted drugs, and their prices may vary on a weekly basis. A study by the Minority Staff, Committee on Government Reform, commissioned by Henry Waxman, D-Calif., found that drug prices have changed since the drug card program's inception. The committee staff selected 10 drugs popular among seniors and compared the lowest available prices for those drugs at the inception of the program with the lowest available prices on June 1, when the cards became valid. Total price for monthly supplies of the 10 drugs dropped by only $4.75. Of the 10 drugs, eight decreased in price and two rose. But some challenge that the study evaluated the full picture of savings as some of the drugs included more than one drug from the same drug class.

"Many seniors are concerned because they aren't sure what they are getting into if they sign up for a card, but their only concern should be in selecting the right card because once they make the selection they are locked into it for the year," said Darren Sivertsen, chief operating officer of Las Vegas-based Sierra Health and Life, a health-care company that, through its subsidiaries, provides and administers the delivery of managed-care benefit plans for employers, government programs and individuals. Medicare beneficiaries enrolled in the card can't elect to renew their card or change to another card sponsor until the fall re-enrollment period that runs from mid-November through the end of December this year.

In addition, some seniors are happy with the savings they are already getting from other programs and venues. For instance, some seniors are funding greater savings from online purchases, warehouse discount centers or drug imports from Canada. About 21% of the 60% of respondents to the Kaiser survey who don't have a card or don't plan to sign up for one said they didn't enroll because they were worried about how the cards would affect other prescription drug coverage they have. "Seniors are savvy consumers, and they have developed their own mechanisms over the past several years as drug coverage became less available and prices rose higher," said Lyons.

Another recent Kaiser Family Foundation survey, in cooperation with Harvard School of Public Health, entitled "Views of the New Medicare Drug Law: A Survey of People on Medicare" found that slightly more than half of respondents said the Medicare-approved discount drug cards "aren't worth the trouble because they don't do enough to help people with their drug costs and are too confusing to use." Only about one-third of respondents said the cards are "worthwhile because they give people on Medicare immediate help before the full drug benefit is available, and provide another way to cut their drug costs."

Calling All Seniors

In addition to more than $50 million spent on advertising by the Bush administration, card sponsors are ramping up marketing efforts to educate seniors about the discount drug card program.

Blue Cross Blue Shield of Florida dedicated an entire issue of its "Florida Blue" newsletter to the Medicare Reform Act and the drug card program and conducted outreach meetings across the state to educate Medicare beneficiaries. The plan also created a frequently-asked-questions brochure and drug card comparison worksheet to help seniors compare savings and find the card that best meets their needs.

At the onset of the program, Nashville, Tenn.-based HealthSpring--an independent managed-care organization serving members in Alabama, Illinois, Tennessee and Texas--mailed members letters about the availability of its card as one of numerous choices. The company also created a page on its Web site so users can learn more about the drug card program and download enrollment forms. Company representatives provided free seminars about the card program in local senior centers and conducted Web demonstrations so seniors could more easily log on and navigate around the Medicare Web site. As of early August, about one-third--or more than 21,000--of HealthSpring's Medicare members were enrolled in its card program, said Beth Kiesler, vice president of member services.

Advertising efforts are paying off. In Kaiser's survey on the new Medicare drug law, 60% of respondents said they received information about the discount drug card program in the mail--30% received information from the government, 27% from private companies selling discount cards and 12% from other sources. Twelve percent said they received information in the mail from multiple sources.

Savings Abound

CMS estimates that the cards generate savings on brand-name drugs ranging from 16% to more than 30% off listed retail prices and 11.5% to 17% off the average retail prices, including the retail discounts that many people with drug coverage receive, with significantly larger discounts available on mail-order drugs. Savings for generic drugs are even higher, ranging from 30% to 60% or more.

Many card sponsors are finding comparable--if not better--savings than the national expectations. During the first seven weeks of the program, Medicare beneficiaries enrolled in the Pharmacy Care Alliance drug card program saved an average of 40% on generic drugs and 23% on brand drugs when compared with retail pharmacy prices. Based on an analysis of 192,000 30-day equivalent prescription claims that were filled during the first seven weeks of the program, the alliance cardholders saved more than $2.9 million, excluding the $600 annual credit provided by the federal government to eligible low-income Medicare beneficiaries.

Many believe low-income seniors have the most to gain from the cards. The Pharmacy Care Alliance cardholders receiving the $600 transitional assistance program credit--which comprises about half of its active cardholders--saved another $3.2 million. Beneficiaries receiving the $600 credit paid only 5%, or 10% of their prescription drug costs, depending on their income level, resulting in an average payment of $2.43 or $3.99, respectively, for their prescription drugs.

In addition, Pharmacy Care Alliance low-income cardholders who deplete their $600 subsidy, benefit from the company's "wrap-around" program. Several manufacturers, including AstraZeneca, Johnson & Johnson Pharmaceutical Cos., Eli Lilly Co., Merck and Novartis, make any prescription drugs free of charge from the manufacturer plus a nominal amount to cover dispensing, processing and other COSTS.

Anthem Inc. is seeing savings between 15% and 50%. "Discounts vary by person and by generic vs. brand," said Lynne Gross, vice president and general manager of government programs. "The percentage of discount on generics will be higher, but the whole dollars may be lower because we're talking about smaller dollars to begin with, whereas the percentages on brand names will be lower but the whole dollars may be higher. "Anthem periodically evaluates card savings by looking at the most frequently-used drugs among seniors and comparing the company's discounts with those offered by other card vendors. "Pharmaceutical manufacturers are helping drive these savings," she said. At the beginning of the program many card sponsors were skeptical about how willing pharmaceutical manufacturers would be to offer discounts, but they've been eager to participate, she said.

"Overall, discounts may not be all that different from plan to plan but may vary within categories where there are contracted rates with particular manufacturers," said Horizon Blue Cross Blue Shield's Johnson. Seniors have to evaluate where they can receive the greatest value. In New Jersey, many low-income seniors have drug benefits through the Pharmaceutical Assistance to the Aged and Disabled program; however, those that don't qualify for the assistance program are finding significant savings from the discount drug card, Johnson said. Seniors may qualify for the state's Pharmaceutical Assistance to the Aged and Disabled program if they are a New Jersey resident, are at least 65 years of age or at least 18 years of age and receiving Social Security Disability benefits, and have a 2003 income of less than $20,016 for individuals and $24,542 for married couples and/or an income in 2004 of less than $20,437 for individuals and $25,058 for married couples.

Despite touted savings for those filling prescriptions via mail order, many card sponsors are finding a less-than-expected number of seniors are taking advantage of the service. Instead, many are finding that some seniors prefer to visit their local pharmacy to purchase drugs--even if it comes at a higher cost. A recent Kaiser Family Foundation study that looked at savings from the discount drug card program found that seniors are saving, on average, about 25% on the 10 most prescribed name-brand drugs, and when using mail-order services available through the program, those same drugs were as much as 33% cheaper.

Families USA released a study earlier this year showing that drug prices available through the new discount card are still far higher than what seniors would pay if they bought their drugs in Canada or through the U.S. Department of Veterans Affairs, which, unlike Medicare, is allowed to negotiate its drug prices. The Pharmaceutical Research and Manufacturers Association, however, said the Families USA comparison is flawed because the VA drug system is only a fraction of the size of the Medicare system.

Some studies offer more promise. The American Enterprise Institute, which sponsors original research on the world economy, U.S. foreign policy and international security, and domestic political and social issues, issued a report saying that the cards could bring low-income seniors savings between 53% and 78% and that even moderate- and high-income seniors would enjoy significant savings with the cards.

Sands of Time 

Card sponsors hope that the low enrollment tide will eventually turn.

"The more positive stories that get out about savings and people's experience with the card, the more people will likely sign up," said Wagner of the Pharmacy Care Alliance.

Many card sponsors are gearing up for the fall re-enrollment period--a time many hope will bring more enrollees into the program. First, Medicare will mail information to beneficiaries about its various programs and the drug card program. Between Nov. 15 and Dec. 31, current enrollees can elect to re-enroll with their current card or switch to another card program. "We often find that this is a key time when seniors pay attention to their health-care benefits, and we're hopeful that during that time we'll see increased interest and enrollment," said Anthem's Gross.

In addition, many believe seniors can only benefit from the program. Aside from an annual enrollment fee that some card sponsors charge enrollees, Medicare beneficiaries have nothing to lose, said Sivertsen of Sierra Health, which offers its cards to enrollees free of charge. "The program can only save them money. "The maximum card fee that card sponsors can charge is $30 per year.

Card sponsors are also keeping a close eye on what lies ahead for Medicare and the discount drug card program. Many are anxiously awaiting what Medicare Part D will look like and evaluating their enrollment in the benefit program. "Being a Medicare Advantage plan, one of the reasons we got into the discount business was to better prepare ourselves for Part D benefits," said HealthSpring's Kiesler.

In addition, some card sponsors are waiting to see what--if any--effect the upcoming presidential election may have on the Medicare program. But some in the industry aren't too concerned. "I don't think it will have a major impact because the drug portion of the bill involved tremendous political compromise," said Lyons. "And to try to significantly change the drug benefit would unravel that compromise and jeopardize the program in a way that neither side wants nor can politically afford."

On the Rise:
Cost of Prescription Drugs
For Seniors

$559

Average annual prescription drug spending per
senior in 1992

$1,205

Average annual prescription drug spending per
senior in 2000

$2,810

Predicted average annual prescription drug
spending per senior in 2010

19.6

Average number of prescriptions per senior in
1992

28.5

Average number of prescriptions per senior in
2000

13%

Percentage of U.S. population constituted by
seniors in 1998

34%

Percentage of all U.S. prescriptions dispensed
that went to seniors in 1998

Source: Families USA, a national nonprofit, nonpartisan
organization

Signing Up for Discount Cards

Percent of people on Medicare
who say they already have or
plan to sign up for a Medicare-approved
drug discount card.

Do Not Plan
To Sign Up      60%
Don't Know/
Refused         14%
Have Already
Signed Up        9%
Plan to
Sign Up         17%

Note: Table made from pie chart

Among the 60% who say they
don't plan to sign up, percent
citing the following reasons.

You already have
cards or coverage.                      63%
You don't think the card
will save you money.                    41%
You're worried how it would affect
other Rx drug coverage you have.        21%
It was too difficult to choose among
the variety of cards offered.           14%
You don't know about the cards.         13%

Note: Table made from bar graph.

Source: Kaiser Family Foundation/Harvard School of Public Health Views
of the New Medicare Drug Law: A Survey of People on Medicare
(6/16-7/21/04)

Key Points

* In the first seven weeks of the Medicare discount drug card program, only slightly more than 4 million of the anticipated 7.4 million Medicare beneficiaries signed up for the program.

* Confusion about the program and its savings, lack of computer savvy that prevented some seniors from logging onto the Medicare Web site for information, and use of other cost-savings alternatives are driving the lower-than-anticipated enrollment.

* The Centers for Medicare & Medicaid Services estimate that the cards generate savings on brand-name drugs ranging from 16% to more than 30% off listed retail prices and 11.5% to 17% off average retail prices, and savings for generic drugs ranging from 30% to 60% or more.

Learn More

Anthem Health Plans Inc.

A.M. Best Company # 68044

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Blue Cross and Blue Shield of Florida Inc.

A.M. Best Company # 68174

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Horizon Healthcare Services Inc.

A.M. Best Company # 64022

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Independence Blue Cross

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