Slow enrollment in Medicare prescription drug plans could lead to a shakeout among the roughly 20 insurance providers that have jumped into the fledgling market.
Smaller Medicare insurance operators may eventually drop or alter their coverage if the sluggish signup pace continues. The Medicare drug benefit is set to begin Jan. 1.
Medicare’s prescription drug benefit was long anticipated by the industry and seniors, who are the bulk of Medicare recipients. It was created in late 2003, when President Bush signed the Medicare Prescription Drug, Improvement and Modernization Act, which stands to give billions of dollars in funding to Medicare providers to create new plans.
Cypress-based PacifiCare Health Systems Inc. counts 778,000 members in its Medicare insurance plans. That’s roughly 17% of enrollment in all its plans, making it one of the country’s bigger Medicare health plan providers.
“Consolidation seems to be inevitable,I think that we’re well-positioned to be one of the remaining players,” said Jacqueline Kosecoff, PacifiCare’s executive vice president, specialty businesses. She oversees the company’s Medicare drug plans.
Analysts predict that less than half of the country’s 40 million Medicare beneficiaries are set to enroll in the new drug plans, despite heavy marketing efforts, media coverage and potential savings.
“I think that there will be a shakeout, and it’s not necessarily driven simply by whether there’s going to be enough business or not,” Kosecoff said.
Companies with less attractive products and services are likely to see weak enrollment, she said.
PacifiCare, which is being acquired by Minnesota’s UnitedHealth Group Inc. for more than $8 billion, is a longtime Medicare power through its Secure Horizons brand.
PacifiCare has a lot riding on Medicare prescription drug plans, spending some $50 million to launch its coverage.
Along with PacifiCare’s drug package, which features three plans with monthly premiums ranging from about $19 to $54.50, the company’s Costa Mesa-based Prescription Solutions drug distribution unit is planning to build a big center in Overland Park, Kan. The plant is being built, in part, to meet expected demand for the drug plan.
The prospect of an industry shakeout doesn’t faze Annemarie Anderson, vice president of sales and marketing, senior markets, for WellPoint Inc., the owner of Thousand Oaks-based Blue Cross of California.
“To be in this industry, you have to understand Medicare and have a good background and in-depth knowledge of it,” she said. “Looking at our competitors, the majority has all been in the Medicare market in one way or another, so I believe there’s good competition out there.”
Too Many Providers?
Tommy Thompson, the former U.S. secretary of health and human services who pushed for Medicare drug coverage during his term, has said in published reports that more insurance companies were approved to offer Medicare prescription drug coverage than expected.
Neither Kosecoff nor Anderson would provide enrollment figures for their Medicare drug plans.
Critics say the launch of the Medicare drug system has confused seniors who are slogging through too many plan designs, comparisons and pricing options.
Health plan operators counter that they’re trying to make things simple.
“I think that the very best thing we can do for seniors is allow them a little bit of space in which to evaluate programs and sign up without any additional pressure or clutter,” Kosecoff said.
Woodland Hills-based Health Net Inc. is “building simple programs and answers” to help seniors choose a drug program, said Phil Orr, a Huntington Beach-based regional vice president who oversees Medicare plans at Health Net.
“Healthcare is complicated,we know that,” Orr said. “It is reasonable to assume that over the next year or two, there won’t be (all the current) plans.”
Another factor leading to slower-than-anticipated enrollment: Many retirees simply don’t need Medicare prescription drug coverage.
“Many retirees get their prescription drug coverage through employer plans,” said Tim Upson, a principal at Mercer Human Resource Consulting’s Newport Beach office.
Upson said that drug coverage, for example, already is built into Medicare Advantage HMOs offered by PacifiCare and its competitors, such as Aetna Inc. and Kaiser Permanente.
“Our experience is that most of our large employer clients, at least for the next year or so, will continue as they did before” and offer drug coverage for retirees, said Mike Kramer, a principal in the San Francisco office of consultant Towers, Perrin, Tillinghast LLC.
“This is a deal (companies) made with their retirees, and that’s not easily changed,” Kramer said.
