Based on a group discussion of managed care consultants at the Cambridge Healthcare Summit, held February 25-27, 2004, this article examines the new Medicare Prescription Drug Benefit plan and the implications for managed care organizations (MCOs).

On December 8, 2003, President George W. Bush signed the Medicare Prescription Drug, Improvement, and Modernization Act into law. At that time, he said, "With this law, we are providing more access to comprehensive exams, disease screenings, and other preventative care, so that seniors across this land can live better and healthier lives."

Accomplishing these goals will require the participation of healthcare providers and Medicare enrollees. But the provisions and operation of the new law are still unclear to many of the interested parties. One working group of managed care consultants at the Cambridge Healthcare Summit analyzed the implications of the Medicare bill and formulated possible solutions to make sense of the new benefits program and what it will mean for MCOs and patients.

THE UNDERLYING PROBLEM: TOO MANY UNKNOWNS

Because the Medicare Prescription Drug Benefit plan and its provisions are so new, the analysis was based on the managed care consultants' current understanding of the situation. Many parts of the plan require further clarification, either through refinements in the legislation or expert interpretation. There are 2 phases to the plan. The first phase provides the opportunity for seniors to obtain a prescription drug discount card, and the second is a fully insured medical and pharmacy benefit. The medical benefit covers injectable drugs, and the pharmacy benefit covers other drugs.

Then the bill becomes more unclear. A lack of information and clarity is affecting the decision-making ability of MCOs, employers, and patients. MCOs are cautious about participation because of the unknowns and managed care's previous experiences with Medicare. Similarly, patients are skeptical about participation because they are not sure of their coverage.

Lack of Clarity: MCOs Are Cautious. MCOs were "informed" about the Medicare prescription bill after the fact rather than being consulted while it was being written. Not having had the opportunity to give any input, the MCOs do not have good background information about the bill. The environment in which the plan was developed was infused with partisan politics, and the government has yet to adequately educate the stakeholders-MCOs and patients.

MCOs were not given a great deal of time to study the plan either. The program was rolled out quickly, with a short deadline to implement phase 1.

Finally, MCOs are afraid they may not be able to handle logistically or financially an onslaught of new patients if they participate in the drug benefit, especially if the first senior citizens to join are those at highest risk. There is also some concern about the growing numbers of senior citizens seeking coverage in the future (Figure).

Risks of Adverse Selection. Adverse selection is a big concern for the MCOs. A pharmacy benefit will most likely attract seniors with more illnesses who will be costlier to cover. To make the program feasible, MCOs need healthy, low-risk seniors.

Financial Stability. MCOs have no assurance that funding will be adequate to cover the cost of the prescription drug benefits that are being offered. Medicare capitation will need to increase to make the system attractive or even viable for MCOs.

Lack of Clarity: Perplexed Seniors. Senior citizens are often confused about benefits under any sort of plan, and this one is especially unclear. They may also be apprehensive about joining a program that has not yet fully evolved.

SOLUTIONS: COMMUNICATE, MANAGE, AND EDUCATE

The managed care consultants outlined specific steps to overcome the problems of the lack of clarity in the new prescription benefits, MCOs' hesitation in entering the program, and senior citizens' skepticism.

MCOs Need a Voice

Communicate with the Federal Government. MCOs need a voice in the further design and refinement of the drug benefit provisions. The first step is to establish a project team that can do an analysis of the needs of all affected departments within managed care plans. Once done, this team will then be the voice of the MCOs to communicate with the Centers for Medicare and Medicaid Services (CMS), to obtain details about the drug plan, and to advance managed care's concerns.

Industry associations, such as America's Health Insurance Plans and the Blue Cross Blue Shield Association, may provide lobbying functions as well as representation to the government. In addition, they could develop educational materials so MCOs could better understand the drug benefit.

By lobbying congressional representatives, the MCOs can make their concerns heard among people with the power to affect change. A consistent message will help to present a unified front on the issues.

Communicate with the Public. MCOs must reach the public as well as regulators and legislators with their messages. Through media campaigns, they must focus on the positive aspects of the drug benefit program to overcome any negative perceptions among the public.

Public relations does not end with the mass media. Every interaction with the public is an opportunity for enhancing the relationship. Therefore, customer service representatives need to be trained to deal with questions from seniors who are or may become members.

Some form of government endorsement would lend credibility to HMOs' participation in the Medicare drug benefit. A government rating system may help the public compare plans, evaluate how well they deliver, and assess the likelihood of their continued participation.

Communicate with Existing and Prospective Patients. The MCOs are not the only group that are unsure about the plan; the public is as well. While the government touts the benefits to the public, specifics are few. The managed care industry needs to communicate to potential members about what their coverage will be.