Drug Beneft

MEDICARE PRESCRIPTION DRUG PLANS: THE DEVIL IS IN THE DETAILS

Cori E. Uccello, FSA, MAAA, MPP Senior Health Fellow American Academy of Actuaries and John M. Bertko, FSA, MAAA Member, American Academy of Actuaries

Updated April 2003

The American Academy of Actuaries is the public policy organization for actuaries practicing in all specialties within the United States. A major purpose of the Academy is to act as the public information organization for the profession. The Academy is non-partisan and assists the public policy process through the presentation of clear actuarial analysis. The Academy regularly prepares testimony for Congress, provides information to federal elected officials, comments on proposed federal regulations, and works closely with state officials on issues related to insurance. The Academy also develops and upholds actuarial standards of conduct, qualification and practice, and the Code of Professional Conduct for all actuaries practicing in the United States.

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MEDICARE PRESCRIPTION DRUG PLANS: THE DEVIL IS IN THE DETAILS As the debate over a Medicare prescription drug benefit continues in Congress, policy-makers need to consider several issues when drafting and evaluating the various proposals. • First, if enrollment in the drug program is voluntary, the program must be designed to minimize adverse selection. That is, actual program enrollment needs to be nearly universal, broad enough to include healthy participants as well as those who would be expected to be high utilizers of the program. Otherwise, per-enrollee costs could become too high, potentially leading to the need for increased beneficiary premium contributions and cost sharing, and discouraging the participation of private entities that administer and/or deliver the benefit. Second, the plan must include components that will help minimize per...