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The Health Care Financing Administration today announced an extended and expanded demonstration project that will measure the efficiencies and economies resulting from providing Medicare payments to help support a pharmacy benefit to Medicare beneficiaries. The project will seek to demonstrate how providing, structuring and managing an outpatient prescription drug benefit will result in more economical and better utilized Medicare Part A and Part B services. HCFA is conducting the demonstration with the United Mine Workers of America Health and Retirement Funds, a Medicare partner since 1990.

HCFA first entered into a demonstration with the UMWA Health and Retirement Funds in 1990 to test two methods of paying the Funds for providing comprehensive health benefits to approximately 60,000 Medicare beneficiaries who are covered by the Funds. Medicare pays the Funds a monthly lump sum based on the number of beneficiaries covered by the Funds for all Medicare Part B services other than those administered by Part A fiscal intermediaries.

For Part A services, the Funds and HCFA share risk for services administered by the Part A fiscal intermediaries. As part of the expanded and extended demonstration, which has been approved for three years beginning July 1, 2001, HCFA will continue the existing payment and incentive arrangement, and will pay 27 percent of the annual cost of the Funds’ prescription drug program.

"This demonstration will provide a unique opportunity for HCFA to test how providing, structuring and managing outpatient prescription drugs can contribute to providing traditional Medicare benefits more effectively and efficiently," said Robert A. Berenson, MD, HCFA Acting Deputy Administrator. "It also will attempt to prove that disease management models for certain chronically ill beneficiaries are cost effective.

"An added benefit of the demonstration is that we can learn how effective management of a pharmacy benefit will reduce Medicare spending, which is crucial for policy makers looking to provide a prescription drug benefit to all Medicare beneficiaries, said Berenson. "We’ve worked with UMWA’s Funds for a decade and know firsthand of their expertise in managing health care for a chronically ill population as well as maintaining their unique data bases."

Similarly, HCFA expects to learn how a drug benefit can be managed for the Medicare population, including the use of a pharmacy benefits manager and mandatory substitution of generic drugs for brand name drugs, as well as the use of preferred pharmacy products and utilization reviews. The Funds currently offers a drug benefit through Advance Paradigm, a pharmacy benefits manager.

The Funds have participated in Medicare since the federal program was first enacted in 1965. The Coal Industry Retiree Health Benefit Act of 1992, also known as the Coal Act, reorganized the health benefits programs of two UMWA health funds and required the Funds’ Trustees to "provide health care benefits to each eligible beneficiary in a health care services plan which undertakes to provide such benefits on a prepaid risk basis."

"The Funds have been a key partner in Medicare and HCFA’s payment demonstration programs for a long time. We are pleased the UMWA has agreed to participate in this extended and expanded demonstration," said Berenson.

Specifically, the main objectives of the Integrated Care Coordination/Management Program for the Elderly and Chronically Ill Population are:

• To demonstrate how providing, structuring, and managing outpatient prescription drugs will contribute to more effective utilization and economical provision of Part A and Part B benefits.
  
  
• To develop, implement, and maintain innovative programs that incorporate cost-effective managed care methods designed to serve a frail, elderly, chronically ill population enrolled in the Medicare fee-for-service program.
  
  
• To develop managed care methods suited for application in non-urban settings.
  
  
• To develop screening and assessment methods for identifying and referring high-risk patients among members of an existing elderly high-risk population with relatively few new entrants.
  

The demonstration will be subject to a comprehensive research and evaluation program conducted by independent organizations. The Department of Health and Human Services has funded a series of research projects aimed at analyzing the demographics of high drug utilizers and the drug mix typically used by Medicare beneficiaries with high drug expenditures.

"Up to now, data that would allow for measuring the savings that access to prescription drugs would have on Medicare Part A and Part B spending have not been available," said Berenson. "This pilot would allow us to measure those savings."