Prescription Drug Benefits:

Impact of Medicare HMOs' Use of Formularies on Beneficiaries

T-HEHS-99-171: Published: Jul 20, 1999. Publicly Released: Jul 20, 1999.

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William J. Scanlon
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Office of Public Affairs
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Pursuant to a congressional request, GAO discussed the prescription drug benefits provided by health maintenance organizations (HMO) that participate in the Medicare Choice program.

GAO noted that: (1) evaluating the prescription drug benefits Medicare HMOs offer is an important but challenging undertaking for prospective enrollees; (2) to determine which plan best meets their needs, beneficiaries need to assess how HMOs' use of formularies can affect their drug benefit; (3) comparing plans can be difficult because the types of formularies HMOs use and the way in which they are managed differ considerably; (4) the choices beneficiaries make can have a significant impact on the value of their drug benefit and their out-of-pocket costs; (5) plans vary widely in the drugs they cover on their formularies, the copayments they require beneficiaries to make, and the annual limits they set on the beneficiaries' coverage; (6) further, beneficiaries in some plans may not learn about formulary changes until they are at the pharmacy counter; and (7) some plans also make it difficult for physicians to obtain an exception to allow patients to remain on their existing medication at no additional cost if it is dropped from the formulary.

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