Medicare Advantage OTC card arrives

Key Points

Some Medicare Advantage (MA) patients have a new way to buy over-the-counter products: OTCNetwork, a prepaid point-of-sale card. Enrollees in MA plans that provide OTC benefits use a prepaid card to pay for nonprescription analgesics, gastrointestinal products, and other covered items. Each transaction is adjudicated based on individual plan coverage and the cost deducted from the prepaid balance. Once the plan benefit is exhausted, the card cannot be used.

It's no accident that the program sounds like prepaid gift cards. The network was created by InComm, an Atlanta-based producer of stored-value gift and prepaid products, and Medagate, a health plan services provider based in San Francisco.

According to Wade, the potential MA OTC market is $5.5 billion in annual benefits. He added that the more than 11 million MA enrollees are currently using less than 5% of potential benefits. He identified 2 key barriers.

One problem is Medicare regulations that prohibit plans from giving enrollees cash to buy covered OTC items. The other is that retailers lack inventory systems that can identify and restrict OTC purchases based on individual plan benefits and OTC formularies.

The Centers for Medicare and Medicaid Services confirmed that OTCNetwork is the first prepaid card program covering MA OTC benefits. As of October 2010, there were 2.6 million beneficiaries enrolled in employer-only MA programs and 9.4 million enrolled in non-employer MA plans who might benefit from OTCNetwork. About 1.2 million enrollees, 13% of the non-employer total, had OTC benefits in 2010. CMS projects that 1.7 million enrollees, or 16% of all non-employer MA enrollees, will have OTC benefits this year and could be eligible to use OTCNetwork or some other OTC benefit program.

User challenges

CMS said it did not have data on the value of these benefits or utilization, but agreed that accessing OTC benefits can be problematic for MA enrollees.

"Since cash is fungible, CMS does not allow MA plans to provide cash as a means for its enrollees to obtain OTC services," the agency said in a written response to Drug Topics' questions. "Also, other means of providing OTC, such as mail order or direct reimbursement of the member for OTC expenditures, are less convenient and reliable. Finally, while a prepaid card is attractive, such cards must be set up so they will only cover approved OTC items; this may not have been an appealing constraint for vendors of prepaid card programs."

Wade said that OTCNetwork avoids problems by including inventory-control systems that limit card use to approved items. Pharmacies and other retailers that want to participate must use special point-of-sale terminals, but Wade said, InComm provides terminals and inventory-control software free of charge.

He added that the initial target market is MA enrollees who are high OTC users, which is why the first participating providers are pharmacy chains Duane Reade and Rite Aid. The initial MA plan sponsors are Access Medicare and HealthPlus. None of the 4 companies responded to repeated interview requests.

The National Community Pharmacists Association (NCPA) favors any type of OTC program that gives MA enrollees access to OTC products from local pharmacies, according to spokesman John Norton.

None of NCPA's CCRx MA plans offer an OTC benefit, but the association is familiar with the problems that independent pharmacists have had in attempting to deal with OTC benefits offered by other plans. Norton said that NCPA would prefer a debit card-style program that did not require a dedicated point-of-sale system or limit participation to specific participating providers.

Editor's note: For more on this subject, see related story, "OTC drugs require prescriptions for account reimbursement," also published January 15, 2011.