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MEDICARE
PART D |
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For other information, follow one of the links below, or scroll down Click HERE for additional information from CMS and others regarding Medicare Part D, including a state-by state breakdown of the Part D plans being offered, Low Income Subsidy information, and more. Click HERE for an online tool to help decide if you qualify for help with Medicare prescription drug costs. The Medicare Part D program provides beneficiaries with assistance paying for prescription drugs. The drug benefit, added to Medicare by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, (MMA),[1] began in January 2006. Unlike coverage in Medicare Parts A and B, Part D coverage is not provided within the traditional Medicare program. Instead, beneficiaries must affirmatively enroll in one of many hundreds of Part D plans offered by private companies. The Annual Election Period for Part D runs from November 15 – December 31. During this period people with Medicare can enroll in a plan or change their enrollment from one plan to another. Individuals who are already in a plan should decide whether it will be right for them in the coming year; if they do not choose to switch they will remain in their current plan. All plans will have different costs and benefits from year to year, thus it is advisable for all beneficiaries to consider their options and make the best choice they can for the coming year. While coverage does not begin until January, plans can market beginning in October and beneficiaries can begin making choices on November 15th. The Medicare law establishes a standard Part D drug benefit. Plans must offer a benefit package that is at least as valuable as the standard benefit. The standard benefit is defined in terms of the benefit structure, not the particular drugs that must be covered. In 2009, this standard benefit includes an initial deductible. After meeting the deductible the beneficiaries pay 25% of the cost of covered Part D prescription drugs, up to an initial coverage limit. Once the initial coverage limit is reached, beneficiaries are subject to another deductible, known as the "Donut Hole," or "Coverage Gap," in which they must pay the full costs of drugs until total out-of-pocket expenses - including the costs of the deductible and coinsurance - on formulary drugs reach the "Catastrophic Coverage " benefit. Beneficiaries entitled to Catastrophic Coverage pay a set price for generic or preferred drugs and and another for other drugs, or a flat 5% coinsurance, whichever is greater.[2] Note that this out-of-pocket amount is calculated annually. Beneficiaries who reach the out-of-pocket threshold in one year have to begin to meet it again on January 1st of the next year. See the chart below for current amounts. Because the deductible, initial coverage limit, and annual out-of-pocket threshold change each year according to the changes in expenditures for Part D drugs, beneficiary out-of-pocket expenses may increase annually. The Medicare law does not mandate a set premium amount. These costs as well as the list of covered drugs vary from plan to plan and from region to region. Beneficiaries should take time to review the various plans available to them in light of their current and anticipated needs and financial resources. Decisions do not have to be made until December 31st. ___________________ [1] Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108-173 (Dec. 8, 2003), 42 U.S.C.A. § 1395w-101 et seq. (2004 supplement), 42 C.F.R. §423.506.
[2]
42 U.S.C.A. §1395w-102(b). Part D Standard Benefit 2006 – 2010
Part D drug plans are not required to offer the standard benefit, but can offer alternative prescription drug coverage. Alternative coverage must be "actuarially equivalent" to the standard benefit. In other words, the value of the benefit package must be equal to or greater than the value of the standard benefit package.[3] In an actuarially equivalent plan the cost-sharing varies through the use of such mechanisms as tiered co-payments. For example, a beneficiary’s share of cost may be less for a generic or preferred brand name drug than for a non-preferred brand name drug. However, a plan that offers an alternative benefit package cannot impose a higher deductible or require a higher out-of-pocket limit than required by the standard benefit. Plans can offer enhanced alternative coverage that might also include changes to the deductible and the initial coverage limit, although the deductible cannot be higher than the amount set in the statute. Enhanced alternative coverage might also include coverage of drugs that are excluded under Part D. A PDP that wants to offer a drug plan with enhanced alternative coverage in a region must also offer a PDP with the basic benefit package in that region.[4] Calculating Beneficiary Expenses Another critical and often over-looked factor is that only the cost of Part D covered drugs that are included on a plan’s formulary count toward the deductible and out-of-pocket limits. For example, a beneficiary whose only drug expenses are $400 a month for drugs that are not on her plan’s formulary will not meet her deductible, and the $4800 in out-of-pocket expenses she will incur for the year will not qualify her for Part D Catastrophic Coverage. Payments that count towards the yearly out-of-pocket limit are referred to as true out-of-pocket expenses, or "TrOOP". Only out-of-pocket costs for formulary drugs that are paid for by the beneficiary, a family member or other person acting on her behalf, or by a state pharmacy assistance program are considered TrOOP and are counted towards the out-of-pocket limit.[5] Payments made by other insurance, including employer-sponsored plans and AIDS Drug Assistance Programs (ADAPs), do not count toward the limit. Such payments work to increase the amount the beneficiary must spend before the reduced cost sharing for high drug expenses begins. Thus, not only is the beneficiary responsible for paying the full costs of non-formulary prescriptions, she gets no credit towards the Part D out-of-pocket limit for the expenses she incurs. The MMA defines the drugs that are covered under Part D, and therefore the drugs for which payment will be made under Part D, in relationship to their coverage under Medicaid and under other parts of Medicare. A Part D drug is a drug that is approved by the Food and Drug Administration, for which a prescription is required, and for which payment is required under Medicaid.[6] Biological products, including insulin and insulin supplies, and smoking cessation drugs are also covered under Part D.[7] The MMA excludes from coverage those categories of drugs for which Medicaid payment is optional.[8] Of particular significance to Medicare beneficiaries is the exclusion of drugs for weight gain (used in connection with treating weight loss due to cancer or HIV/AIDS), barbiturates (used to treat seizures in older people), benzodiazepines (used to treat acute anxiety, panic attacks, seizure disorders, and muscle spasms in those with cerebral palsy), and over the counter medications. Many of these excluded medications are used by nursing home residents. MMA also excludes from Part D coverage those drugs for which payment could be made under Medicare Part A or Part B. CMS has determined that such drugs are excluded from Part D coverage even if the beneficiary does not have coverage under the part of Medicare (either Part A or Part B) which would generally pay for the drug.[9] Part D plans are not required to pay for all covered Part D drugs. They may establish their own formularies, or list of covered drugs for which they will make payment, as long as the formulary and benefit structure are not found by CMS to discourage enrollment by certain Medicare beneficiaries.[10] Part D plans that follow the formulary classes and categories established by the United States Pharmacopoeia will pass the first discrimination test. However, CMS indicates it will still review formularies to determine whether the placement of specific drugs in each category or class, as well as other benefit design issues, discriminates against particular individuals. Importantly, plans can change the drugs on their formulary during the course of the year with 60 days notice to affected parties. Each drug plan must develop its own exceptions process under which a plan enrollee may ask the drug plan to cover a non-formulary drug or to reduce cost sharing for a formulary drug. In other words, the enrollee asks the drug plan to make a ruling that formulary requirements apply to all plan enrollees "except for" the requesting enrollee. An unfavorable exception determination gets an enrollee into the appeals process. The prescribing doctor will play an important role in the exception process, since an exception will only be granted if the plan agrees with the doctor certification that no other drug on the formulary would be as effective as the drug in question or formulary drugs would cause adverse consequences to the enrollee. The Center for Medicare Advocacy, along with The Alzheimer's Association, American Medical Association, American Pharmacists Association, Medical Group Management Association, National Community Pharmacists Association and the National Council on the Aging, developed a form for pharmacists to fax to physicians when there are issues with their Medicare patients' prescriptions. The form has been approved for use by CMS. Click HERE to download a copy of the Request for Prescription Information or Change form. Eligibility for Part D Coverage Prescription drug coverage under Part D is voluntary. A beneficiary may purchase Part D coverage if she is entitled to Part A or enrolled under Part B. The beneficiary does not have to have both Part A and Part B coverage to choose prescription drug coverage. The beneficiary must enroll in a Part D plan that serves the geographic region in which she resides.[11] Beneficiaries who are incarcerated are not eligible to participate in Part D.[12] The Part D benefit is premised on the notion that individual Medicare beneficiaries should have a choice of private drug plans in order to select a drug benefit that best meets their needs. The statute creates three categories of drug plans: stand-alone plans that offer only prescription drug coverage, Medicare Advantage plans with a drug benefit, and fall-back plans (It does not appear that fall-back plans will be needed or offered in 2009). Prescription Drug Plans (PDPs) The majority of Medicare beneficiaries are in the traditional Medicare program and will be required to purchase drug coverage through prescription drug plans (PDPs) that offer only prescription drug coverage. PDPs will be offered by sponsoring organizations pursuant to a one-year contract with the Centers for Medicare & Medicaid Services (CMS).[13] Medicare Advantage Plans (MA-PDs) Individuals who are enrolled in a Medicare Advantage plan established under Medicare Part C must receive their drug coverage through their Medicare Advantage prescription drug plan, known as an MA-PD. They may not purchase a separate PDP. However, individuals who are enrolled in a Medicare Advantage private fee-for-service (PFFS) plan that does not include a prescription drug option may purchase a PDP for their Part D coverage.[14] Consequences for People with Low Incomes and for States The MMA establishes a low income subsidy for the costs of Part D. Individuals with incomes up to 150% of the federal poverty level and with limited resources are eligible for the subsidy. Unfortunately, the Act also eliminates all Medicaid drug coverage for the more than six million individuals who are dually-eligible for both Medicare and Medicaid (dual eligibles). Moreover, it requires states to pay back to the federal government – through a mechanism referred to as "the clawback" – much of the savings they would otherwise realize from the state’s reduced Medicaid obligation, and includes other provisions that will affect state budgets. State Pharmaceutical Plans: Medicare Part D Implications States may be able to provide cost-sharing and supplemental drug coverage for dual eligibles and other low-income residents through their State Pharmaceutical Assistance Program (SPAP).[15] Any payments made by a SPAP on behalf of a Part D enrollee will count toward the enrollee’s true out-of-pocket costs, which count toward meeting the catastrophic threshold which leads to reduced or eliminated enrollee cost-sharing. State Medicaid programs, including Pharmacy Plus waivers under Section 1115 of the Social Security Act, ADAPS, and any other programs where the majority of the funding is from federal programs, cannot be SPAPs.[16] SPAPs must not discriminate among drug plans with respect to their supplemental coverage;[17] this requirement prevents an SPAP from automatically enrolling subsidy-eligible individuals into one particular drug plan. Plans must coordinate with SPAPs concerning certain basic elements. For example, a card issued by a plan may also be used in connection with coverage of benefits provided under an SPAP, if this is the case, the card may contain an emblem or symbol indicating such connection.[18].
For CMS' complete list of qualified SPAPs, go to www.cms.gov/States/Downloads/QualifiedSPAP4.15.08.pdf. State Medicaid Programs: Medicare Part D Implications Because of the design of the Medicare drug benefit, many dual eligibles find themselves with less prescription drug coverage than they had under Medicaid and with less protection to challenge denials or other barriers to coverage. Further, they have to make co-payments for their prescriptions, with the co-payment amounts increasing yearly. Medicaid can continue to cover drugs which are excluded from Part D and are optionally covered by Medicaid, and receive federal financial participation (FFP). Such drugs include benzodiazepines, barbiturates, prescription vitamins, cough and cold relief drugs, and non-prescription drugs, among others. States also have the option of paying co-payments for dual eligibles and/or for drugs that are not on a plan’s formulary but will receive no federal matching payments.
1. Meeting the Annual True Out-Of-Pocket (TrOOP) Spending Requirement
To get past the Donut Hole and into Catastrophic Coverage beneficiaries need to meet their out-of-pocket (TrOOP) spending requirement, which is $4,350 in 2009. Only certain costs count toward the true out-of-pocket spending requirement.
Costs that count toward the TrOOP:
Costs that do not count toward the TrOOP:
2. Using a Network Pharmacy During the Donut Hole To ensure that beneficiaries get credit for costs they incurred during the Donut Hole, and to take advantage of lower drug prices negotiated by their plan, beneficiaries must show their plan membership card at the pharmacy and must be sure to use their plan's network pharmacies. The Part D plan has the responsibility to track beneficiaries' TrOOP spending during the Donut Hole so they can determine when the beneficiary becomes eligible for Catastrophic Coverage. The plan will mail the beneficiary a monthly Explanation of Benefits (EOB) to show how much the beneficiary and the plan have each paid during the month. The EOB will also show how much more the beneficiary needs to spend to reach Catastrophic Coverage. 3. Important Information About Drug Discount Cards
Drug discount cards can be useful to reduce beneficiaries' expenses during the Donut Hole. But remember, only the portion that the beneficiary pays out-of-pocket, not the amount paid by the discount card, can be applied toward the TrOOP spending requirement. Again, beneficiaries must show their plan membership card at the pharmacy and must use a network pharmacy to get proper credit.
Avoiding or Minimizing the Donut Hole
MEDICARE PART D LOW-INCOME SUBSIDIES Medicare Part D will provide a full drug subsidy with low co-payments to Medicare beneficiaries with incomes up to 135% federal poverty level and limited resources. Medicare Part D will provide a partial subsidy of premium, deductible and co-insurance to Medicare beneficiaries with incomes up to 150% federal poverty level and limited (but higher than allowed for full subsidy) resources. Unlike rules for Medicare Savings Programs, which allow for a family unit of only one or two, eligibility rules for Part D subsidies will recognize larger family units, to the extent that those family members rely on the applicant or her spouse for one half of their financial support. Because new poverty guidelines are generally published in February or March of each year, the prior year's levels will be used to compute Part D low-income subsidies for the beginning of the next. 2010 LOW INCOME SUBSIDY GROUPS AND COSTS
* Individuals in these four groups do not have the
"Donut Hole" gap in coverage. APPLYING FOR THE LOW INCOME PRESCRIPTION DRUG SUBSIDY The Social Security Administration (SSA) administers the Part D Low Income Subsidy (LIS). The LIS is designed to assist with the cost of the Medicare prescription drug benefit. Individuals on both Medicaid and Medicare (Dual Eligibles), in a Medicare Savings Program, or on SSI with Medicare are automatically eligible for the LIS. Others may apply for the LIS and will qualify if they meet the income and resource limits in group 3 or 4, above. SSA and state Medicaid offices, which are also authorized to take low income subsidy applications, will evaluate applications using criteria similar to the criteria used to evaluate applications for Supplemental Security Income (SSI). The reviewing agency will look at income for both the applicant and the applicant’s spouse who lives with the applicant, even if the spouse is not applying for a subsidy. Both unearned and earned income will be counted, though certain amounts will be disregarded for expenses related to the individual’s medical condition. As with SSI, the maximum amount of income counted from in-kind support and maintenance will be one-third of the monthly benefit rate. SSA proposes to count liquid resources, i.e., resources that can be converted to cash within 20 days, in determining whether an applicant for the subsidy meets the assets test. The home in which a person lives and the land on which it is situated are excluded from consideration. Again, resources belonging to a spouse with whom the applicant lives are considered, even if the spouse is not applying for the subsidy. Other resources excluded from consideration are non-liquid resources, business or other property necessary for support, housing assistance, and up to $1500 per person set aside for burial expenses. The proposed regulations do not set any time limits for SSA to act on a subsidy application; the application remains in effect until a decision is made. If a subsidy application is approved, SSA proposes to conduct an eligibility redetermination within one year of its initial determination. After the first redetermination, the length of time between redeterminations will vary depending on SSA’s assessment of the likelihood that a beneficiary’s situation may change. All redeterminations will be prospective. If a low-income subsidy application filed with SSA is denied, or if SSA decides to reduce or terminate a subsidy, the individual has 60 days to request administrative review by SSA. (Note: LIS applications filed with the state Medicaid office are subject to Medicaid agency appeals procedures.) The appeal will consist of a telephone hearing conducted by someone who was not involved in making the initial determination. Federal regulations require at least 20 days advance notice of the hearing date, but they do not set a time frame within which the decision must be made. An individual who is dissatisfied with the LIS appeal decision has 60 days to file an action in federal district court seeking review of the decision. MARK YOUR CALENDARS! TIMETABLE FOR MEDICARE PART D ENROLLMENT August
September
October
November
December
January
GUIDELINES FOR SELECTING A PART D PLAN
Factors to consider when choosing a plan:
MEDICARE PART D ARTICLES & UPDATES
OTHER PRESCRIPTION DRUG ARTICLES
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[1] Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108-173 (Dec. 8, 2003), 42 U.S.C.A. § 1395w-101 et seq. (2004 supplement), 42 C.F.R. §423.506. [4] 42 C.F.R.§ 423.104(f). [5] 42 U.S.C.A. §1395w-102(b)(4)(C)(ii), 42 C.F.R. §423.100. [6] 42 U.S.C. §§1395w-102(e)(1), 1396r-8(d), (k). [7] 42 U.S.C. §§1395w-102(e)(1)(B), (2)(A). [8] 42 U.S.C. §§1395w-102(e)(2)(A), 1396r-8(d)(2). [9] 42 C.F.R. §423.100. [10] 42 C.F.R. §§ 423.120(b), 423.272(b). [11] 42 U.S.C. 1395w-101(a)(3)(A), (b)(1)(B)(i). [12] 42 C.F.R. §§423.4, 423.30(a). [13] 42 U.S.C. §§ 1395w-101(a)(1)(A), 1395w-112(b)(1), 1395w-151(a)(14). [14] 42 U.S.C. 1395w-101(a)(1)(B). Note that individuals enrolled in a Medicare Part C Medical Savings Account (MSAs) may also purchase a PDP to obtain drug coverage; however, no MSAs are currently offered under Medicare Part C. [15] 42 C.F.R. §§ 423.454, 423.464(e)(1). [16] 42 C.F.R. § 423.464(e)(1)(iv). [17] 42 C.F.R. § 423.464(e)(1)(ii). [18] 42 C.F.R. § 423.464(e)(2). [19] These figures include one $20/month unearned income disregard. [20] These figures include one $20/month unearned income disregard.
For further information on the Medicare Modernization Act, you may also refer to our Medicare Act of 2003 news page and our FAQ - Privatization (and Occasional Reform) page. We have also prepared a summary of the new law, available for a small fee. Click HERE to order. |
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