PRINTER FRIENDLY
 

Effective March 2009, the Centers for Medicare & Medicaid Services (CMS) implemented a new policy for full-benefit dually eligible (FBDE) individuals who have retiree prescription drug coverage through an employer or union that is claiming them for the Retiree Drug Subsidy (RDS).[1] The policy was promulgated in final regulations issued in January 2009.  FBDEs are those individuals who have Medicare and full Medicaid benefits.  They qualify for the full low-income subsidy (LIS) and thus may join certain Medicare prescription drug plans at no premium cost.  By contrast, an FBDE who has a retiree drug plan must often pay a monthly premium and/or deductible. 

The rule creates an exception to the standard auto-assignment procedures that apply to FBDE individuals.  Normally, CMS assigns and enrolls dually eligible beneficiaries who do not choose their own Part D plan into one for which LIS will pay the whole premium. It establishes that an FBDE beneficiary with qualified retiree coverage for which an RDS is being paid will not be automatically enrolled in a Medicare Part D plan.  Instead, FBDEs with employer or union-provided Part D coverage are presumed to decline Part D coverage if, following a CMS-issued notice, they do not indicate that they wish to receive it.  Thus, if an FBDE takes no action after receiving notification of the availability of Part D coverage, CMS will not auto-enroll them in a Part D plan. 

Why the Change?

Under the new rule, Medicare will not automatically enroll FBDEs for whom a Retiree Drug Subsidy is being paid in a Part D plan because these FBDEs already have creditable drug coverage offered by their former employer or union. These retiree prescription drug plans are creditable because they are deemed to provide, on average, at least as much coverage as Medicare's standard prescription drug coverage.

If individuals who become dual eligibles move from a retiree prescription drug plan to a Part D plan, they may encounter difficulties caused by changes in formularies (lists of covered drugs) and other utilization management tools, such as prior authorization, which are used by Part D plans to contain costs.  The transition may be particularly difficult for nursing home residents and those with chronic conditions who are stabilized on their current treatments. 

CMS-Issued Notice Letter Will Notify FBDEs of Availability of Part D Coverage

Once CMS identifies that an individual is an FBDE and has a creditable employer or union-sponsored prescription drug plan, it will send a notice letter indicating eligibility for Part D coverage (the letter doesn't mention the low income subsidy by name but informs recipients that they will have no premium or deductible and identifies what their out-of-pocket costs will be). On the back of the one-page letter is a list of regional plans that have premiums at or below the regional low-income premium subsidy amount. If the FBDE enrolls in one of these plans he or she will not have to pay a premium for drug coverage.  The letter directs these beneficiaries to "contact your employer or union plan now to learn how joining a Medicare drug plan may affect your current coverage" but does not tell them with whom to discuss this.[2]  If a beneficiary fails to take affirmative steps to enroll in a Medicare Part D prescription drug plan, CMS presumes that the beneficiary has opted to retain his or her employer or union-provided drug coverage. 

How to Respond to the Notice

Beneficiaries who receive the notice and must make a choice between a Part D and retiree prescription drug plan should be aware of the following:

1. As explained above, joining a Medicare drug plan may force an FBDE individual and his or her dependents to permanently lose employer or union-sponsored drug or other medical coverage.   Thus, if an FBDE individual chooses to enroll in Medicare Part D upon receiving the notice letter, but later wishes to leave Medicare Part D and re-enroll in his or her previously-declined retiree prescription drug plan, the individual may be disqualified for that plan.
    

2. As always, an FBDE individual with retiree prescription drug coverage may choose to enroll in a Medicare Part D plan at any time, as long as he or she retains status as an FBDE.  An FBDE beneficiary receives the full LIS, and so pays $0 in monthly premium, $0 in yearly deductible, and up to $2.40 for any covered generic drug and up to $6.00 for any covered brand name drug for the year 2009.  Additionally, as an FBDE, the beneficiary has full Medicaid coverage to supplement Medicare.  On the other hand, potentially losing the full range of retiree prescription drug and medical coverage by enrolling in Medicare Part D may cause substantial hardship for an FBDE's dependents. Therefore, it may or may not be financially advantageous for an individual FBDE to give up his or her retiree health benefits and enroll in a Part D plan in order to receive the LIS. 
    

3. If making a switch between drug plans, it is important that beneficiaries or their representatives ensure that there is no gap in prescription drug coverage. For example, an FBDE individual with retiree prescription drug coverage who receives a notice letter may take action to enroll in a Medicare Part D plan but later decide to disenroll from Part D and receive employer coverage instead.  In this situation, the beneficiary may want to request retroactive cancellation of Part D to avoid paying double premiums or other costs.  The rules that apply to disenrollment from a Part D plan by any FBDE would apply.  If the beneficiary makes this cancellation request prior to the effective date of auto-enrollment, then the enrollment is cancelled.  If the effective date of the auto-enrollment is retroactive, the beneficiary may request a retroactive cancellation as long as the request is made by the 15th of the month after the month in which auto-enrollment occurred.  If the request occurs after those dates, then the disenrollment is effective with the last day of the month in which the request is made.  It is also important to keep in mind that while an FBDE may re-enroll in Part D at any time, CMS lacks the authority to require employer or union-sponsored plans to accept re-enrollments to retiree prescription drug or other medical plans

Conclusion

While the new rule may result in stability and continuity of prescription drug coverage for one of the most vulnerable Medicare beneficiary groups, those FBDE individuals affected by the rule should be sure that they make the wisest choice between Part D or retiree prescription drug plans. In general, Medicare Part D may be cheaper, but enrollment into Part D may result in ineligibility for otherwise available retiree prescription drug or medical coverage plans.  Beneficiaries or their representatives should consult their group health plan administrator or personnel office to learn the effect of enrolling in a Part D plan on their retiree health benefits.  They also should contact their local State Health Insurance Assistance Program (SHIP) for questions about Part D plans and LIS.[3]