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  • ENROLLMENT (cont.)
    • The Late Enrollment Penalty (LEP)
    • LEP Reconsideration
    • Special Enrollment Periods (SEPs)
    • How to Enroll and other Enrollment Miscellany
    • EOCs and ANOCs (notices you need to know about)
    • Income Related Premium Increase
  • MEDICARE SAVINGS PROGRAMS
    • QMB
    • SLMB
    • QI / ALMB
    • QDWI
  • THE LOW INCOME SUBSIDY
    • Deemed and Undeemed Eligibles
    • Full and Partial Subsidies
    • Income and Asset Levels Limits for Undeemed Individuals
    • Cost Sharing for Deemed and Undeemed Individuals
  • DUAL ELIGIBLES AND OTHER LIS ELIGIBLES
    • Auto-enrollment
    • Facilitated Enrollment
    • POS Enrollment
    • LINET
  • SPAPS
  • APPEALS and GRIEVANCES
    • Coverage Determinations and Exceptions
    • Formulary Exceptions
    • Tiering Exceptions
    • What to Do When a Drug is Denied at the Pharmacy
    • The Medical Statement
    • Time Frames for Exception Requests and Authorized Representatives
    • How to File an Exception Request
    • Other Levels of Appeal
    • Grievances
  • ARTICLES AND UPDATES

Introduction to Medicare Part D

This section constitutes an introduction to Part D. For more detailed information on any of the topics in this section, please click on the links within the topics. There you will also find relevant legislative, statutory and CFR citation.

Prior to 2006, Medicare paid for some drugs administered during a hospital admission (under Medicare Part A), or a doctor’s office (under Medicare Part B). Medicare did not cover outpatient prescription drugs until January 1, 2006, when it implemented the Medicare Part D prescription drug benefit, authorized by Congress under the "Medicare Prescription Drug, Improvement, and Modernization Act of 2003." This Act is generally known as the "MMA."

The Part D drug benefit (also known as "Medicare Rx") helps Medicare beneficiaries to pay for outpatient prescription drugs purchased at retail, mail order, home infusion and long-term care pharmacies.

Unlike Parts A and B, which are administered by Medicare itself, Part D is "privatized." That is, Medicare contracts with private companies that are authorized to sell Part D insurance coverage. These companies are both regulated and subsidized by Medicare, pursuant to one-year, annually renewable contracts. In order to have Part D coverage, beneficiaries must purchase a policy (i.e., enroll in a plan) offered by one of these companies.

The costs associated with Medicare Part D include a monthly premium, an annual deductible (sometimes waived by the plans), co-payments and co-insurance for specific drugs, a gap in coverage called the "Donut Hole," and catastrophic coverage once a threshold amount has been met.

Qualified low income individuals can receive help with their Part D costs for premiums, deductibles and co-pays through the Part D Low Income Subsidy (known as "LIS" or "Extra Help"), which is administered by the Social Security Administration.

Within parameters established in law, plans are free to establish their own formularies. There is an appeal process for members who need drugs that are not on their plan’s formularies.

Plans revise their formularies every year, adding new drugs, eliminating others, and generally charging higher co-pays and co-insurance for drugs. Beneficiaries need to re-evaluate their plan options every year to be sure their chosen plan will continue to meet their financial and medical needs.

Many Part D plan sponsors offer multiple plans that may be viewed as analogous to commercial "good, better and best" options. Buyers need to evaluate these choices carefully as it is sometimes the case that the "best" (and most expensive) plans offer little or no extra value for their higher prices.

Beginning with the 2011 plan year, Medicare required plans to eliminate their low enrollment plans and to consolidate duplicative plans. This lowered the overall number of plans available to beneficiaries, but there are still many plans to choose from and their differences are now more transparent to consumers.

SOURCES OF PART D COVERAGE

Medicare doesn’t administer Part D directly. It contracts with private companies that are approved to sell Part D insurance coverage. There are two main sources of Part D coverage:

PDPs (Prescription Drug Plans) – these are stand-alone companies that sell prescription drug coverage only. They do not offer hospital or medical coverage.

 

PDP plan sponsors have a four-digit identifier that begins with the letter "S." The different plan options offered by the sponsor each have a unique three-digit suffix identifier. For example, in 2015 United HealthCare sponsors the AARP Preferred Plan (S5820-002).

 

MA-PDs (Medicare Advantage Prescription Drug Plans) – these plans offer hospital, medical and prescription drug coverage under a single policy. Medicare Advantage plans are sometimes called "Part C" of Medicare. There are different types of MA-PDs, e.g., including HMOs, PPOs, PFFS plans, and SNPs). Plans need to identify their plan type in their plan names. People who wish to enroll in a Medicare Advantage plan must take their prescription drug coverage from the same plan, unless they are enrolled in a PFFS that does not offer prescription drug coverage.

 

MA-PD plan sponsors have a four-digit identifier that begins with the letter "H." The various plan options offered by the plan sponsor each have a unique three-digit suffix. For example, in 2015 Anthem sponsors the MediBlue HMO Standard Plan (H5854-008).

 

MA-PD Plan Types

Description

HMO

(Health Maintenance Organization)

These plans follow a "gatekeeper" model. Members must choose a primary care physician (PCP) from the plan’s network of providers. Members may not disenroll from the plan if their PCP leaves the network. Members may not see a specialist without a referral from their PCP. Members must use network providers or the plan will not cover the service. Individuals who belong to an HMO type MA-PD must take their prescription drug coverage through their HMO plan, not a separate PDP.

PPO

(Preferred Provider Organizations)

Members must choose a primary care physician (PCP) but do not need a referral to see a specialist. They may seek treatment outside the plan’s network of providers but will pay more if they go out-of-network. Individuals who belong to a PPO type MA-PD must take their prescription drug coverage through their PPO plan, not a separate PDP.

PFFS

(Private Fee for Service Plan)

Until 2011, these plans did not have to have a network of providers. Members could see "any willing provider" that would accept the plan’s terms and conditions of payment for specific services. As a result of 2008 MIPPA legislation, PFFS plans now need to have provider networks. Quite a few PFFS plans left the market in response to this mandate. Some PFFS plans offer drug coverage and some do not. Members in PFFS plans that do not offer drug coverage may get their prescription drug coverage through a PDP.

SNP

(Special Needs Plan)

These plans are only available to the following populations with special needs: 1. Dual eligibles (people with Medicare and Medicaid); 2. Institutionalized individuals (e.g., in nursing homes); 3. People with certain diagnoses (e.g., diabetes, cardiovascular disease). SNPs are required to offer case management services targeted to their populations’ special needs. Individuals who belong to a SNP must take their prescription drug coverage through their SNP plan, not a separate PDP.

 

NOTE: Not all Medicare Advantage plans offer prescription drug coverage. Some offer only hospital and medical coverage, with no prescription drug coverage. These are "MA" plans (as opposed to "MA-PD" plans). MA plans are only appropriate for people who have prescription drug coverage from some other source, such as the Veteran’s Administration (VA). Members of these plans may NOT enroll in a PDP for their prescription drug coverage. Aside from PDPs, MA-PDs and SNPs, there is another source of Part D coverage.

Employer or Union Sponsored Part D Retiree Plans – Employers and unions may offer Part D coverage to their Medicare-eligible employees and retirees through their own MA-PD plans. These plans are only available to eligible employees and retirees and are not open to the public. These plans may have a four-digit identifier that begins with the letter "E" or a three-digit suffix "800 – series" number. Employer sponsored Part D plans must follow all of the same rules as commercial Part D plans. Likewise, members of these plans have the same rights as members of commercial plans.

RETIREE DRUG SUBSIDY

Employers and unions that offer their retirees prescription drug coverage that is actuarially equivalent to (as good as or better than) Part D may qualify for a federal Retiree Drug Subsidy (RSD). The RDS became available in 2006, with the advent of Part D, to encourage employers and unions to continue to offer high quality prescription drug coverage to their Medicare eligible retirees. The 28% federal subsidy helps to defray the employer’s/union’s cost in providing coverage. Beneficiaries enrolled in employer or union plan that receives an RDS cannot enroll in Part D.

ELIGIBILITY FOR PART D

Anyone with Medicare is eligible to enroll in a Part D plan. To enroll in a PDP, the individual must have Part A OR Part B. To enroll in an MA-PD, the individual must have Part A AND Part B.

Enrollees must live in (have a permanent residence in) their plan’s service area. In the case of homeless persons, the following may be used as a permanent residence: a Post Office box, the address of a shelter or clinic, or the address where the person receives mail such as Social Security checks.

PDPs are usually national plans, but MA-PDs have delineated regions, sometimes by state, sometimes by counties within states. For this reason, MA-PDs may not be appropriate for those who travel a great deal or who maintain summer and winter residences in different areas of the country. NOTE: Some MA-PDs offer "passport" plans that allow members to obtain benefits outside their normal service areas.

Individuals who reside outside the United States* are not eligible to enroll, but may do so upon their return to the country. Incarcerated individuals may not enroll in Part D, but they may enroll upon release from prison. People with end-stage-renal-disease (ESRD) may not enroll in an MA-PD. (But they may not be disenrolled if they develop ESRD while a member of the plan.)

There are no other eligibility restrictions or requirements for Part D.

*The United States is defined as the fifty federated states, plus the District Of Columbia, American Samoa, Guam, the Northern Mariana Islands, and Puerto Rico.

PART D COVERED DRUGS

Medicare law defines the drugs that are covered under Part D in relation to their coverage under the federal Medicaid program. Drugs that are mandatory under Medicaid may be covered under Part D; drugs that are optional under Medicaid are excluded under Part D. In addition, Part D drugs must be:

  • Approved by the Food and Drug Administration (FDA) for sale in the US;

  • Available only by prescription;

  • Medically necessary and for a "medically accepted indication."

A drug that is for a "medically accepted indication" is one that is prescribed to treat a disease or condition (indication) approved by the FDA. A drug that is prescribed for a condition that is not approved by the FDA is considered to be prescribed "off label." Off label drugs may be covered only when support is found in one of three compendia named in law or, in the case of anti-cancer drugs, in peer reviewed journals.

(additional information: http://www.medicareadvocacy.org/2010/09/cma-report-medicare-coverage-for-off-label-drug-use/)

  • Part D also covers biological drugs, insulin and insulin syringes and smoking cessation drugs.

Plans must provide coverage to Medicare-eligible individuals who reside in long-term care facilities and must offer dosages and forms of drugs that are common in these settings. Drugs used to treat opioid dependence may be covered when medically necessary. LTE-DESI (Less than Effective Drug Efficacy Study) drugs are not covered.

Most commercially available vaccinations, including the shingles vaccine, have been covered by Part D since 2008. The amount paid for the vaccination includes a fee for administration of the injection.

Commercially available combination prescriptions that contain at least one Part D drug component are considered Part D drugs. In extemporaneous compounds, only the component(s) that meet the condition of a Part D drug may be covered.

Drug manufacturers are required to enter into an agreement with CMS to provide a discount on brand name drugs purchased during the Donut Hole. Drugs produced by manufacturers that do not sign such agreements will not be covered under Part D, even if they otherwise meet the definition of a Part D drug. 

Formularies

Part D plans are not required to cover all Part D drugs. They may establish their own formularies, which must include categories and classes of drugs that cover all disease states. Formularies may not be discriminatory, i.e., designed to discourage the enrollment of certain beneficiaries. A formulary is not considered discriminatory if it:

  • Follows the model formulary in the US Pharmacopeia;

  • Includes at least two drugs in 148* categories of drugs;

  • Covers all or "substantially all" drugs in the following protected classes of drugs: anti-cancer; anti-psychotic; anti-convulsant, anti-depressants, anti-psychotic, immuno-suppressant, and HIV and AIDS drugs.

CMS monitors the sufficiency of plan formularies, including the placement of drugs in tiers and the application of utilization management restrictions in relation to industry best practices.

People are limited to the drugs on their plan’s formulary, but may request an exception to have a non-formulary drug covered. If a plan approves a non-formulary drug through the exceptions or appeal process, the plan may charge a higher price for the drug by placing it at a higher tier.  Non-formulary drugs also do not count toward the "true out-of-pocket" ("TrOOP") amount required to get out of the Donut Hole, unless approved by exception or appeal. The obstacles to obtaining non-formulary drugs emphasize the importance of choosing a plan with a formulary compatible with the individual’s needs.

        * Previously, plans were required to cover at least 2 drugs in 146 categories of drugs.  Effective January 1, 2013, two new classes of drugs are covered under Part D.  These are the previously excluded classes of barbituates and benzodiazepines.  NOTE that in 2013, barbituates will only be covered when used to treat cancer, epilepsy, or chronic mental health conditions.  Starting in 2014, barbituates will be covered for all other medically appropriate dignoses.

Excluded Drugs

Certain drugs are optional under the Medicaid program, and therefore are not coverable (excluded) under Part D. Excluded drugs include:

  • Over-the-counter drugs (even if they are prescribed by a physician);

  • Drugs for weight loss or gain, even if used for non-cosmetic purposes, such as to treat morbid obesity. Note that drugs to treat AIDS wasting and cachexia due to other disease are not considered to be for cosmetic purposes and are therefore NOT excluded.

  • Cough and cold preparations, when prescribed for symptomatic relief only, without underlying medical indication;

  • Fertility drugs;

  • Erectile dysfunction drugs, except as medically necessary and approved by the FDA to treat conditions other than sexual or erectile dysfunction;

  • Cosmetic and hair growth drugs. Note that drugs to treat acne, psoriasis, rosacea and vitiligo are not considered cosmetic.

  • Drugs purchased in another country;

  • Vitamins and minerals, except niacin products, Vitamin D analogs (when used for a medically accepted indication), prenatal vitamins and fluoride preparations.

  • Drugs that may be covered under Part A or Part B of Medicare, even if coverage is not actually available (e.g., because the individual has a Part A or B deductible, or does not yet have Part B.)

Note the important distinction between non-formulary and excluded drugs. Non-formulary drugs are coverable under Part D but are not on a particular plan’s formulary. For example, Plan A may only the prescription forms of Prevacid and Nexium (or their generics) to treat acid reflux, when Plan B may only cover the prescription forms of Protonix and Zantac (or their generics).

Excluded drugs are not coverable under Part D, but may by offered as a supplemental benefit in some enhanced plans. Members may not appeal the denial of excluded drugs and their cost will not count toward TrOOP. In addition, some states may continue to provide coverage of excluded drugs for their dual eligible and SPAP populations.

Network Pharmacies and Mail Order

Plan members are required to use pharmacies within the plan’s network of pharmacies. (Exceptions may be made for emergencies.) Plans, in turn, are required to offer their members adequate access to retail, mail order, home infusion and long-term care pharmacies. Plans are not required to contract with all long term care pharmacies but CMS expects that they will do so for their members who are in a long term care facility. Member costs can vary, depending upon the network pharmacy they use. Some network pharmacies have the status of "preferred" network pharmacies, where members can obtain better prices. Plans may encourage their members to use mail order for 90-day supplies, but they must have at least one retail pharmacy where members can obtain a 90-day supply. Consumers should enter into mail order with caution as mail order co-pays are not always less expensive. In fact, if the full cost of a drug is more using mail order, the member will enter into the Donut Hole faster, even if co-pays are the same as retail. As indicated below, in order to get credit toward TrOOP, members must use network pharmacies, which keep track of member purchases.

Utilization Management Restrictions

Part D plans are permitted to impose restrictions on certain formulary drugs in order to control costs. These cost cutting tools are collectively known as utilization management restrictions. They are usually applied to more expensive drugs or those that have abuse potential. Pain medications, for example, nearly always have one or more of the following type of restrictions.

  • Prior Authorization – The physician must "justify" the prescription to the plan and explain why the medication is medically necessary as prescribed. If the plan continues to deny the medication it may be necessary to file an appeal.

  • Quantity Limits – The plan may limit the dosage allowed over a specified period, e.g., x milligrams over a 25-day period. Such dosage restrictions are often an issue for chronically ill individuals who take high dosages of pain medications on a maintenance schedule. These cases often need to go to appeal.

  • Step therapy (sometimes called the "fail first" requirement, the requirement that a member try and fail other specified drugs before the plan will approve the prescribed drug). Plans may require a trial of up to 90 days on a different medication, which may be completely untenable for some patients.

Members and potential members of a plan may review the plan’s utilization management restrictions on particular drugs in the plan’s formulary, website or the Medicare Plan Finder at www.medicare.gov (external link opens in new window). These restrictions should be taken into consideration when choosing a plan.

In addition to utilization management restrictions, all plans also impose safety edits at the point-of-sale. These may include but are not limited to over-utilization (early refill), age/gender contraindications, drug-drug interactions, therapeutic duplication, incorrect dosage or duration of therapy, etc.

Formulary Changes

Plans generally change their formularies each year (making it important to review one’s plan choice annually). Plans may also change their formularies mid-year but must generally obtain CMS approval to do so. Current plan members are protected from some of these changes under Transition Policy.

Unless the FDA declares a drug to be unsafe, or a drug is taken off the market by the manufacturer, Part D plans may not remove drugs from their formularies, or make changes to the cost sharing status of a drug, from the beginning of the AEP (October 15) through the first 60 days of the plan contract (calendar) year.

Plans may expand formularies by adding drugs, lowering cost sharing, or removing utilization management tools, at any time of the year.

After March 1, Part D plans may amend their formularies as summarized below. CMS approval and notice to members is required for both types of formulary changes.

  • Maintenance changes – While CMS values the stability of plan formularies, it generally gives positive consideration to maintenance changes, which are intended to refine the safety of the Part D benefit, save taxpayer money and protect the interest of beneficiaries throughout the plan year. Maintenance changes include: removal (or change in tier placement) of a brand name drug based upon the addition of a new grade A generic at a lower cost to members; removal (or change in tier placement) of a formulary drug in light of new clinical evidence; adding new utilization management restriction(s) based on a new FDA "black box" warning; removal of a drug based on an FDA market withdrawal notice; removal of a non-Part D drug mistakenly included on the formulary. Plans may notify members of maintenance changes at the same time that they submit the changes to CMS for approval.

  • Non-maintenance changes – Changes to formularies other than maintenance changes require the pre-approval of CMS. These changes can include changing the status of "preferred" vs. "non-preferred" drugs, adding utilization restrictions, or increasing cost sharing (for reasons other than those given for maintenance changes). After providing justification to and receiving approval from CMS, the plan is required to provide members with 60 days written advance notice. Further, members who are already taking the drug in question are exempt from the formulary change for the rest of the calendar year.

Generic Substitution

Brand name drugs have patents that expire after a number of years. When these patents expire, other manufacturers are free to develop generic versions of these drugs. To keep Medicare costs low, CMS encourages Part D plan members to take the less expensive generic drugs. In fact, the pharmacy may substitute a generic drug for a brand name drug at the point of sale because these formulary changes fall into the category of maintenance changes, which do not require advance notice to the beneficiary. There is no transition policy that guarantees a member the right to continue to receive the brand name drug for the rest of the year when a generic becomes available.

Members need to read their EOC's (Evidence of Coverage) carefully to find out what they need to do to get brand name drugs instead of generics. Usually, it is necessary to file an exception or appeal request. To prevail in an exception or appeal, the physician must document a history of adverse reactions or ineffectiveness of the generic.

Transition Policy

All Part D sponsors must have a transition process to ensure that newly enrolled members, and other individuals described below, have access to non-formulary medications during their first 90 days in a plan. (For transition purposes, formulary drugs that are subject to prior authorization or step therapy are treated as non-formulary drugs.)

The transition process applies to:

  • new members who enroll during the AEP; (or, depending upon the plan’s declared transition policy, current enrollees affected by a formulary change from one contract year to the next)

  • newly eligible Medicare enrollees who previously had other coverage;

  • individuals who transition from one Part D plan to another during the year (as through a Special Enrollment Period);

  • enrollees in long-term care facilities.

The transition process requires Part D plans to allow a one-time temporary supply of a non-formulary drug, during which time the member, his/her physician, and the plan, can work out an appropriate change to another drug, or commence an exception request to obtain the non-formulary drugs. The plan must provide a written notice to all members who receive a transition fill within three business days of the temporary fill.

For members living in the community, the temporary supply is a one-time fill for at least 30 days of medication (unless the script is written for fewer days). For members living in long-term care facilities, the temporary supply may be for up to 31 days, and may be renewed as necessary during the entire length of the 90-day transition period.

Depending upon the circumstances of the individual, the transition period may be extended beyond the 90-day period.

THE PART D STANDARD BENEFIT

At a minimum, plan sponsors must offer a "standard benefit" package mandated by law. The standard benefit includes an annual deductible and a gap in coverage known as the "Donut Hole." Sponsors may also offer plans that differ from – but are actuarially equivalent to – the standard benefit. Finally, they may also offer "enhanced" plans that provide benefits in addition to the standard benefit. Typically, the enhanced plans offer some coverage during the Donut Hole.

The Standard Benefit is defined in terms of the benefit structure, not the drugs that must be covered under the plan.

  • In 2014, the Standard Benefit includes an initial Annual Deductible of $310 (the maximum allowed under law) (2015 – $320). This is called the Deductible Phase, or Stage 1. 

  • After meeting the deductible the beneficiary pays 25% of the next $2,540 ($635) (2015 – $2640/$660) in formulary drugs. This is called the Initial Coverage Period or Stage 2.

  • Once the plan and the beneficiary have together paid the Initial Coverage Limit of $2,850 ($310 + $2,540 = $2,850) (2015 – $320 + $2640 =$2960), the beneficiary has a gap in coverage known as the "Donut Hole," or Stage 3.

  • During the Donut Hole the beneficiary pays for 100% of the next $3,605 (2015 – $3720) in formulary drugs, subject to a brand discount of 52.5% or a generic discount of 28%)

  • Once the beneficiary has spent a total of $4,550 (2015 – $4700 = $320 + $660 + $3720)in "true out-of pocket costs" (TrOOP) in formulary drugs, he/she enters the Catastrophic Coverage Period, or Stage 4.

  • During Stage 4 the beneficiary pays 5% of the cost for formulary drugs, or $2.55 for generics and $6.35 (2015 – $2.65/$6.60)for brand name drugs, whichever is greater. Beneficiaries who meet the $4,550 out-of-pocket threshold remain in Stage 4 for the rest of the calendar year. The process begins over again the next year.

Medicare does not establish premium amounts for plans. Instead, premiums are established through an annual competitive bidding process and evaluated by CMS. Medicare does establish the maximum deductible amount, the Initial Coverage Limit, the TrOOP threshold and Catastrophic Coverage levels every year. The table below shows the standard benefit each year from 2010 – 2015.

Standard Part D Benefit 2010-2015

 

 

2010

2011

2012

2013

2014 2015

Annual Deductible Maximum

$310

$310

$320

$325

$310 $320

Member pays 25% of the next

$2,520

(25% = $630)

$2,530

(25% = $632.50)

$2610
(25% = $652.50)

$2645
(25%=$661.25)

$2,540
(25%=$635)
$2,640
(25%=$660)

Initial Benefit Period Maximum

(what the member AND the plan have spent)

$2,830

($310 + $2,520)

$2,840

($310 + $2,530)

$2,930
($320 + $2,610)

$2,970
($325 + $2645)

$2,850
($310+$2540)
$2,960
($320+$2,640)

DONUT HOLE

Member pays 100% of the next

("TrOOP")

$3,610

(starting in 2010, $250 rebate)

$3,607.50*

(Starting in 2011 prices are discounted, see below)

$3725.50
(brand discount 50%, Generic discount 14%)

$3763.75
(brand discount 52.5%, Generic discount 21%)

$3,605 $3,720

Catastrophic Coverage

Begins when member (NOT plan) has spent a total of…

$4,550

($310 +

$630 + $3,610)

$4,550

($310 + $632.50 + $3,607.50

$4,700
($320 + $652.50 + $3,725.50)

$4750
($325 + $661.25 + $3763.75)

$4,550
($310 + $635 + $3,605)

$4,700
($320 + $660 + $3,720)

Cost sharing during Catastrophic Coverage

$2.50/$6.30

or 5% (whichever is greater)

$2.50/$6.30

or 5% (whichever is greater)

$2.60/$6.50

or 5% (whichever is greater)

$2.65/$6.60

or 5% (whichever is greater)

$2.55/$6.35
or
5% (whichever is greater)

$2.65/$6.60

or 5% (whichever is greater)

Alternatives to the Standard Benefit

Most plans do not follow the defined Standard Benefit (DS) model. Medicare law allows plans to offer actuarially equivalent or enhanced plans. While structured differently, these alternative plans cannot impose a higher deductible or higher initial coverage limits or out-of-pocket thresholds. The value of benefits in an actuarially equivalent plan must be at least as valuable as the Standard Benefit.

CMS distinguishes two types of actuarially equivalent plans:

  • Actuarially Equivalent (AE) plans – have the same deductible as the standard benefit but have different cost-sharing. Instead of a flat 25 % co-insurance during the Initial Coverage Period, they may employ a system of tiered co-payments on groups of drugs.

  • Basic Alternative (BA) plans – have a smaller deductible, with or without different cost sharing, such as tiered cost sharing.

In addition, Enhanced Plans (EA) offer a benefit package more generous than the Standard Benefit. Most typically, they include coverage of some drugs during the Donut Hole. 

Income-Related Monthly Adjustment Amount (IRMAA) – Part D

Medicare Part D beneficiaries with higher incomes pay higher Medicare Part D premiums based on their income, similar to higher Part B premiums already paid by this group.  The premium adjustment is called the Income-Related Monthly Adjustment Amount (IRMAA).  The IRMAA is not based on the specific premium of the beneficiary's plan, but is rather a set amount per income-level that is based on the national base beneficiary premium (the national base beneficiary premium is recalculated annually; for 2015 it is $33.13).  In effect, the IRMAA is a second premium paid to Social Security, in addition to the monthly Part D premium already being paid to the plan.

The IRMAA is withheld from an individual's monthly Social Security payment, even if the beneficiary otherwise makes premium payments directly to the plan.  If the beneficiary is not receiving Social Security, or if the Social Security payment is insufficient to cover the IRMAA, the beneficiary will be billed by Social Security for the IRMAA.

While 2015 income thresholds remain the same as 2014, the IRMAA is up slightly in 2015 because of a small increase in the national base beneficiary premium this year.  Single Medicare beneficiaries whose modified income is less than $85,000, and couples whose modified income is less than $170,000, do not pay an IRMAA.  The following table shows IRMAA rates by income level for 2015.

Single Filers

Joint Returns

2013 IRMAA

2014 IRMAA 2015 IRMAA

≤ $85,000

≤ $170,000

$0

$0 $0

≥$85,000 and ≤ $107,000

≥$170,000 and ≤ $214,000

$11.60

$12.10 $12.30

≥$107,000 and ≤ $160,000

≥$214,000 and ≤ $320,000

$29.90

$31.10 $31.80

≥$160,000 and ≤ $214,000

≥$320,000 and ≤ $428,000

$48.30

$50.20 $51.30

≥$214,000

≥$428,000

$66.60

$69.30 $70.80
Drug Tiers

Instead of the flat 25% co-pay during the Initial Coverage Period in standard benefit plans, alternative and enhanced plans may instead employ a system of tiered cost sharing. In a tiered model, various drugs are assigned to different drug tiers and will cost more or less than other drugs depending upon their tier placement. Cost sharing in various tiers may take the form of co-pays (a flat dollar amount), or co-insurance (a percentage of costs).

When Part D began in 2006, drug tiers were fairly straightforward. That is: generic drugs were the least expensive at Tier 1; "preferred" brand name drugs were more expensive at Tier 2; non-preferred brand name drugs were still more expensive at Tier 3, and specialty drugs were at Tier 4. For example, cost sharing might appear as follows:

Tier 1

Tier 2

Tier 3

Tier 4

Generics

"Preferred"
brand name drugs

"non-preferred"
brand name drugs

Specialty drugs
and injectables

$5

$25

$65

33%

Since 2006, however, plans have taken advantage of their ability to define their own tiers. Some plans have four tiers while others now have five or even six. The placement of drugs within tiers also varies among plans. For example, the same generic may be a Tier 1 drug in one plan, a Tier 2 drug in another plan, and a Tier 3 drug in yet another plan. Adding to the confusion, some plans make tier distinctions between "value" and "regular" generics, and may further classify (and price accordingly) "value," "preferred," and "non-preferred" brand name and generic drugs. 

This lack of standardization among the tiered plans means that it is virtually impossible to compare plans and Part D cost-sharing without the use of CMS’s on-line Plan Finder tool. While the Plan Finder is relatively easy to use, Medicare beneficiaries who lack confidence in their computer skills should ask family, friends, their local pharmacy, or their area SHIP agency to help them compare plans on the Plan Finder.

The Donut Hole

The Donut Hole is a gap in coverage common to Standard, Alternative and Enhanced Plans. Unless their plan offers some coverage during the gap, beneficiaries will pay 100% for drugs during the Donut Hole (subject to a discount beginning in 2011 – see below). They will continue to pay out-of-pocket until their total expenditures (deductible co-pays and costs during the Donut Hole) meet the out-of-pocket threshold ($4,700 in 2015).

While a few plans offer coverage of drugs during the Donut Hole, such coverage is generally limited to generics. Few plans cover brand name drugs during this period. Further, co-pays for drugs covered during the Donut Hole may be higher than they are in the Initial Coverage Period.

"TrOOP"

Once beneficiaries reach their out-of pocket threshold (their "true out-of-pocket" (TrOOP) costs), they move out of the Donut Hole and into Catastrophic Coverage.

The only expenses that count toward TrOOP are formulary drugs purchased by the member, the member’s family, charity, an SPAP or ADAP program, the Indian Health Service, or the Part D LIS ("Extra Help").

Payments for premiums, non-formulary drugs (unless approved by exception or appeal), drugs purchased outside the US, and drugs paid for by other insurance do not count toward TrOOP.

The member’s Part D plan keeps track of TrOOP expenditures so it can determine when the member qualifies for Catastrophic Coverage. Therefore, in order to get credit for their drug costs during the Donut Hole, it is imperative that members use plan network pharmacies and show the pharmacy their plan membership card.

EOBs

Plans are required to send their members an Explanation of Benefits (EOB) for every month that the member uses plan services. The EOB shows what the member, the plan, and others paid for drugs during the period. The EOB also tells the member what stage of coverage he/she is in, and how much more the member needs to spend to move to the next stage of coverage.

For some individuals, drug costs during the Donut Hole present an extreme financial hardship. In some cases, a single medication may costs hundreds, even thousands, of dollars. Paying for such an expensive drug during the Donut Hole will help move the member toward eligibility for Catastrophic Coverage. However, coming up with this amount of money all at once – even for a critical medication – may be impossible for some people. This not-uncommon scenario means that some people simply do not take their medications during the Donut Hole.

There are programs to help people with their Part D costs, including some that provide coverage during the Donut Hole. The Part D Low Income Subsidy (LIS) is one such. Medicare Savings Programs (MSP) or State Pharmacy Assistance Programs (SPAPs) may also provide assistance and generally have more generous income and asset limits than the LIS. Other sources of help include pharmacy discount cards, drug manufacturer Patient Assistance Programs (PAPs), and insurance company discount programs. For a complete listing of many drug assistance programs see our article "Finding Help to Get Prescription Drugs."

The Donut Hole Discount

The Donut Hole will gradually be phased out between 2010 and 2020. In the first phase, eligible individuals who reached the Donut hole in 2010 received a one-time $250 rebate check.

 

In subsequent years, gradually increasing discounts will be applied to brand name and generic drugs.  By 2010, members will be paying a flat 25% for all drugs.

 

Donut Hole Drug Discounts by Year, 2010-2015
 

  2011 2012 2013 2014 2015
brand name discount 50% 50% 52.5% 52.5% 55%
generic discount 7% 14% 21% 28% 35%

 

The discounts will be given right at the pharmacy – members will not have to fill out forms or do anything to get the discount. Members will have to pay a small dispensing fee (cost to the pharmacy for filling the drug), which will not be discounted.

 

The full amount (negotiated price) of brand name drugs (not the discounted amount paid by the member), will count toward TrOOP. This means members will not need to spend as much to get out of the Donut Hole. For generic drugs, only the actual amount paid for the drug will be applied toward TrOOP.

 

People on the Part D Low Income Subsidy (LIS) are not eligible for the $250 rebate or the discounts because they already have very low cost sharing during the Donut Hole. But people enrolled in an SPAP (State Pharmaceutical Assistance Program) ARE eligible for the rebate and discount.

 

The discount is only available if the drug’s manufacturer has signed an agreement to participate in the Discount Program. Drugs sold by manufacturers who do not sign an agreement will not be covered under Part D and cannot be requested by exception.

 

The discount is only available if Medicare Part D is the primary payer. If there is secondary insurance (such as SPAP), it will pay after the Part D discount has been applied. If the plan already offers coverage during the Donut Hole, the discount will be applied to the price of the drug the member would pay under the plan’s Donut Hole coverage.

 

If the prescription crosses Part D stages of coverage, i.e., a "straddle claim," the discount will only apply to the portion of the drug that is in the Donut Hole.

Straddle Claims

Whether in a standard, alternative or enhanced plan, with each purchase of formulary prescription drugs during the plan year (calendar year), plan members move through the four stages of Part D coverage: the Deductible Period, the Initial Coverage Period, the Donut Hole, and Catastrophic Coverage. Beneficiaries experience different cost sharing as they move through these stages. A "straddle" claim occurs when a prescription drug crosses multiple stages of the benefit. For example, the member may have $400 left in the Initial Coverage Period but needs a brand-name drug that costs $500. His claim, therefore, "straddles" the Initial Coverage Period and the Donut Hole.  The plan will "prorate" the claim accordingly. In the example above, the first $400 is subject to a 25% co-pay (assuming the member is in a standard plan), and the member pays 47.5% of the $100 balance.

Calculating what the beneficiary owes is complicated and trickier still when the plan has tiered co-pays instead of the standard benefit. a more detailed discussion of straddle claims, see Part Covered, Part Not: "Straddle Claims" in Medicare Part D.

(additional information: http://www.medicareadvocacy.org/InfoByTopic/Reform/10_06.10.DonutHole.htm)

(additional information:http://www.medicareadvocacy.org/InfoByTopic/PartDandPrescDrugs/
PartD_08_07.24.StraddleClaims.htm)

Enrollment

For most people, enrollment in Part D is voluntary. Most people need to select and enroll in a plan in order to have coverage. There are several Part D enrollment periods.

  • Initial Enrollment Period (IEP) – People can enroll during the 7-month period surrounding their 65th birthday. For example: the three months before, the month of, and the three months after their birth month. (Note: this IEP is the same as for Part A and Part B.) People who become eligible for Medicare because of a disability have an IEP that begins the month they are notified of Medicare entitlement and continues for three months after. A second 7-month IEP is available for people who already have Medicare because of a disability and who turn 65.

  • Annual Coordinated Election Period (AEP) [also called the Annual Election Period] – During the AEP, people can join or change their PDP.The AEP runs from October 15 to December 7 of every year, for coverage beginning the following January 1. (Pior to 2011, the AEP ran from November 15 – December 31). Members are "locked in" to their chosen plan for the rest of the calendar year and cannot change plans unless they qualify for a Special Enrollment Period).
    (additional information: http://www.medicareadvocacy.org/InfoByTopic/MedicareSummaryAndGeneralInfo/10_11.18.AnnualEnrollment.htm)

  • Initial Coverage Election Period (ICEP) – During the ICEP people can join or change their MA-PD. The ICEP runs from October 15 to December 7 every year, for coverage on January 1 of the following year. (Previously, the ICEP ran from November 15 – December 31, like the AEP.) Members are "locked in" to their chosen plan for the rest of the calendar year unless they opt for the Medicare Advantage Disenrollment Period (MAPD) or qualify for a Special Enrollment Period (SEP).

  • Medicare Advantage Disenrollment Period (MADP) – During the MADP, which runs from January 1 to February 14 of every year, people enrolled in a Medicare Advantage plan (MA-only or MA-PD) can disenroll from Medicare Advantage, re-join original Medicare, and enroll in a PDP for drug coverage. (People cannot just change their PDP or join a differnt MA plan during this period.) If the MADP election is taken in January, the new coverage will be effective February 1. If the election is taken in February, the new coverage will begin on March 1.

  • NOTE that the MADP was new in 2011 and replaced the former Open Enrollment Period (OEP), which ran from January 1 to March 15 and allowed people in Medicare Advantage plans to switch to another Medicare Advantage plan or return to original Medicare, provided they did not add or drop prescription drug coverage during this period. (additional information: http://www.medicareadvocacy.org/InfoByTopic/MedicareAdvantageAndHMOs/11_01.06.MADP.htm)

  • General Enrollment Period (application to Part D) – People who enroll in Medicare Part B (whether or not they have Part A) during the Part B General Enrollment Period (January 1 – March 31), may enroll in Part D between April 1 – June 30, with coverage beginning July 1.

 

Involuntary Disenrollment

 

Members can be involuntarily disenrolled from a plan if the plan terminates, or the member loses eligibility for Part D, moves from the plan’s service area, engages in behavior that makes it difficult for the plan to provide services, or fails to pay premiums timely. Note that the plan cannot terminate a member for non-payment of premiums if premiums are being withheld from Social Security. Plans must also provide a two-month grace period before terminating a member for non-payment. The notice period begins when the plan notifies the member that payment is due.

 

Exceptions to Voluntary Enrollment

 

Enrollment in Part D is generally voluntary, however, some people are required to enrolled, and others should not enroll.

  • People who have Medicare and who receive assistance under certain federal programs (Medicaid, Medicare Savings Programs, SSI or the Part D Low Income Subsidy) are required to enroll. If they do not self-enroll, Medicare will automatically enroll them in a plan. People enrolled in their state’s State Pharmacy Assistance Program (SPAP) are also required to enroll.

  • People who have "creditable" prescription drug coverage (coverage that is as good as or better than Part D) are not required to enroll and are often better off in their private plans than under Part D. They should not consider enrolling in Part D without consulting with their current plan Benefits Administrator.

Non-LIS eligibles who do not have creditable coverage, and who do not enroll in Part D when they are first eligible to do so, may have a Late Enrollment Penalty and may have to wait up to 12 months to enroll in a plan.

Creditable Coverage

Creditable coverage is prescription drug coverage that is as actuarially as good as, or better than, Part D coverage. All insurers are required to notify their Medicare-eligible members of their plan’s creditable coverage status every year. This notice must be in writing and it must be received before September 30.

Examples of creditable coverage include TriCare (coverage for military members and their families), Veteran’s (VA) benefits, and Federal employee group health insurance. Many Medigap policies that offer prescription drug coverage are not creditable. Individuals with Medigap policies should check with their plans.

Individuals who have creditable coverage are not required to enroll in Part D and may not find it to their advantage to do so. This is because they may lose the hospital and medical coverage if they enroll in Part D. They should check with their plan’s Benefit Administrator before deciding to enroll in Part D.

Individuals who involuntarily lose creditable coverage are entitled to a Special Enrollment Period. They have 63 days in which to enroll in a Part D plan.  Non-payment of premium is NOT considered involuntary loss.

NOTE: Individuals who do not receive a notice or creditable coverage, or who receive an incorrect notice, may qualify for a SEP that allows them to enroll in Part D outside the AEP. Complaints regarding lack of or inadequate notice should be reported to 1-800-MEDICARE.

The Late Enrollment Penalty (LEP)

Unless exempt, there is a penalty for not enrolling in Part D when first eligible to do so. Those exempt from the penalty include individuals who:

  • Had creditable coverage, or

  • Qualify for the LIS, or

  • Are eligible for a Special Enrollment Period because they were impacted by Hurricanes Katrina, Wilma or Rita

The penalty is 1% of the national base monthly premium ($33.13 in 2015) for every full month the individual could have been but was not enrolled. The base calculation changes yearly, based on the average national base premium amount. The LEP cannot go back farther than June 2006.

CMS calculates the penalty amount, which is collected by the Part D plan. The penalty is a "lifetime" penalty and is added to the person’s monthly premium. Note, however, that if a penalty is imposed before the individual is 65, the slate is "wiped clean" when she/he turns 65.

2014 LEP Examples: Mr. D. was eligible to enroll in January 2013 but did not enroll until January 2014. Assuming he is not exempt, he will incur a 12-month (12%) penalty. Using a base calculation of $32.42, his penalty is .01 x $32.42 x 12 (months) = $3.89 monthly penalty. Assuming he is over 65, this amount will be added to his monthly Part D premium for life.

If Mr. D had been eligible to enroll when Part D began in January 2006, and does not enroll until January 2014, his penalty will be calculated from June 2006 through December 2011. His penalty will be 55 months, or 1% x $32.42 x 55 (months) = $29.50 per month.

There is a process to request reconsideration if a late enrollment penalty appears to be imposed in error. Medicare contracts with an independent review entity (Maximus) to conduct these reconsiderations and the decision is final. The penalty must be paid during the time the penalty is being reconsidered, which can take many months. If reconsideration is granted, the beneficiary will be reimbursed for erroneous penalty charges assessed.

Special Enrollment Periods

Special Enrollment Periods allow people to enroll, disenroll or change plans outside the AEP, the ICEP and the MADP. The most commonly available are listed here. All SEPs require CMS approval, some on a case-by-case basis.

SEP Type

Who Qualifies

Effective date/length of SEP

All LIS Eligibles

Anyone eligible for the Part D Low Income Subsidy (LIS) may change plans at any time. This includes full benefit dual eligibles, people on a Medicare Savings Program (MSP), i.e., partial duals, people on SSI with Medicare, and people on LIS only.

The plan change is effective the first of the month following the month of change. This effectively limits this SEP to twelve times per year.

Loss of Medicaid Eligibility

Applies to people who lose eligibility as a full or partial dual eligible.

Two months after the month of notification

Loss of LIS Eligibility

(1) Applies to non-dual eligibles that lose LIS because they are deemed ineligible for the following year.

(2) Also applies to people who lose LIS eligibility during the year.

(1)Have a SEP from January through March. (2) Two months, including the month they are notified.

Institutionalized

Applies to people who move into, live in, or move out of an institution such as a long term care facility (NF or SNF), an intermediate care facility for the mentally retarded (ICF-MR), a psychiatric, rehabilitation hospital or unit, or long term care hospital, or a "swing-bed" hospital. It does not apply to people in acute care hospitals.

Lasts as long as the person lives in the institution and for two months following discharge.

Change of residence

This SEP includes people who: make a permanent move outside their plan’s service area; have a new plan choice available to them as a result of their move within the plan’s service area; move back to the US after living outside the country; and people who were released after a period of incarceration

Two months from the date the person notifies the plan, or returns to the US, or is released from jail. Onset is later if the person does not notify the plan, and the plan learns of the move through CMS or the Post Office.

SPAP

People who belong to a State Pharmaceutical Assistance Program (SPAP)

May make one change during the calendar year.

Involuntary loss of creditable coverage

The person involuntarily loses creditable coverage, i.e., coverage that is as good as Medicare Part D coverage. (Note that failure to pay premiums does not constitute involuntary loss.) Also includes changes to other coverage such that it is no longer creditable.

May enroll in Part D two months from the loss of creditable coverage, or notification of the loss, whichever is later.

Not accurately informed of creditable coverage

Applies to people who were misinformed of their existing plan’s creditable coverage status, by an entity required to provide such notice.

Case-by-case basis.

Enroll in or maintain other creditable coverage

Such as VA or TriCare. (But note that it is permissible to have both Part D and VA or TriCare concurrently.)

May disenroll from Part D anytime.

EGHP (Employer Group Health Plan)

(1) Applies to people who wish to leave employer or union coverage, including COBRA, or

(2) Applies to people who wish to disenroll from Part D to take employer or union sponsored of any kind.

(1) SEP to join a Part D plan lasts for two full months after employer/union/COBRA coverage ends.

(2) During the EGHP’s "open season" or at other times that the employer or union allows.

SEP related to Special Needs Plans (SNPs)

(1) Applies to people who have a severe or disabling condition, and wish to join a SNP that serves people with that condition, or

(2) Enrolled in a SNP and no longer have the condition that qualifies as a special need.

(1) Anytime, but limited to one opportunity only

(2) Up to 3 months after the SNP’s grace period ends.

SEP "65"

Applies to people who enroll in a Medicare Advantage plan during the ICEP surrounding their 65th birthday, and who wish to return to original Medicare and join a PDP

Anytime during the 12-month period following their enrollment in the MA plan.

SEP related to dropped Medigap policy

Applies to people who dropped a Medigap policy the first time they enrolled in a Medicare Advantage plan, and who wish to return to original Medicare and join a PDP.

Anytime during the 12-month period following their enrollment in the MA plan. Also have a guaranteed right to purchase another Medigap policy, provided they are still in 12-month trial period.

Marketing Fraud and contract violations.

A person’s enrollment in an MA-PD or PFFS plan is based on false or misleading marketing materials or agent behavior. May disenroll from existing plan and join a different MA-PD, or return to original Medicare and join a PDP

SEP begins when CMS determines that a violation has taken place. SEP may continue up to 90 days. CMS may allow retroactive disenrollment/enrollment.

SEPs related to PACE (Program of All-Inclusive Care for the Elderly)

(1) May disenroll from Part D to join a PACE plan, or

(2) May disenroll from a PACE plan to enroll in Part D

(1) Anytime

(2) Up to 2 months after the month of PACE disenrollment.

SEP related to Medicare Cost Plan

Applies to people who wish to disenroll from their Medicare Cost Plan

Two full months after the month of disenrollment from the Medicare Cost Plan

Error by Federal Employee

Applies to people who elected not to enroll in Part D, or who erroneously enrolled in a Part D plan, due to an error by a Federal employee

May change coverage for 2 full months following receipt of notice of error from Medicare.

Retroactive Medicaid entitlement

Person is granted full dual status (Medicaid) with retroactive uncovered months.

The PDP is required to make the enrollment retroactive to prevent gaps in coverage.

CMS plan sanctions

Plan member is affected by a problem that caused CMS to officially sanction the plan.

May change plans, determined on a case-by-case basis. CMS may allow retroactive disenrollment

CMS terminates plan contract

The person is enrolled in a plan whose contract is terminated by CMS, or whose contracted is terminated by mutual consent.

Plan must give members 60 days notice. May switch plans until one full month after the plan’s contract ends.

Plan Non-Renewals

Plan’s contract is not renewed, effective January 1

Plan must give members 90 days notice. SEP to enroll in another plan begins October 1 and ends January 31 of the following year

"5-Star" SEP Persons enrolled in a PDP, an MA or MA-PD plan, or not in any plan but eligible to enroll in Medicare may join or change to a 5-star PDP or MA-PD one time during the year (even if existing plan is 5 stars). Beginning 12/8/2011.  Coverage begins the first of the month following the month of enrollment.
SEP to leave a consistently low-rated PDP or MA-PD CMS will notify individuals if their current PDP or MA-PD has failed to achieve a 3-Star rating for three straight years. Members may switch to any 4- or 5-Star plan.
Must go through 1-800-MEDICARE to switch.

(additional information:http://www.medicareadvocacy.org/InfoByTopic/MedicareAdvantageAndHMOs/10_11.04.NonRenewal.htm)

How to Enroll, Payment of Premiums, and Other Enrollment Miscellany

CMS (Medicare) plays a central role in Part D enrollment and actual enrollment in a plan is not complete without CMS approval. Enrollment may be accomplished by calling the plan directly, calling 1-800-MEDICARE, contacting the area SHIP agency, or using the on-line Plan Finder tool at www.medicare.gov.

Premiums may be paid directly to the plan, deducted from Social Security, or deduction from a bank account (EFT). Members who wish to change their method of payment during the year should contact their plan to make the change but the byword in this exchange is "patience." Some changes, such as going from Social Security withholding to "direct pay" status, may take up to three months. Any change that has not been processed within three months should be reported to 1-800-MEDICARE.

Individuals may not belong to more than one Part D plan at a time. In fact, enrollment in one plan automatically cancels out enrollment in the previous plan. For this reason, beneficiaries who want to switch plans need only enroll in their desired plan. Medicare will cancel out their enrollment in their old plan.

Note that individuals who wish to remain with their existing plan from one year to the next need do nothing. Their enrollment will automatically "roll over" into the next year.

Evidence of Coverage (EOCs)

Shortly after enrolling in a plan, new members should receive a member card and a contract called the Evidence of Coverage (EOC). The EOC explains the member’s benefits under the plan, how to access member services such as mail order (if it is offered), and how to access the plan’s grievance and appeal processes.

Along with the EOC, the member should receive at least an abridged copy of the plan’s formulary and information how to obtain or access the complete formulary. The formulary will show not only what drugs are covered by the plan but what restrictions may apply to some of those drugs (such as prior authorization, quantity limits and step therapy).

Returning members (those staying with the plan for another year) should also receive an EOC and a copy of the plan’s formulary by September 30th each year.

NOTE: Complaints that a plan has not fulfilled its contract as described in the EOC should be reported to 1-800-MEDICARE.

Annual Notice of Change (ANOCs)

All plans need to send their existing members an Annual Notice of Change (ANOC) by September 30 each year. The ANOC informs members how their plan will change in the coming year, including any changes that may be made to the formulary.

October 15 marks the beginning of the Annual Election Period (AEP) when people can join or change their Part D plans. People need to read the ANOC carefully to decide if they should remain in their existing plan or look for another during the AEP.

People should not assume that their existing plan will meet their needs or remain an appropriate choice in subsequent years. This is because plans make changes to their costs and coverage every year. It is not unexpected for costs to increase, but people may not realize that plans can also remove drugs from their formularies, or change the pricing of certain drugs, or impose utilization management restrictions (such as prior authorization, quantity limits and step therapy) on their drugs in the next year.

The ANOC is so important that a plan’s failure to send the ANOC timely is grounds for a Special Enrollment Period (SEP) that will allow the member to change plans outside the normal enrollment periods. Complaints that a plan has not sent the ANOC by the date above should be reported to Medicare.

THE MEDICARE SAVINGS PROGRAMS

Medicare Savings Programs help low income individuals to pay for their Medicare Part A and/or Part B co-pays and deductibles. There are four Medicare Savings programs, all of which are administered by state Medicaid agencies and are funded jointly by states and the federal governments. Participants in these programs are sometimes called "partial dual eligibles." Individuals who qualify for a Medicare Savings program automatically qualify for the Part D Low Income Subsidy (LIS), which is also known as "Extra Help." The LIS helps qualified individuals pay their Part D expenses, including monthly premiums, co-pays and co-insurance. The LIS also covers people during the deductible period and the gap in coverage called the "Donut Hole."

The LIS The four Medicare Savings Programs are:

  • QMB (Qualified Medicare Beneficiary) – Eligible individuals have countable income up to 100% of the Federal Poverty Level (FPL) and countable assets not exceeding $6,600 for an individual and $9,910 for couples. QMB covers all Medicare Part A and B co-pays and deductibles, as long as the recipient uses Medicaid-enrolled providers. (In some areas this is a significant bar to access as it may be difficult to find providers who accept Medicaid.) Note that the program also pays the Medicare Part A premium for those individuals who do not qualify for free Part A.  For individuals who use Medicaid-enrolled providers, the QMB program is equivalent to having a Medigap (Medicare Supplement) policy, often saving them hundreds of dollars each month.  Note that Medicare providers may not bill QMB members for the 20% part B co-pay.

  • SLMB (Specified Low-Income Medicare Beneficiary) – Eligible individuals have countable income up to 120% of the FPL and countable assets not exceeding $6,600 for an individual and $9,910 for couples. SLMB pays the Medicare Part B premium, thereby increasing recipient’s spendable income each month.

  • QI/ALMB (Qualified Individual, a/k/a Additional Low-Income Medicare Beneficiary) – Eligible individuals have countable income up to 135% of the FPL and countable assets not exceeding $6,600 for an individual and $9,910 for couples. Like SLMB, QI/ALMB pays the monthly Part B premium. Unlike SLMB, which is an entitlement program, QI/ALMB is subject to renewed federal funding each year.

  • QDWI (Qualified Disabled and Working Individuals) – This program pays the Medicare Part A premium for disabled individuals who have lost their Part A benefits because they returned to work. Eligible individuals may have countable income up to 200% for the FPL and countable assets not exceeding $4,000 for an individual and $6,000 for a couple. They must be eligible to purchase Part A and may not be covered by Medicaid.

NOTE: Calculation of applied income and assets follow SSI rules, but some states liberalize these rules for their residents. For example, some states have raised or eliminated the asset test and have significantly increased unearned income disregards as a means of effectively raising program income limits. Interested individuals should contact their state Medicaid agency for more information and applications.

THE LOW INCOME SUBSIDY

 

The Low Income Subsidy ("LIS"), also known as "Extra Help," is administered by the Social Security Administration (SSA) and helps qualified individuals pay their Part D expenses, including monthly premiums, co-pays and co-insurance. The LIS also covers people during the deductible period and the gap in coverage called the "Donut Hole."

 

Deemed and Undeemed Eligibles

 

Some people automatically qualify for the LIS and do not have to apply for the program, regardless of their income or asset levels. This "deemed" group includes:

 

• Full Dual eligibles (people on Medicare and full Medicaid)

• Partial duals (people on a Medicare Savings Program: QMB, SLMB and QI)

• SSI recipients who have Medicare but not Medicaid.

 

Other individuals (the "undeemed") may qualify if their income and assets are within LIS program limits. Note that income and asset rules were relaxed, making it easier to qualify for assistance, in 2011. Calculation of income and assets follow SSI rules.

 

Full and Partial Subsidies

 

There are "full subsidies" and "partial subsidies."

 

• A full subsidy means the monthly Part D premium is paid in full if the individual enrolls in a "benchmark" plan. A benchmark plan is a PDP that offers basic (rather than enhanced) coverage and has a premium below the monthly regional benchmark threshold (scroll to page 2 of the link).

• A partial subsidy means the individual’s premium obligation will be calculated on a sliding scale. The LIS will pay 25%, 50% or 75% of the regional benchmark threshold, depending on income level.

• Both full and partial subsidies offer cost sharing assistance for the part D deductible, low co-pays for drugs, coverage during the Donut Hole, and reduced co-pays for drugs during the Catastrophic Coverage Period.

• All LIS beneficiaries who wish to enroll in an enhanced (rather than benchmark) plan may do so, provided they pay the excess premium out-of-pocket.

 

LIS Eligibility and Cost-Sharing, 2015

 

 

Annual Income Limit

Asset
(Resource) Limit

LIS Eligibility

LIS Type

Monthly Premium Paid

(up to benchmark)

Annual Deductible

Co-Pays
Initial Coverage Period

Co-pays
Donut Hole

Co-Pays Catastrophic Coverage

Dual Eligible in Institution or on HCBS waiver

N/A

N/A

Deemed

Full Subsidy

$0

$0

$0

$0

$0

Dual Eligible in Community

Income up to 100% FPL

N/A

N/A

Deemed

Full Subsidy

$0

$0

$1.20 /*

$3.60

$1.20 /*

$3.60

$0

Dual Eligible in Community

Over 100% FPL

N/A

N/A

Deemed

Full Subsidy

$0

$0

$2.65/*

$6.60

$2.65*

$6.60

$0

On SSI or Medicare Savings Program

N/A

N/A

Deemed

Full subsidy

$0

$0

$2.65

$6.60

$2.65

$6.60

$0

All others

Up to 135% FPL

$8,580 (s)

$13,620 (c)

Undeemed

Full Subsidy

$0

$0

$2.65

$6.60

$2.65

$6.60

$0

All others

Up to 150% FPL

$13,300 (s)

$26,580 (c)

Undeemed

Partial Subsidy

Sliding scale

$66

15%

15%

$2.55

$6.35

* Duals in CT pay only the first $15/month in co-pays; DSS pays for rest of month

Once granted, the LIS continues for a year. This provision is extremely helpful to dual eligibles that go on a Medicaid "spenddown" sometime during the year. While the spenddown causes them to lose full dual status, they continue to get prescription drugs at low cost due to the continuing LIS cost sharing.

 

SSA redetermines eligibility for the LIS every year. A portion of the universe of undeemed individuals is selected for redetermination every August. Individuals deemed eligible for the LIS between January 1 and June 30 are deemed eligible for the rest of the year. Individuals deemed eligible between July 1 and December 31 are deemed eligible for the rest of the year and all of the following calendar year. Notices of eligibility (if the subsidy is reduced or terminated) go out in the fall. No notice is sent to those who remain eligible at the same subsidy level for the following year.

 

Dual-Eligibles and Other LIS Eligibles

 

Until 2006, when Part D began, full benefit duals in most states received prescription drug coverage through their state’s Medicaid programs. Since the advent of Part D, prescription drug coverage for full benefit duals is now provided by private Medicare Part D plans. (Some states continue to provide coverage of Part D excluded drugs for their dual eligibles.)

 

Auto-Enrollment of Duals

 

To ensure that duals do not "slip though the cracks," those that fail to enroll in a Part D plan on their own are auto-enrolled by Medicare. To ensure that full benefit duals are able to afford Part D costs, they are also deemed eligible for the Part D Low Income Subsidy, which covers premiums (in full if the person is enrolled in a benchmark plan), deductibles and co-pays, and provides coverage during the Donut Hole.

 

Prescription drug plans that offer basic (vs. "enhanced") coverage, and have a monthly premium set below each state’s regional benchmark thresholds, are referred to as "benchmark" plans. Full benefit duals (and all other LIS-eligibles) are encouraged to enroll in benchmark plans, but they may enroll in non-benchmark plans if they pay the premium in excess of the benchmark threshold. Often, benchmark plans have less robust formularies than non-benchmark, and it may be worthwhile for the beneficiary to pay the excess premium out-of-pocket to obtain the drugs s/he needs. Dual eligibles (and all other LIS-eligibles) have a continuous SEP that allows them to enroll in more compatible plans at any time. Enrollment in the new plan is effective the first day of the month following the month of enrollment.

 

Newly granted duals are created when Medicaid recipients become eligible for Medicare. To ensure that newly granted dual eligibles have Part D coverage, states forward twice monthly electronic data files to CMS. These files identify individuals who will be eligible for Medicare within 3 months by virtue of reaching their 65th birthday or their 24th month of disability. CMS then enrolls these individuals to the temporary LINET plan, pending their ultimate prospective random assignment to a benchmark plan (in about two months time). Coverage in Part D is retroactive to the effective the date of Medicare entitlement. The process of enrolling full dual eligibles in a Part D plan is called auto-enrollment.

 

Newly granted duals are also created if a Medicare beneficiary becomes eligible for Medicaid. In these cases, the person may already have a Part D plan, which needs to update the individual’s status as an LIS-eligible through the presentation of Best Available Evidence (BAE).

Facilitated Enrollment

Other LIS eligibles include individuals on a Medicare Savings Program, or SSI (with Medicare but not Medicaid), or "undeemed" eligibles who qualify because they meet LIS income and asset requirements. LIS-eligibles who do not choose a Part D plan on their own are also enrolled into a plan by Medicare. Unlike full duals who are enrolled in a temporary plan (LINET) and then are randomly assigned to benchmark plans), other LIS eligibles are enrolled directly into a benchmark plan through the random assignment process. This is called facilitated enrollment.

Point of Sale (POS) Enrollment

LIS eligible individuals should be auto-enrolled or facilitated enrolled into a Part D plan of they do not select a plan on their own. These processes generally work very well. However, if an LIS-eligible individual presents him/herself at the pharmacy without a Part D plan, there is the Point of Sale (POS) process administered by LINET.

If the pharmacy has reasonable assurance that the individual qualifies for the LIS, and has no other prescription drug coverage, the pharmacy can immediately fill the prescription(s) and bill the claim to LINET. The pharmacy can confirm LIS eligibility through an on-line query or may accept other reasonable documentation, such as (but not limited to) a Medicaid card, an LIS award letter. Individuals and advocates may telephone LINET if there are questions about the person’s eligibility for LIS.

LINET (Low Income Newly Eligible Transition Program)

LINET is a CMS Part D program, administered by Humana, which began on January 1, 2010. LINET administers the Point of Sale enrollment process for LIS eligibles that are not enrolled in a Part D plan. LINET also acts as a temporary plan for newly enrolled full dual eligibles, and provides reimbursement to individuals who have retroactive Medicare prescription drug coverage. LINET has an open formulary, with no utilization management restrictions on any drugs, and no pharmacy network restrictions.

(additional information: http://www.medicareadvocacy.org/InfoByTopic/
PartDandPrescDrugs/PartD_09_12.24.LINET.htm)

SPAP Programs

State Pharmacy Assistance Programs are state-funded prescription drug assistance programs for the elderly and/or disabled. Program rules, income and asset limits, and program benefits vary by state.  Federal law allows SPAPs to "wrap around" Part D coverage by filling in Part D program gaps. SPAPs may provide co-pay assistance, coverage during the Part D Donut Hole, and coverage of non-formulary and/or excluded drugs. Payments made by an SPAP for formulary drugs purchased while the beneficiary is in the Donut Hole count toward TrOOP.

Appeals and Grievances

Coverage Determinations and Exceptions

All Part D plans must have an appeal process through which members can challenge a denial of drug coverage. The Part D appeals process is based on and similar (but not identical) to the Part C appeals process.

Denials of drug coverage by a PDP or MA-PD are called "coverage determinations." For example, a coverage determination may be issued by the plan if the drug is not considered medically necessary or if the drug was obtained from a non-network pharmacy. It is necessary to have a coverage determination (a written denial from the plan) in order to initiate an appeal. A doctor’s supporting statement is not required for this type of appeal, but it may be helpful to submit one. If the request for coverage is denied, the member may proceed to further levels of appeal, including redetermination by the plan, reconsideration by an Independent Review Entity (Maximus), Administrative Law Judge (ALJ) review, the Medicare Appeals Council (MAC), or federal district court.

One type of coverage determination is called an "exception request." An exception request is a coverage determination that requires a medical statement of support in order to proceed to appeal. There are two types of exceptions that may be requested:

Formulary Exceptions – This type of exception is requested because the member:

  • needs a drug that is not on the plan’s formulary, or is removed from the formulary, and other drugs that are on the formulary do not work or are poorly tolerated; or

  • disagrees with the plan’s prior authorization requirement for the particular drug, and thinks it should not apply to him/her;

  • disagrees with the plan’s step-therapy requirement because he/she has already tried and failed the drug(s) the plan wants him/her to take before it will approve a particular drug.

  • requires a strength or dosage that exceeds the plan’s quantity limit for the particular drug.

Members may not request an exception to obtain an excluded drug. Excluded drugs include (but are not limited to) erectile dysfunction drugs, drugs for weight loss or gain and drugs for the symptomatic relief of cough.

Tiering Exceptions – This type of exception is requested because the member asks that a drug he/she is taking be assigned to a lower (preferred) tier – thereby reducing his/her cost sharing – because the drugs on the plan’s higher (non-preferred) would not be as effective or are poorly tolerated. Members may not request that a drug be priced at the generic level if the plan maintains a separate Tier 1 for generics. Further, members may not ask for a tiering exception for high cost and unique genomic and bio-tech products, if the plan maintains a separate tier (Tier 4 or 5) for these drugs. These two caveats essentially mean that member can only ask to receive a Tier 3 (non-preferred) drug and Tier 2 (preferred) prices. Note also that if a member receives a favorable Formulary Exception decision, he/she cannot then ask for a Tiering Exception for the same drug.

If a Formulary or Tiering Exception is denied, the member may proceed to further levels of appeal, including redetermination by the plan, reconsideration by an Independent Review Entity (Maximus), Administrative Law Judge (ALJ) review, the Medicare Appeals Council (MAC), or federal district court.

What to do When a Drug is Denied at the Pharmacy

There are two things a member must do when a drug is denied at the pharmacy.

  • First, the member should contact his/her prescriber. If the drug has been denied because it is not on formulary, the prescriber may believe that a change to a formulary alternative would be equally effective and unlikely to cause negative side effects. In this case, an exception request need not be pursued. If an exception request is necessary, e.g., because there is no viable on-formulary alternative, or because the member needs a dosage in excess of the plan’s quantity limit, the prescriber will need to submit a statement of support to the plan.

  • Second, the member needs to contact the plan to obtain a written denial, or coverage determination, in order to pursue an exception or further levels of appeal. Note that a statement from a pharmacy that the drug will not be covered does not constitute a coverage determination. The decision must come from the plan itself. All network pharmacies are required to post or provide information to members on how to contact their plan to request a coverage determination or ask for an exception.

The Medical Statement

Without support from the prescriber (physician or other provider), the exception will not go forward. The importance of the medical statement of support cannot be overemphasized. Without it, the member may not progress in accordance with the prescriber’s treatment plan and goals. The statement need not be lengthy, but it must be specific as to why the prescribed drug is medically necessary at the prescribed dosage. Diagnosis must be provided. Any adverse reactions to the plan’s preferred drug or dosage level must be documented as to date and specific effects. If the drug is being denied because a step therapy requirement, the statement should indicate which formulary alternatives the member has tried and failed, including dates and length of treatment and the reason the drug failed. At the initial Exception Request and the Redetermination levels, the physician’s statement may be oral or written, but the latter is preferable (and required at later stages of the appeal process). The plan is not required to reverse a decision based simply on the provider’s letter of support; however, the strength of that support will increase the likeliness of a favorable decision. Providers may include case notes, charts, laboratory reports, etc. to strengthen their support.

Time Frames for Exception Requests and Authorized Representatives

The member (or his/her representative, or the prescriber) has 60 days from the date of the plan’s Notice of Denial to request an Exception. The plan has 72 hours (three calendar days) to render a "standard" decision, or 24 hours if an expedited ("fast") decision is requested. The plan must render an expedited decision (in 24 hour or less, based on medical necessity) if the plan determines, or the prescriber statement indicates, that a standard decision would seriously jeopardize the patient’s life or health or ability to regain maximum function. The plan is not required to render an expedited decision if the member has already obtained the medication. The timing of the plan’s decision begins when it receives the prescriber’s documentation.

The member or his/her prescriber (usually a physician) may request an exception. (At higher levels of appeal, the member’s physician cannot file an appeal without being an appointed representative.) A duly appointed conservator or other person named in a health care power of attorney may also apply on behalf of the member. Or the member may appoint anyone he/she chooses to act as a representative. It is usually best and simplest to use CMS Form 1696 to appoint a representative. The form may be downloaded from CMS’s website.

How to File an Exception Request

The plan’s initial Notice of Denial (coverage determination) or Redetermination Decision will provide clear instruction on when, where and how to file the next level of appeal. The plan’s website and 1-800 customer service should also clearly provide this information. The appeal may be mailed or faxed (the latter is preferable in situations requiring an expedited decision). No specific form is required to complete an exception request or redetermination request. A detailed cover letter, accompanied by relevant medical documentation and a signed appointment of representative form, is sufficient. An attorney is not required to submit an exception request, but may be necessary at higher levels of appeal.

If an Exception is Granted

If an exception is granted, coverage is granted back to the earliest date of request for the approved drug. If the member has already paid for the drug, the plan is required to reimburse the member in a timely way. The exception continues for the remainder of the plan year (although the plan may extend approval beyond this period). For example, some drugs may be approved "for life," depending on the member’s diagnosis and condition. The plan may set a specific Tier at which it will place all drugs approved by exception or appeal. A non-formulary drug approved by exception will be considered a formulary drug for purposes of TrOOP.

Other Levels of Appeal

If the exception is denied, the member may go on to further levels of appeal, which are briefly summarized below.

  • Redetermination – This is a secondary review of the decision by the plan itself, using a different set of examiners. The member, prescriber, or authorized representative may file the request. The request may be oral or in writing, although the latter is preferred. Medical support is required. The request must be filed within 60 days of the plan’s notice of denial. This is a paper review, no hearing is held. There are no specific forms required. An attorney is not required. A standard decision must be rendered in 7 days, an expedited decision in 72 hours. Timing begins when the plan receives the medical documentation.

  • Reconsideration – The case is reviewed by an Independent Review Entity. (IRE) Maximus is the IRE contractor. If the plan is not timely in its redetermination decision, it must forward the case to Maximus for review. Otherwise, the member (or authorized representative) must request Reconsideration. The request must be written and submitted within 60 days of the Redetermination decision, but this deadline may be extended for good cause. Again, this is a paper review only. The appellant may submit more medical information than was previously submitted to the plan. An attorney is not required but may be better able to represent the appellant. Instructions on filing for Reconsideration are contained in the plan’s redetermination decision. Maximus must solicit and record the prescriber’s views. A standard decision must be rendered in 7 days, an expedited decision in 72 hours. Timing begins when Maximus receives the provider information.

  • ALJ Review – The case is reviewed by an Administrative Law Judge. Appellants should generally use an attorney at this level and beyond, but it is not required. The amount in controversy (cost of the denied drug projected for a year) must equal at least $150 in 2015. The Office of Medicare Hearings and Appeals (OMHA) provides forms and information on the ALJ process on their website. The request must be in writing and must be submitted within 60 days of the Reconsideration decision. The member may submit additional supporting medical information. Hearings are usually held by video or teleconference. A standard decision is rendered in 90 days but there is also a 10-day provision for expedited decisions.

  • MAC Review – This is a paper review of the case by the Medicare Appeals Council. Filing information is on the OMHA website. The member should be represented by an attorney at this level. The MAC may decline to review the case, and allow the ALJ decision to stand. Or, it may – at the request of the IRE (if the IRE disagrees with the ALJ decision) – take up the case on its own motion. The request for MAC review must be filed within 60 days of the ALJ decision. A member may submit additional supporting information. A standard decision is 90 days but there is also a 10-day provision of expedited decisions.

  • Federal Court – the fifth and final level of appeal. The amount in controversy must be at least $1460 in 2015. The appeal must be filed within 60 days of the MAC decision. An attorney is required at this level.

Grievances

A grievance is a complaint about some aspect of service from the plan, other than actual denial of a drug. For example, mail order delays, poor customer service, enrollment problems, overcharges at the pharmacy, etc. Some complaints can have aspects of both an appeal and a grievance. For example, A person may file an appeal because a drug was denied, and then file a grievance because the plan did not issue a timely coverage determination. It is up to the plan to determine whether a complaint is an appeal or a grievance.

A grievance must be filed within 60 days of the event that is the source of complaint. The grievance may be oral or in writing. The plan must issue a written decision if one is requested. Generally, the plan should respond to the grievance within 30 days. However, if a grievance is filed because of the plan’s failure to expedite a coverage determination or to forward an untimely redetermination decision to the IRE, and the member does not yet have the drug, the plan must respond within 24 hours of receiving the grievance.

Unlike an appeal, there are no further levels of appeal if the member is dissatisfied with the plan’s decision on a grievance. However, failure of a plan to respond to a grievance should be reported Medicare through 1-800-Medicare or the complaint tracking feature at www.medicare.gov.

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