In December 2003, the Medicare Improvement, and Modernization Act of 2003, Public Law 108-173 (Medicare Act) was signed into law. The law’s much talked about Medicare prescription drug coverage will not begin until 2006. In the mean time, the law creates the Medicare prescription drug discount card and transitional assistance program. This program will be in effect from June 2004 through December 31, 2005. There are many questions about this new and untested program. We answer some of those questions here.

What will the Medicare discount prescription drug cards provide?

The prescription drug discount cards will provide eligible Medicare beneficiaries with access to discount prices negotiated by a Medicare endorsed drug card sponsor. "Transitional assistance," for certain low income individuals, will provide up to $600 of coverage for "covered discount card drugs."

Who Qualifies for the Prescription Drug Discount Card?

Individuals who are enrolled in Medicare may purchase a Medicare Prescription Drug Card, unless they receive prescription drug coverage through Medicaid, either under a state Medicaid program or through a Section 1115 waiver. Individuals enrolled in a state Medicaid program or in a waiver program that does not provide drug coverage may purchase a discount card if they are otherwise eligible for the program. Similarly, "medically needy" individuals who qualify for Medicaid based on a spend down or other method of eligibility, may purchase a discount card if, at the time of applying for the discount card program, they otherwise meet its eligibility requirements. Individuals enrolled in a state pharmacy assistance program may purchase a card. Individuals enrolled in a Medicare Managed Care Plan that offers a discount card with Medicare’s endorsement may only purchase their plan’s card.

How Does One Enroll in a Prescription Drug Discount Card Program?

At least two Medicare endorsed prescription discount drug cards will be available to Medicare beneficiaries. The card benefits will not be uniform; the covered prescriptions will vary from card to card, as will the negotiated prices. Beneficiaries will choose, presumably based on the cards’ benefits, which card to purchase. Of particular note, the regulations permit card sponsors to change the medications available through the card and permit the sponsors to change the negotiated prices offered to the enrolled beneficiaries. These changes can occur at any time, even after the beneficiary has enrolled in a particular program.

Enrollment in the prescription drug card program will begin in May 2004. Beneficiaries who enroll in a prescription drug card program will be required to pay a yearly fee that cannot exceed $30. Though the program does not begin until June 2004, enrollees will be required to pay the full yearly fee for this year. Enrollment will be accomplished by filing a simple application with the card sponsor. By filing the application, the individual grants the social security administration and the state Medicaid agency authority to verify eligibility information.

When Can One Enroll in a Prescription Drug Discount Card Program?

The Medicare Act and the implementing regulations provide for continuous open enrollment for the duration of the program. This means that beneficiaries will be able to enroll in the program any time during the years it is offered. However, a beneficiary may only enroll in one Medicare endorsed prescription drug card, and once enrolled in a program, unless "exceptional circumstances" exist, he or she will be barred until November 15, 2004 (the start of the annual coordinated enrollment period), from enrolling in a new prescription drug card program. A beneficiary with exceptional circumstances, such as moving outside of the card’s service area, who does change cards during the course of the year, will be required to pay the full enrollment fee to the new discount drug card sponsor. The fact that a card does not offer a medication that the beneficiary needs, does not qualify as an "exceptional circumstance." Beneficiaries may continue to use discount drug cards from organizations that are not endorsed by Medicare in addition to their Medicare endorsed card.

What Happens After the Prescription Drug Card Program Ends?

Although no one may enroll in the prescription drug card program after December 31, 2005, those who are enrolled may continue to use the card to receive the discounted prices for their prescriptions. Coverage ends when the individual enrolls in a prescription drug plan under the new Medicare Part D drug benefit, or if the individual has not enrolled in a prescription drug plan, May 15, 2006, when the initial enrollment period for Medicare Part D ends.

Who is Eligible for Transitional Assistance?

The Medicare Act provides additional assistance for "transitional assistance

eligible individuals." An eligible individual is someone whose income is not more than 135% of the federal poverty level, and who does not have coverage under a group health plan or health insurance coverage; insurance related to uniformed services; or federal employees’ health benefits program.

What is Transitional Assistance?

An eligible individual will have payment made for the annual enrollment fee in the prescription drug card program, as well as payment available for 90% of costs incurred for covered discount card drugs obtained through the program. An individual with income below 100% of poverty is entitled to payment of 95% of costs incurred.

Payment is available for up to $600 of costs in 2004. Any left over money carries over to 2005, when the individual becomes eligible for an additional $600. Money left over in 2005 may be carried over into 2006 until the individual becomes enrolled in a Medicare Part D prescription drug plan or until the initial enrollment period for the drug plans ends on May 15, 2006. Conversely, the $600 amount is reduced proportionately for individuals whose enrollment begins later than January 1, 2005.


What are Covered Discount Card Drugs?

The phrase "covered discount card drugs" is defined expansively in the regulations. It is not limited to prescription medications for which the card sponsor has negotiated reduced prices, and specifically includes insulin and the necessary medical supplies associated with insulin injection -- syringes, needles, alcohol swabs, and gauze. Test strips and lancets, however, are specifically excluded from the definition of covered discount card drugs.


It is important that beneficiaries understand that the prescription drug card offers negotiated drug prices, not prescription drug coverage. Only those who are eligible for the transitional assistance program will receive coverage for prescription drugs. Prior to enrolling in a prescription drug card, beneficiaries will have to take stock of their prescription needs. They will need to contact the endorsed sponsors who provide service in their community and ascertain which sponsor best meets their individual needs. This will be particularly complicated, as sponsors will be permitted to change the medications for which they offer discounts, as well as the prices of the negotiated drugs.

It will be important for beneficiaries to realize that they will be permitted to join only one prescription drug plan and that once they have joined that plan, they will be barred from joining another plan until the annual coordinated enrollment period. This is true even if the prescription drug plan increases its negotiated prices or changes the medications offered at negotiated prices.

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