FEDERAL REGULATIONS ISSUED:
CMS PROPOSES COMPLICATED PROCESS
FOR MEDICARE DRUG PLAN
On August 3, 2004, the Centers for Medicare & Medicaid Services (CMS) issued two voluminous sets of proposed regulations to implement the Medicare Act of 2003, Public Law 108-73. One set establishes the new Part D prescription drug benefit. 69 Fed Reg. 46632 (August 3, 2004). The other implements the changes to the Medicare Advantage (MA, formerly Medicare+Choice) program. 69 Fed Reg. 46866 (Aug. 3, 2004). The regulations result in more questions than answers about how the programs will work. In the guise of flexibility for providers, the regulations outline a system that makes choosing a prescription drug plan difficult and burdensome. Further, the proposed system raises questions about the prescription drug coverage that will actually be available to people with Medicare.
CMS does not plan to provide detailed information to each
CMS proposes to provide to all Medicare beneficiaries, before the annual coordinated enrollment period, information about prescription drug plans available to them similar to the information currently provided about managed care plans. This information will include a description of benefits and cost sharing available under each plan, whether it is a stand-alone prescription drug plan (PDP) or a Medicare Advantage plan with prescription drug benefits (MA-PD). The information will NOT include the list of drugs on each planís formulary. Individuals will have to contact each PDP and MA-PD separately to determine whether the prescriptions they take are included on the planís formulary. The information will NOT include prescription drug prices; that information may be available on the Internet.
Each Drug Plan can establish its own network of
People with Medicare will also need to check with each plan to determine whether the pharmacy they use is part of the planís network. Plans generally will be able to charge more for the use of non-network pharmacies. Although CMS proposes to include pharmacy access requirements similar to those for the prescription drug discount card, the proposed regulations raise questions about whether plans should be required to include pharmacies that serve certain special populations, including residents of long-term care facilities, native Americans, and low-income individuals in rural areas. For example, CMS may require plans to treat long-term care pharmacies as out-of-network providers, meaning that people in nursing homes who are required to use such pharmacies would be subject to the extra charges for using a non-network pharmacy.
Each Drug Plan will cover a limited number of drugs.
As proposed by the regulations, each PD and MA-PD will have the flexibility to design its own formulary using a pharmacy and therapeutic committee. The United States Pharmacopeia is charged under the statute with developing model therapeutic categories and classes for plans to follow; however, plans are free to develop their own models. Even plans that follow the model will be allowed to determine which drugs they will include in each class. Plans can only change the therapeutic categories and classes at the beginning of the plan year. However, they can change the drugs included in each category or class at any time except for during the annual coordinated enrollment period and a 30 day period thereafter.
The Drug Plans will have different premiums and different
Beneficiaries may still have difficulty choosing the Plan that is best for them even if they obtain the formulary and pharmacy information about the plans available in their area since out-of-pocket costs will also vary between plans.
Plans will be able to set their own premiums, which will be approved by CMS based on establishment of a national base premium and analysis of the benefits offered in each plan. Further, plans will not be required to use the "standard benefit" that was included in the statute. They can design their own benefit package if it is "actuarially equivalent" to the standard, and they can offer supplemental coverage for an additional price. For example, a plan may decide to reduce the initial deductible and the initial coverage limit - thereby lowering the dollar amount at which the second large deductible (or "doughnut hole") begins.
Plans may also establish tiered co-payments, rather than charging their enrollees 25% of the cost of each prescription, up to the initial coverage limit, as set in the statute. For example, a plan may have a 10% co-payment for generic drugs, and then a 50% co-payment for non-preferred brand name drugs. In the preamble to the regulations, CMS discusses a possible plan that would have a tier where beneficiaries are required to pay 100% of the cost of a formulary drug. The "benefit" in that case is access to the price negotiated by the plan for the prescription; since the drug is included on the formulary, the beneficiaryís payment counts towards the deductible and the out-of-pocket limit that triggers the catastrophic benefit.
Beneficiaries will be "locked-in" to their Plan
choice, but the Plan can change.
Once beneficiaries make their choice, they will be required to file an application with the plan itself. People will be locked into the plan they choose, even if the plan makes changes to the covered drug formulary. Plans will be required to provide notice to their "affected enrollees," those who use a prescription, if that prescription is being removed from the formulary or if it is being changed to a different tier. In the preamble to the regulations CMS implies that this notice must be in writing, but the regulatory language itself only says plans must provide notice.
What recourse will people have if their Medicare Drug Plan
drops a drug from the formulary or increases the cost for a drug?
An enrollee will be able to go through the "exceptions process" to get coverage for a non-formulary drug (including one being removed from the formulary) or to pay for the drug at a lower tiered co-payment; however, the exceptions process established by the proposed regulations is not user friendly. The proposed regulations set a very high standard for establishing why an enrollee needs a particular drug, using scientific and clinical evidence that is not likely to be available in most situations.
In addition, CMS failed to incorporate the new Medicare managed care "fast-track pre-termination" review into the drug benefitís appeals process, so there does not appear to be a defined process for pre-termination review when a needed drug is removed for the formulary. In addition, unlike in managed care appeals, unfavorable decisions by the plan will not automatically be sent to the independent review entity. An enrollee must request such review, creating yet another barrier to receipt of a needed prescription.
Low income people will often not benefit from receiving
coverage for their prescription drugs from Medicare.
Supporters of the Medicare Act argue that the Medicare benefit is more generous for people who are eligible for both Medicare and Medicaid (full dually eligibles) because there are no limits on the number of prescriptions that will be covered each month. However, the proposed regulations do not preclude PDPs and MA-PDs from including caps on prescriptions, which some Medicare managed care plans currently do. Because the low-income subsidies for premiums only cover the lowest premium amount, dually eligibles and others eligible for the Medicare Part D low-income subsidies may find themselves in plans that impose more restrictions in order to keep their premiums low. Another problem currently encountered by dually eligibles is the need to obtain prior authorization before certain prescriptions are covered by Medicaid. The preamble to the proposed regulations makes clear that CMS anticipates that PDPs and MA-PDs will use prior authorization requirements as a means of controlling costs.
Dually eligible individuals will lose their Medicaid prescription drug coverage on January 1, 2006. The proposed regulations state that dual eligibles who do not enroll in a drug plan of their own choosing will be automatically enrolled in a plan at the end of their initial enrollment period, without clarifying by whom or how the plan will be chosen, how the individual will be informed or the time frame for completion of the process. The proposal also raises questions about how dually eligible individuals who do not choose a plan will get their prescriptions from January 1, 2006 until the end of the initial enrollment period on May 15, 2006, since their Medicaid coverage will end on January 1st and they will not be automatically enrolled in a Medicare drug plan until after May 15th.
In addition to choosing and applying for a prescription drug plan, people who are not dually eligible but who are eligible for the low-income subsidy will have to apply separately for that assistance. State Medicaid offices and Social Security offices will begin taking applications for the low-income subsidy on July 1, 2005, in order to have time to process all of the applications. If an individual is found eligible for the low-income subsidy, she will then still have to go through the process of choosing a drug plan, creating the possibility that many people found eligible for the low income subsidy will not take the all steps needed to get a drug benefit.
Although the Secretary has exercised his statutory authority to deem all those receiving benefits under a Medicare Savings Program (MSP, also known as, QMB, SLMB, QI), as eligible for the low-income subsidy, it is unclear from the proposed regulations whether those individuals will still have to apply for the subsidy. Other issues may arise in some states concerning the best office in which MSP-eligible individuals should apply for the low-income subsidy. Medicaid offices, but not SSA offices, will be required to screen people who apply for the low-income subsidy for MSP eligibility. In some states, eligibility requirements are more generous for MSP than for the low-income drug subsidy. Someone may therefore be denied eligibility for the drug subsidy but be eligible for MSP - and therefore be deemed eligible through the back door for the low-income drug subsidy. In those states, individuals who apply for the subsidy at their Medicaid office will also be screened for MSP, and, if found eligible for MSP, will get the low-income subsidy. Those who apply at the SSA office will not be screened for MSP, will be turned down for the low-income subsidy, and will receive no assistance.
People will be penalized financially if they donít
enroll in the Drug Plan when first eligible.
The regulations further add to the complexity and confusion of the Part D Drug Plan. Unfortunately, experience with the new Medicare discount drug card program indicates that people who find the process too confusing simply wonít enroll. But the stakes will be high for individuals who fail to apply when they are first eligible for the Part D drug program. That is because there is a penalty for failing to enroll timely in the prescription drug benefit. CMS is proposing that a late penalty of 1% for each month that the beneficiary could have enrolled be added to the premium; the penalty would continue for as long as the beneficiary is enrolled in Part D. CMS is also asking for additional ways to calculate the late penalty to encourage more people to enroll during their initial enrollment period. The proposed penalty fails to recognize that the complexity of the program itself may well be the major cause of a failure to enroll.
The Center for Medicare Advocacy is analyzing and
responding to the proposed regulations.
The Center for Medicare Advocacy, in conjunction with other organizations, is developing comments to the proposed regulations for groups to sign on to or to use in preparing their own comments. These model comments should be available in mid-September and will be posted on our web site.
Comments to the proposed regulations are due by October 4, 2004. For further information contact attorney Vicki Gottlich in the Center for Medicare Advocacyís Washington, DC office at (202)293-5760 or vgottlich@Medicareadvocacy.org.
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