As of July 6th, 2004 Medicare is implementing a two-year, $500 million, nationwide demonstration project, created by the Medicare Act of 2003, under which Medicare will cover prescription drug therapies for specified chronic conditions. This demonstration project is a separate program from the discount drug card program that went into effect on June 1. Participation in the demonstration project is limited to up to 50,000 patients with multiple sclerosis, certain kinds of cancer, rheumatoid arthritis, osteoporosis, pulmonary hypertension, secondary hyperparathyroidism, Pagetís Disease, hepatitis C, or CMV retinitis. The covered prescriptions are those that may be used to "replace" or in lieu of drugs that are currently covered under Medicare Part B. The demonstration project drugs, which are often very expensive, generally are not covered under Part B. Unlike drugs covered under Part B, these drugs do not have to be administered in a doctorís office and they are "self-injectable" i.e., they can be administered by the patient him or herself.

The demonstration project is open to individuals with Medicare Parts A and B (including enrollees in Medicare managed care plans) who live in one of the 50 states or the District of Columbia. Medicare must be the primary payer for the beneficiaryís health care services. People who have "comprehensive" prescription drug coverage under TRICARE, Medicaid, an employer or union-sponsored health plan, or a drug company assistance plan are not eligible to participate. The Centers for Medicare & Medicaid Services (CMS) recommend that individuals with other coverage analyze their cost-sharing under that coverage and under the demonstration project to determine whether their other drug coverage is more comprehensive than the coverage available under the demonstration project.

Individuals chosen to participate in the demonstration project must pay the same cost-sharing for the covered drugs as will be required under the Medicare Part D prescription drug benefit when it is implemented in 2006. These amounts have been reduced for 2004, since the earliest the program will begin covering prescriptions is September. The cost-sharing is as follows:

2004 (Sept-Dec)

2005 (Jan-Dec)




25% co-insurance



"Doughnut" begins



Out-of-pocket in doughnut



Catastrophic coverage begins



Total out-of-pocket



* The catastrophic limit may be higher for a beneficiary whose employer-sponsored plan pays the cost-sharing, as those payments do not count toward the annual out-of-pocket limit.

The demonstration project will only pay for drugs that CMS has identified as eliminating the need for a drug currently covered under Medicare Part B for the chronic conditions included in the project. A list of those pharmaceuticals is available on  Beneficiaries do not currently have to be using the prescription as long as the drug treats their chronic condition. People chosen to participate in the demonstration will remain responsible for the full cost of any other prescriptions they take.

As with the Medicare Part D drug benefit, payments made by employer or union-sponsored health plans will not "count" when calculating a demonstration project participantís out-of-pocket expenses. Similarly, Medigap policies cannot be used to pay for the deductible, co-insurance, or the cost of drugs in the "doughnut hole." Payments made by a state pharmacy assistance program will count toward the out-of-pocket limit, however.

Payments made by certain charitable organizations to assist patients with their cost sharing will also count toward the out-of-pocket limit. The charitable organizations must be independent, non-profit organizations not subject to control by any donor, and must determine financial eligibility criteria without regard to the provider or drug used. The Patient Advocacy Foundation has announced that its patient assistance program meets CMSí criteria for a charitable organization approved to provide financial assistance to participants in the demonstration project,  The National Organization for Rare Disorders (NORD) also has medication assistance programs that help uninsured or under-insured individuals get the life-sustaining medications they need,

The demonstration project also provides assistance with cost-sharing for people who meet the income and resource requirements for the low-income subsidies under the Part D prescription drug benefit. Eligible individuals must have income that is less than 150% of the federal poverty level and assets worth less than $10,000 for an individual or $20,000 for a couple. People seeking low-income assistance will have to attest to their income and resources and, if found eligible, will remain eligible throughout the demonstration project. CMS has said that it will use SSI criteria to determine income and resources; the application contains an explanation of income and resource exclusions.

Application Process

The number of beneficiaries who may participate in the demonstration project is very limited; there is no guarantee that a beneficiary who applies will be chosen for assistance.

Congress indicated that 40% of the $500 million allocated for the project should go toward cancer treatments. To implement this requirement, CMS will separate the applicants into two pools, one for people with cancer and one for people with the other chronic conditions. They will randomly select an applicant from each pool until the specified dollar amount or number of participants is met. Applications received by August 16th will be included in the first drawing; drug coverage for the selected participants will begin around September 1. A second drawing will take place after the application deadline of September 30; applications not chosen in the first drawing will be included in the second drawing. CMS will extend the deadline if enrollment slots remain available after the application deadline.

Applications are available on and through Trailblazer Health Enterprises, the Medicare contractor that will administer the demonstration project. Starting July 6, 2004, Trailblazer will operate a call center to provide information about the demonstration. The contact number is 866-563-5386, or 866056305387 (TTY). Before July 6th, interested beneficiaries may call 1-800-Medicare for an application and/or information. The application must include a signed confirmation of the diagnosis, by the doctor who prescribes the covered prescription, in order for someone to be enrolled. A separate doctorís statement must be included for each prescription for which an applicant seeks coverage as part of the demonstration project. Individuals seeking low-income assistance must provide information about their income and resources and attest to the accuracy of the information.

Administration of the Demonstration Project

Once an applicant is chosen to participate in the demonstration, he or she will receive a letter from TrailBlazer. The participant will then receive a demonstration-specific drug card from Caremark, a pharmacy benefit management (PBM) company that will help administer the benefit. The participant must use the demonstration-specific drug card each time a covered prescription is filled, and must use a pharmacy in Caremarkís network. According to CMS, 98% of local pharmacies participate in Caremarkís network. CMS also states that participants in the demonstration may receive greater savings if they use Caremarkís mail order pharmacy.

CMS will continue to provide information about the demonstration project on its Medicare website,  Everyone with multiple sclerosis, certain kinds of cancer, rheumatoid arthritis, osteoporosis, pulmonary hypertension, secondary hyperparathyroidism, Pagetís Disease, hepatitis C, or CMV retinitis who doesn't have insurance to pay for their prescriptions should apply for the demonstration project, even though the chances of being selected may be minimal. People also need to evaluate independently whether the discount drug cards that are available in their community provide discounts for the treatments they need.

Beneficiaries with multiple sclerosis who would like further assistance should contact the National Multiple Sclerosis Society at (212) 476-0450, or visit

© Copyright, Center for Medicare Advocacy, Inc. 09/10/2013