Medicare prescription drug coverage

The new prescription drug benefit added to the federal Medicare program, known as Medicare Part D. The prescription drug coverage will begin on January 1, 2006.

Centers for Medicare and Medicaid Services (CMS)

The federal agency that runs the Medicare program, including the Medicare Prescription Drug Benefit program. In addition, CMS works with the States to run the Medicaid program.

Medicare

The federal health insurance program for: people 65 years of age or older; certain younger people with disabilities; and people of any age with end-stage renal disease (permanent kidney failure with dialysis or a transplant), sometimes called ESRD. Part A pays for hospital care, Part B pays for doctor visits, Part C includes the managed care option, and Part D is the new prescription drug benefit.

Prescription Drug Plan (PDP)

A private insurance plan that offers coverage for prescription drugs under Medicare, also known as a Medicare prescription drug plan.

Premium

Regular monthly payment made to a health or prescription drug plan by beneficiaries for health care coverage. The lowest average premium for a Medicare prescription drug plan is expected to be about $32.

Medicare Advantage Perscription Drug Plan (MA-PD)

The Part D prescription drug plan that will be offered to enrollees in a Medicare Advantage managed care plan.

Limited Income

Under Medicare, limited income refers to income below 150% of the Federal Poverty Level. In 2005, the year Medicare prescription drug benefit goes into effect, this is equal to a yearly income of $14,355 for an individual and $19,245 for a couple, with other resources of no more than $11,500 for an individual and $23,000 for a couple.

Extra Help

The name that has been given to the low-income subsidy program for Medicare Part D. Extra Help will pay for part or all of the Medicare prescription drug premiums for Medicare beneficiaries who have incomes below 135% of the Federal Poverty Level (FPL) (including dual eligibles) and part of the premium for those who have incomes between 135% and 150 % of the FPL. The benefit will protect beneficiaries under 150 % of the FPL from the gap in coverage referred to as the "doughnut hole." Dual eligibles will get this benefit without applying. All others will need to apply for Extra Help.

Dual eligible (or duals)

A person who is eligible for both Medicare and Medicaid. CMS will automatically enroll dual eligibles in low-premium PDPs. If they choose to stay in a low-premium PDP, dual eligibles’ only cost for drugs will be a $1 co-pay for generic drugs and a $3 co-pay for brand-name drugs.

Supplemental Security Income (SSI)

A program to help aged, blind, and/or disabled people who have little or no income pay for basic needs such as food, clothing, and shelter.

Medicare Savings Plan

Medicaid programs that help pay for some or all of Medicare premiums and deductibles.

Partial dual eligible

Low-income individuals with Medicare, including Qualified Medicare Beneficiaries (QMB), Specified Low-Income Medicare Beneficiaries (SLMB), and Qualifying Individuals (QI), as well as Supplemental Security Income (SSI) recipients and individuals with Medicare Savings Plans. These individuals will have facilitated enrollment by CMS into prescription drug plans and will receive financial help with the costs of Medicare Part D.

Auto-enrollment

The process by which CMS will randomly assign individuals with both Medicare and Medicaid (dual eligibles) into prescription drug plans (PDPs).

Formulary

A list of medications that a prescription drug plan covers (prior authorization by the Medicare prescription drug plan may be required).

Deductible

A flat dollar amount a person must pay before Medicare will pay for prescription drugs costs. The standard yearly deductible for Medicare patients who don’t have a low-income subsidy is $250.

Co-payment

A dollar amount that a person must pay out-of-pocket for a medication or other health service. For example, a PDP may ask for a $3 co-payment for each generic prescription and $5 for brand name prescriptions. Co-pays may be further tiered by PDPs to discourage use of more expensive drugs.

Spend down

This option allows a person to spend down to Medicaid eligibility by having medical expenses that can be subtracted from their income. Subtracting medical expenses such as prescription drugs and eye glasses from your income can reduce a person’s income to a level below the maximum allowed by a particular state’s Medicaid plan.

Medigap Policy

A Medicare supplement insurance policy sold by private insurance companies to fill "gaps" in original Medicare coverage.

Medicaid

A joint federal and state program that provides medical coverage for people with low incomes and limited resources. Medicaid programs vary from state to state.

Qualified Medicare Beneficiary (QMB)

A person with an income equal to or below 100% of the Federal Poverty Level and limited financial resources who receives some assistance with Medicare costs but is not on Medicaid.

Qualified Individual (QI)

A person with an income between 120% and 135% of the Federal Poverty Level (FPL) and limited financial resources who receives some assistance with Medicare costs but is not on Medicaid.

Qualified Medicare Beneficiary (QMB)

A person with an income equal to or below 100% of the Federal Poverty Level and limited financial resources who receives some assistance with Medicare costs but is not on Medicaid.

Specefied Low-income Medicare Beneficiary (SLMB)

A person with an income between 100% and 120% of the Federal Poverty Level and limited financial resources who receives some assistance with Medicare costs but is not on Medicaid.

Prior authorization

Specific drugs on a formulary may require that the physician seek approval from the prescription drug plan (PDP) before the prescription can be filled.

Fail first

(Also known as "step therapy") This requires that a patient fail on one or more preferred formulary drugs—generally lower price, or generic drugs—before a prescription will be filled for the non-preferred drug a physician has determined would be most appropriate/effective for the patient.

Step therapy

(Also known as "fail first") This requires that a patient fail on one or more preferred formulary drugs—generally lower price, or generic drugs—before a prescription will be filled for the non-preferred drug a physician has determined would be most appropriate/effective for the patient.

True Out-of-Pocket Costs (TrOOP)

The government will pay most (or in some cases, all) of your drug costs for the rest of the year, once you pay $3,600 in out-of-pocket expenses (this amount may increase on a yearly basis and does not include premium payments). Out-of-pocket costs include all prescription drug costs paid by you or another person or organization, including the government (for example, Extra Help), State Pharmaceutical Assistance Programs (SPAPs), registered charities, and pharmaceutical manufacturer patient assistance programs. The out-of-pocket costs include payment of the deductible, co-insurance, co-payments, and medication costs that are not covered by other insurance. These costs do not include expenses paid by the individual with Medicare prescription drug coverage for medications that are not on a plan’s covered list of drugs or for medications excluded from the Medicare prescription drug benefit.

Coverage Determination

A written notice from the Medicare prescription drug plan informing the patient that they will or will not cover a prescribed medication.

Exception

The first phase of the appeals process; a formal decision by a Medicare prescription drug plan to cover a medication not on its formulary, or to reduce a co-payment for a drug not on the PDP’s preferred list. If the plan does not approve the exception, the appeals process can continue.

Medicare Appeals Council (MAC)

The fifth stage of the Medicare prescription drug benefit appeals process is conducted by the Medicare Appeals Council (part of the Centers of Medicare and Medicaid Services), after an Administrative Law Judge (ALJ) has denied a request to cover a medication.

Independent Review Entity (IRE)

The third stage of the Part D appeals process; an IRE reviews a plan’s decision not to cover a medication. An IRE is a review body that is under contract with the prescription drug plan to do such reviews.

Administrative Law Judge (ALJ)

A hearings officer who presides over appeal conflicts between providers of services or beneficiaries and Medicare contractors.

Reconsideration

The third stage of the appeals process; after a redetermination has been denied. This stage of the appeals process is conducted by an Independent Review Entity (IRE).

Non-formulary drugs

Drugs not on a prescription drug plan (PDP) approved list.

Medically Necessary

Medical services or supplies that: are proper and needed for the diagnosis or treatment of a patient’s medical condition; are provided for the diagnosis, direct care, and treatment of a patient’s medical condition; meet the standards of good medical practice in the area; and are not chosen mainly for the convenience of the patient or doctor.

Beneficiary

Someone who has Medicare prescription drug coverage. (See also: dual eligible.)

Part D & Your Patients

The new Medicare Part D prescription drug benefit (created by the Medicare Modernization Act of 2003) may affect all 42 million people with Medicare. This includes both senior citizens, eligible for Medicare after age 65, and disabled Americans who receive their health coverage through Medicare. All new Medicare prescription drug plans (PDPs) will begin coverage on January 1, 2006, with the initial enrollment period running from November 15, 2005, to May 15, 2006. Medicare beneficiaries who do not currently have drug coverage that is as good or better than that being offered under Part D will incur a penalty (currently projected to be 1% for each month they fail to enroll in Part D) should they choose to enroll at a later date. It is important that psychiatrists and other physicians understand how this new benefit will affect their patients.

Questions Answered

NEW Are Medically Needy individuals counted as full-benefit duals?

If an individual has met a state’s criteria for Medicaid in any month between March and the end of 2005, they are deemed eligible for the full 2006 benefit year for Part D. In August, 2006, CMS will compare state data from 2005 with state data for Medicaid eligibility in 2006 to determine both the spend down eligibles (Medically Needy) and those qualified for the MSP (partial duals) to determine eligibility for Part D in 2007.

What is the Medicare prescription drug program?

Medicare prescription drug coverage is insurance provided by private companies, Medicare prescription drug plans (PDPs) and Medicare Advantage PDPs, that have been approved by Medicare.

  • The new program starts January 1, 2006, and will be available to everyone with Medicare.
  • Individuals can get coverage through the new program in two ways:
    • Through enrollment in Medicare Advantage or other Medicare Health Plans, which will provide drug coverage (MA-PDs)
    • Through enrollment in independent Medicare prescription drug plans (PDPs), to which they will pay a monthly premium
  • All new plans must offer coverage that is at least as good as the current standard Medicare Advantage prescription drug coverage.
  • Some plans may offer wider prescription drug coverage with additional drugs for higher monthly premiums.
  • Patients with limited incomes and resources may be eligible for what CMS is calling Extra Help. ( SeePatient Costs and Low-Income Subsidies.)

Which of my patients will be affected, and how will Part D be different fromthe prescription drug coverage they receive now?

All Medicare beneficiaries will be eligible to enroll in the Medicare prescription drug program, including:

Patients who are eligible for both Medicare and Medicaid (dual eligibles) and Other Low-Income Medicare Beneficiaries

Dual eligibles will be automatically enrolled by CMS in a low-premium prescription drug plan. These individuals will no longer receive medications through Medicaid as of January 1, 2006.

  • Dual eligibles will be sent a letter in late October/early November, informing them of which plan they have been enrolled in. They may switch plans at any point thereafter, but coverage will begin on January 1, 2006, under whichever plan they are enrolled in on December 31, 2005.
  • Others who are currently eligible for Medicare Savings Plans or Supplemental Security Income also automatically qualify for a low-premium Medicare prescription drug plan and will be enrolled with CMS facilitation by May 15, 2006, if they haven’t already enrolled by then.

Patients with Medicare who do not currently have prescription drug coverage

  • Patients without current coverage for prescriptions can voluntarily enroll in a Medicare Part D prescription drug plan (PDP) beginning on November 15, 2005. The initial enrollment period ends on May 15, 2006.
  • Medicare will be sending out information on available Part D plans in October 2005, and the PDPs may begin marketing their plans at that time as well.
  • Patients interested in enrolling in Part D can submit an application to an approved Part D prescription drug plan that serves their locale.
  • Information will also be available online at www.medicare.gov.
  • If the patient does not enroll in Part D by May 15, 2006, and wants to join a Part D plan later, a higher monthly premium will be imposed thereafter (the next time enrollment will be open will be November 15, 2006, and a 1% penalty for each month after May 2006 will be added to the patient's premium).

Patients with Medicare who have current drug coverage through other insurance such as:

Medigap

  • New Medigap policies that cover prescription drugs will not be available for purchase after January 1, 2006, although the current ones may continue.
  • In fall 2005, people with Medicare should receive a notice from their Medigap insurance company indicating whether the current Medigap drug coverage is as good or better than the drug coverage offered under Part D.
  • In most cases, prescription drug coverage offered by Medigap policies will not be as good as Medicare Part D prescription drug coverage, so if these patients do shift their coverage to Part D by May 15, 2006, they will incur a penalty for each month beyond that when they do choose to enroll in Part D.

Employer or Union

  • Employers and unions are expected to send information to people with Medicare by November 14, 2005, to let them know how their current drug coverage compares to standard Part D prescription drug coverage.
  • If the current prescription drug coverage is at least as good as the Medicare plan, the patient can keep it without incurring a penalty if he or she later opts for Part D coverage, and these employer plans can receive subsidies for continuing to provide drug coverage for the Medicare beneficiaries.
  • If the current prescription drug coverage is not as good as the Medicare Part D plan, individuals must switch to a Medicare plan by May 15, 2006, or pay a penalty (1% for each month) thereafter.

Medicare Advantage (HMO, PPO, PFFS) or other Medicare Health Plan

  • Medicare is working with Medicare Advantage (MA) and other Medicare Health Plans to help provide more coverage to enrollees at lower costs. Beneficiaries should receive a notice from their plan about prescription drug choices.
  • If an individual is currently enrolled in a MA managed care plan, he or she will be required to get drug coverage from that MA plan if he or she decides to stay in that plan. An individual can switch to another MA plan in his or her area that offers prescription drug coverage or can switch to the fee-for-service Medicare plan and join an independent Prescription Drug Plan (PDP).

Federal Employee Health Benefits/Veterans Affairs

  • TRICARE, Veterans Affairs (VA), and Federal Employee Health Benefits Program (FEHB) coverage will continue to offer drug benefits to their beneficiaries who also have Medicare.
  • Current federal employee and veterans prescription drug coverage will almost always be better than Medicare Part D prescription drug coverage, so patients who have this coverage should stick with it.

Who will provide my patients’ drug coverage if they sign up for (or are automatically enrolled in) a Medicare prescription drug plan?

  • Drug coverage will be provided through independent contractors or prescription drug plans (PDPs).
  • All prescription plans should be announced by October 2005 by the Centers for Medicare and Medicaid Services (CMS), with enrollment beginning on November 15, 2005.
  • Prescription drug plans are expected to provide information on their formularies and utilization management techniques as well as the specific pharmacies in their networks, and this information should be available starting in October 2005 at www.medicare.gov.
  • For more information on the drugs that will be included on the prescription drug plans, see Prescription Drug Plan Formularies.

How will my patients access their medications under the new plan?

  • All Medicare Advantage Prescription Drug Plans (MA-PDs) and independent prescription drug plans (PDPs) will contract directly with pharmacies across the country. Each plan will have its own pharmacy network.
  • Patients should review their plan’s pharmacy list to find out where they will have to go to fill their prescriptions. It is important to note that a patient’s current pharmacy will not necessarily participate with his or her new PDP.

What if my patient already has prescription drug coverage or doesn’t take many prescription drugs?

  • If a patient already has drug coverage, he or she should talk with their current plan, benefits administrator, or insurer before making any decisions about whether Medicare’s prescription drug coverage would be better. CMS has said that insurers will be getting in touch with their beneficiaries to let them know whether their current plans are at least as good or better than that being offered under Part D. If this is the case the patient will not incur a penalty if things change and he or she decides to enroll in Part D at a later date.
  • If a patient doesn’t currently take many prescription drugs, he or she might still want to consider signing up for one of the lower premium plans, so as not to pay a penalty to enroll later.

When and how can my patients enroll?

  • Initial enrollment runs from November 15, 2005 to May 15, 2006.
  • If a patient signs up by December 31, 2005, coverage will begin January 1, 2006. If they join from January to May 2006, their coverage will begin on the 1st day of the following month.
  • If a patient who does not already have as good or better coverage fails to sign up by May 15, 2006, he or she may have to wait until November 16, 2006, to enroll, and the premium cost will go up at least 1% per month for every month that he or she waits to enroll.
  • Beginning on November 15, 2005, people with Medicare should be able to contact the prescription drug plans in their area directly to enroll, or may do so by calling 1-800-MEDICARE.

Current as of 12-27-2005

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