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.

Auto-enrollment

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

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.

Generic Substitution

Prescription drug plans (PDPs) may automatically switch prescriptions to generics when they are available.

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.

Low-income subsidy (LIS)

(Also known as Extra Help) A program that 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. Dual eligibles will get this benefit without applying. All others will need to apply.

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.)

Long-term care facility

A facility or medical institution that meets criteria outlined by the Social Security Act and which cares for residents with Medicare and/or Medicaid. Includes primarily skilled nursing homes.

Long-Term Care Facilities (LTC)

Residents of long-term-care (LTC) medical or nursing facilities with psychiatric illnesses are a unique and vulnerable population with special pharmacy needs. All facilities that comply with Medicare and Medicaid conditions of participation are covered under the new Part D prescription drug benefit. These are primarily nursing home facilities.

Other living arrangements such as assisted living facilities, other facilities recognized by state law, group homes for the developmentally disabled, and other forms of congregate living arrangements regulated by the states, but not by the Federal government, are not covered as LTC facilities under Part D, and patients who reside in these facilities will be auto-enrolled (if dual eligible) or will have to individually enroll in a Part D plan and access their prescription drugs through regular pharmacies that have contracted with the PDP or Medicare Advantage plan that they are enrolled in. In either case, they will access their prescription drugs through the pharmacies that have contracted with their PDP or Medicare Advantange plan.

Questions Answered

Will my LTC patient be able to receive a one-time temporary or emergency supply if a required drug is not on formulary?

Yes. CMS stated that PDPs may need to provide a temporary “first fill” supply order for a limited quantity of medication prescribed by the attending physician until an appropriate liaison between the facility, the attending physician, and the plan’s LTC pharmacy on behalf of the resident can be achieved. A transition period of 90 to 180 days is specified as being appropriate for residents of nursing facilities on multiple medications who require some changes to their medication regimen in order to accommodate plan formularies. See section on Transition & Continuity of Care.

How will individuals in LTC facilities with both Medicare and Medicaid (dual eligibles) be affected?

Many dual eligibles reside in LTC facilities and receive their prescription drugs through a LTC pharmacy. As of January 1, 2006, all patients with both Medicare and Medicaid in LTC facilities will automatically transition to the new Medicare prescription drug benefit and will no longer receive their prescription drugs through Medicaid. LTC pharmacies will contract directly with Medicare prescription drug plans (PDPs) and will not bill Medicaid.

How will LTC residents select a plan?

LTC residents who have both Medicare and Medicaid (dual eligibles) will be randomly auto-enrolled into a drug plan unless they make an alternative selection based on individual existing treatment needs. Those residents with only Medicare will have to enroll into a PDP just like other Medicare beneficiaries (see section on Enrollment & Eligibility).

Will my patients in LTC facilities be subject to co-pays?

Dual eligibles residing in LTC facilities will receive continuous prescription drug coverage with no premiums, no deductibles, and no co-pays. Other residents, with only Medicare, may be subject to the standard costs of the Medicare prescription drug program, including co-pays, if they are not eligible for Extra Help, the low-income subsidy being offered by CMS. (See sections on Patient Costs and Low-Income Subsidies).

How will formulary restrictions affect LTC patients?

Prescription drug plans are expected to accommodate the needs of LTC residents within a single formulary structure by providing coverage for all medically necessary drugs at all levels of care. However, utilization management tools may be used to regulate access to specific drugs. There are exceptions processes to override restrictions (See section on Coverage Determinations, Exceptions, and Appeals.)

What if my LTC patient’s drug is not on the PDP formulary?

CMS has stated that if a patient is stabilized on certain drugs, the new plan must continue to provide these same drugs when the patient requires a refill, so this may help solve the problem of plan selection for them. However, the plan is not obligated to provide the drug in the same form or dosage the patient has been getting. Therefore, if the patient’s medication is not available as needed, an exception will have to be filed with the PDP or the patient will have to look for a PDP that can supply the necessary drugs.

Which LTC pharmacies will participate in the program ?

CMS expects that each LTC facility will select at least one eligible Network LTC Pharmacy (NLTCP) to provide Medicare drug benefits to its residents.

Part D plans will be required to offer a contract to any pharmacy willing to participate in its LTC pharmacy network so long as the pharmacy is capable of meeting certain minimum performance and service criteria (and relevant state laws governing the practice of pharmacy in the LTC setting) and any other standard terms and conditions established by the PDP for its network pharmacies.

Patients should be able to check www.medicare.gov in fall 2005 to compare the available prescription drug plans in their area and their participating pharmacies.

Current as of 9-26-2005

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