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.

Tiered co-payments

Co-payments of different amounts for different drugs on a PDP formulary.

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.

Medicare Prescription Drug Benefit: Utilization Management

Utilization management (UM) techniques (sometimes referred to as “benefit management tools”) are measures taken by prescription drug plans to control the access to or use of specific drugs.  The Centers for Medicare and Medicaid Services (CMS) states that UM techniques for the new Medicare prescription drug coverage  “must include incentives to reduce costs when medically appropriate and assist with preventing over-utilization and under-utilization of medications.”

Questions Answered

Are medications under the new Medicare prescription drug coverage subject to UM policies and procedures?

Yes, the new Medicare prescription drug plans will include several types of utilization management tools, including formularies; co-pay tiering; prior authorization; fail-first or step therapy; and promotion of lower cost generics. Although CMS has stated that it expects formulary drugs to be available in all dosages and forms, it is unclear whether this will actually be the case.

What are common types of utilization management?

Tiered co-pays: Drugs that are more expensive, such as brand name drugs, may be placed on higher tiers than others and may have higher co-pays associated with them (Dual eligible patients will have $1 or $3 co-pays).

Prior authorization: Specific drugs may require that the physician seek prior authorization from the prescription drug plan (PDP) before the prescription can be filled.

Promotion of lower cost generics or generic substitution: Plans might have a variety of promotion plans to encourage use of generic vs. brand name drugs, or may automatically switch prescriptions to generics when they are available.

Fail-first or Step therapy: This requires that a patient fail on one or more formulary drug, generally a lower price, or generic drug, before a prescription will be filled for the drug a physician has determined would be most appropriate/effective for the patient.

Quantity or dose limitation: Plans can limit filling prescriptions of certain drugs up to a specific quantity.

Off-label restrictions: Although many drugs are routinely used to treat conditions for which the FDA may not have approved them, this UM technique permits PDPs to cover drugs only for their FDA-approved uses.

How will I know which drugs are subject to UM policies and procedures?

Once prescription drug plans are approved and released by CMS, the various formularies and other utilization management techniques should be accessible online through a CMS search engine.

Will plans have quality assurance measures and systems?

Yes, and quality assurance measures and systems may include both concurrent and retrospective drug utilization review systems (DURs) that may assist with preventing and detecting inappropriate drug therapy and adverse drug interactions.

Plans will also be required to implement internal medication error identification and reduction systems.

Current as of 9-26-2005

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