AHIA Medicare Update Medicare Prescription Drug Benefit

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AHIA Medicare UpdateMedicare Prescription Drug
Benefit

• December 6, 2005
• Mark S. Joffe, Esq.

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How Does a Beneficiary Get Part D Drug Benefits?

• Voluntary benefit available to all Medicare
  beneficiaries through
• Prescription drug plans (PDPs)
• Medicare Advantage plans (MA-PD plans)
• Coordinated care plans required to offer Part D
  benefits
• PFFS plans may elect to offer Part D benefits
• MA enrollees must get their Part D drug coverage
  from an MA-PD plan

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When Can a Beneficiary Enroll in a Part D Plan?

• Initial enrollment period
• November 15, 2005 to May 15, 2006
• For new Medicare beneficiaries, generally the
  period from 3 months before to 3 months after the
  person is first eligible for Medicare hospital
  benefits or is age 65.
• Annual election period
• November 15-December 31, 2007 and subsequent
  years
• Special Election Periods (SEPs) include
• Full benefit dual eligibles
• Upon disenrollment from MA plan during open
  enrollment period
• Creditable coverage Involuntary loss of
  creditable coverage or inadequately informed of
  creditable coverage status
• Moved out of service area
• Other SEPs at the discretion of CMS

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What Drugs Can a BeneficiaryGet Under Part D?

• Includes
• Coverage of prescription drugs and biologicals
  that must be covered by states that provide
  Medicaid Rx benefits
• Excludes
• Agents used for weight loss or gain, fertility,
  cosmetic purposes, coughs and colds
• Vitamins
• Barbiturates
• Benzodiazepines
• Also excluded are
• Non-prescription drugs
• Part B covered drugs

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Can Enrollees of a Part D Plan Get Any
Prescription Drug?

• Part D plans may limit coverage to drug lists
  formularies
• CMS has a number of requirements related to
  formularies including having two drugs in each
  class and category
• Formulary changes are permitted
• With 60 days notice
• No changes between November 15 and March 1
• Exceptions process

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What Factors Influence a Decision to Enroll in a
Part D Plan

• An evaluation of the benefits and costs of
  enrolling in a Part D plan
• Benefits include drug coverage and ability to
  purchase drugs at drug plans negotiated prices
• Cost include premiums and cost sharing
• Consideration of beneficiarys existing drug
  coverage and its cost
• Evaluation of whether beneficiary will need to
  pay a late penalty for enrolling later
• Late enrollment period only during enrollment
  periods

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What Factors Influence theChoice of Part D Drug
Plan?

• MA-PD plan vs. PDP
• Basic coverage vs. enhanced coverage
• Benefit design
• Formulary (which drugs are covered and use of
  formulary tiers)
• Pharmacies in network
• CMS has developed tools to assist in selection
  at www.Medicare.gov

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When Does a Part D Enrollee Qualify for
Catastrophic Coverage?

• Catastrophic coverage commences when enrollee has
  incurred true-out-of-pocket (TrOOP) costs of
  3,600
• TrOOP costs are those incurred
• By the Part D enrollee or on behalf of the Part D
  enrollee, including
• payments by family members, SPAPs, bona fide
  charities
• funds from an HSA, MSA, FSA
• On covered Part D drugs by the plan
• Incurred costs do not include
• Costs covered through group health plan or other
  third-party arrangement
• Costs funded from HRA

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What Happens If a Beneficiary Enrolls in a Part
D Plan Late?

• Late enrollment penalty applies if there is a
  continuous period of 63 days after the initial
  enrollment period during which the beneficiary
  is
• Eligible to enroll in a part D plan
• Not covered under creditable coverage
• Not enrolled in a part D plan
• Amount of penalty
• Beneficiary premium increased by 1 of base
  beneficiary premium for each uncovered month

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When Is Drug Coverage Creditable?

• Expected plan payout for an average individual
  must be at least equal to the average payout
  under the Part D standard benefit
• Creditable coverage determination only considers
  payout, not who pays the premium

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How Do Beneficiaries Know If They Have Creditable
Coverage?

• Disclosure notices must be issued by specified
  entities that provide prescription drug coverage
  to beneficiaries, including the following types
  of coverage
• Group health plans (including FEHBP and qualified
  retiree prescription drug plans) and individual
  health insurance coverage
• Medigap
• Medicaid and State Pharmaceutical Assistance
  Programs
• VA and military coverage
• Disclosure notices not required for PDPs and
  MA-PD plans

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When Do Notices of Creditable Coverage Need to Be
Given?

• Notices of creditable and non-creditable coverage
  may be provided with other routine materials to
  retirees and must be provided
• Prior to annual election period
• Prior to individuals initial election period
• Prior to effective date of enrollment
• Prior to change in creditable coverage status
• Upon request

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What Special Rules Apply to Medigap Insurers?

• After January 1, 2006, beneficiaries with Medigap
  drug policies may keep them if they do not enroll
  in Part D
• No new Medigap Rx policies may be sold
• Beneficiaries with Medigap Rx policies who enroll
  in Part D plan have right
• To retain Medigap policy without drugs or
• Guaranteed issue of certain other policies

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What Disclosure Requirements Apply to Medigap
Insurers?

• Medigap insurers must provide a disclosure notice
  to Medigap drug policyholders about initial
  implementation of Part D
• Notice must be provided to affected policyholders
  60 days before initial enrollment period
  September 16 November 15, 2005

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What Options Do Employers Have to Offer Drug
Benefits to Retirees?

• Purchase Part D coverage from a Part D plan
• Offer retiree drug coverage and qualify for
  Retiree Drug Subsidy
• Offer benefits as a supplement to Part D drug
  plan coverage
• Discontinue the offering of drug coverage

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What Are the Benefits to an Employer That
Participates in Retiree Subsidy Program?

• Employer group is eligible for a subsidy in the
  amount of 28 of claims costs between 250 -
  5,000 in 2006
• The subsidy is tax exempt
• Administrative burden is less than administrative
  burden under Part D program

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What Tests Must the Employer Meet to Qualify for
the Subsidy?

• Actuarial equivalence Two prong test
• Gross Value Test (same as test for creditable
  coverage)
• Expected plan payout for an average individual
  must be at least equal to the average payout
  under the Part D standard benefit
• Net Value Test
• Expected plan payout for an average individual
  reduced by the amount of retiree premium payments
  must be at least equal to the average Part D
  standard benefit payout reduced by the enrollee
  premium (in making calculation, retiree plans
  will consider the impact of supplemental coverage
  provided by the employer/union)
• Employer with multiple drug benefit designs
  within an ERISA plan
• Each benefit design must meet Gross Value Test
• Aggregate value of all benefit designs must meet
  Net Value Test

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Should a Retiree Covered Under a Subsidy Program
Enroll in a Part D Plan?

• Employers are no longer eligible for subsidy for
  retirees who enroll in Part D plan
• Will retiree lose retiree coverage?
• Is retiree eligible for Part D low income
  subsidy?
• Does employer have different benefit options with
  different contribution amounts?
• Is Part D coverage a better value than retiree
  coverage?

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Who Is Eligible to Receive Low Income Premium
Subsidies?

• Full subsidy
• Full benefit dual eligibles
• Medicare savings program (QMBs, SLMBs, QIs)
• Others (SSI, under 135 of FPL)
• Other low-income subsidy (not greater than 150
  of FPL)

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How Will Medicare Beneficiaries Receive the
Subsidy?