Medicare Prescription Drug Coverage

Since January 2006, Medicare beneficiaries have been able to get some assistance paying for prescription drugs through a new Medicare program: Part D. The drug benefit, added by the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA), is not part of the traditional Medicare program, it is instead offered through private insurance and Medicare Advantage plans.

The Medicare Prescription Drug Benefit is not automatic , which may be a nasty surprise for some Medicare patients. Medicare beneficiaries have to affirmatively choose and enroll in a Part D plan every year. There are many options, and what they offer is really confusing. You are in the driver’s seat here, and for many Medicare patients this is not a familiar or comfortable place. In fact, as of June 2006, almost 10% of qualified seniors had not yet enrolled to take advantage of the Medicare drug benefit.

The Standard Drug Benefit

The MMA established a standard drug benefit that Part D plans may offer. Many plans actually offer different designs that they say are "actuarily equivalent" in value. The “standard” benefit is defined in terms of the basic benefit structure and not in terms of the drugs that must be covered, which we will explain further. In 2007, this “standard” benefit consists of the following, but may vary widely between standard and Medicare Advantage plans.

• An initial payment of a $265 deductible.
• Variable premiums (estimated average is about $27.35 per month in 2007).

A co-payment of 25 percent of the cost of a covered Part D prescription drug, up to an initial coverage limit of $2,400.

• Once the initial coverage limit is reached, beneficiaries are subject to another deductible, known as the “doughnut hole,” in which they may pay the full cost of medicine.
• When total out-of-pocket expenses on formulary drugs for the year, including the deductible and initial coinsurance, reach $3,850, the beneficiary pays $2.15 for a generic or preferred drug and $5.35 for other drugs, or 5 percent — whichever is greater. Note that the $3,850 amount is calculated on a yearly basis; a patient who has a total annual cost of $3,850 in out-of-pocket costs on December 31 of one year will have to start all over again on January 1. Your 2006 out-of-pocket costs do not apply in 2007. What counts in the $3,850 is tricky too. Read on …

Costs will vary from what we said above. Check this out:

• Your out-of-pocket expenses increase annually because they are adjusted for inflation and other factors. Even so, for most seniors, your annual out-of-pocket costs are lower than if you have no drug benefit.
  
• The Medicare law does not mandate a set premium amount. Premiums are determined by a bidding process and will vary from plan to plan and from region to region.
  
• Private insurance companies that want to continue participating in the Part D drug benefit must submit new bids to Medicare each year. Thus, the costs that plans charge you and the drugs that they will allow are likely to change on a yearly basis.  This means you have to go through the selection process every year, even if your drugs do not change .
  
• Premium amounts are especially critical for individuals with low incomes, as they receive full assistance from Medicare (yes, there is assistance) only for the plans with the lowest premiums. That may also mean that poor patients will have access to fewer drugs, pharmacies, and brand names.
  
• All plans do have the option of NOT CHARGING THE PATIENT ANYTHING. That’s right. But read the fine print. If they do reduce your deductible, co-pays, and premium, they may not have all the drugs you might want to take. If they cover the doughnut hole (and very few plans provide this coverage for brand drugs), then they could charge a larger premium. If they are a Medicare Advantage plan, you will be on a plan that may be quite different than “regular” Medicare. Do not choose anything without reading up on this carefully.

Eligibility for Part D Coverage

Again, prescription drug coverage under Part D is voluntary . A beneficiary may purchase Part D coverage if he or she is entitled to Part A or enrolled under Part B. The beneficiary does not have to have both Part A and Part B coverage to choose prescription drug coverage. The beneficiary must enroll in a Part D plan that serves the geographic region in which he or she lives (the official Medicare place of residence).

Beneficiaries who are incarcerated are not eligible to participate in Part D. Individuals will have the option of having the premium taken from their Social Security checks, paying the premium directly, or having the premium taken directly from a bank account. We suggest the first or third option so you do not forget to pay your premium.

Choice of Drug Plans 

The Part D benefit is based on the notion that individual Medicare beneficiaries should have a choice of private drug plans so they can select a drug benefit that best meets their needs. The statute creates three categories of drug plans: stand-alone plans that offer only prescription drug coverage, Medicare Advantage plans with a drug benefit, and fallback plans. However, fallback plans aren't needed or offered in 2006 or 2007.

• Prescription drug plans (PDPs): The majority of Medicare beneficiaries are in the traditional Medicare program and purchase drug coverage through prescription drug plans (PDPs) that offer only prescription drug coverage. PDPs are offered by sponsoring organizations based on a 1-year contract with the Centers for Medicare and Medicaid Services (CMS).
  
• Medicare Advantage plans (MA-PDs): Individuals who are enrolled in a Medicare Advantage plan established under Medicare Part C and want drug coverage must receive it through their Medicare Advantage prescription drug plan, known as an MA-PD. They may not purchase a separate PDP, unless their plan has no drug coverage or will not offer it. If you do not know which one you are in, ask your physician or your Medicare plan contact person.

Signing Up 

Remember that this is a PLAN, not a benefit. Unless you have Medicare and Medicaid, you have to ACT! Here’s what we mean:

• If you did not enroll when you became eligible, you pay a penalty if you do enroll later.
• This penalty becomes part of your premium each month as long as you are enrolled!
• The longer you wait, the higher the premium.
• If you have coverage other than Medigap, you might not have to enroll. However, check that your insurance is indeed a substitute. We’ll explain more in a later section.

Or, Not Signing Up 

Signing up is optional, and no one should influence your decision to do so. I should not, nor should any of your physicians — even your oncologist. But unless you are on less than about $265 worth of drugs and believe you will never need any additional pharmacy prescriptions, you should sign up. However, if you aren’t on much of anything in the way of prescription drugs, consider choosing a plan that has lower premiums and waives the deductible. But cancer patients may need all kinds of prescriptions, including drugs that are not yet available. So do not pass up an opportunity to get in on Part D.

Low-Income Assistance/Low-Income Subsidies (LIS)

Obviously, the out-of-pocket costs for this plan are quite steep to discourage patients from overusing the program. However, as it’s a public program, there must be help for our less-fortunate citizens. Here’s what you need to know:

• If you have Medicare and full Medicaid benefits, you will not have to sign up, and you will pay:
  • No monthly premium for a standard plan
  • No deductible
  • A co-payment of $1 for a generic drug or $3.10 for a brand-name drug if your income is below $9,800 (if you’re single) or $13,200 (if you’re married)
  • A co-payment of $2.15 for a generic drug or $5.35 for a brand-name drug if your income is above $9,800 (if you’re single) or $13,200 (if you’re married)
  • No co-payments if you live in a nursing home
  • No co-payments after you spend $3,850 out of pocket on your prescription drugs
• If you are single, your income is below $13,200, and your assets** are below $6,000, or if you are married, your income is below $17,820, and your assets are below $9,000, you will pay:
  • No premium for a standard plan
  • No deductible
  • A co-payment of $2.15 for a generic drug or $5.35 for a brand-name drug
  • No co-payments after you spend $3,850 out of pocket on your prescription drugs
• If you are single, your income is below $13,200, and your assets** are below $10,000, or if you are married, your income is below $17,820, and your assets are below $20,000, you will pay:
  • No premium for a standard plan
  • A $53 deductible
  • 15 percent of your drug costs until your prescription drug costs total $5,451 (and you have spent $3,850 out of pocket)
  • A co-payment of $2.15 for a generic drug or $5.35 for a brand-name drug, after you have spent $3,850 out of pocket on prescription drugs
• If you are single, your income is below $14,700, and your assets** are below $10,000, or if you are married, your income is below $19,800, and your assets are below $20,000, you will pay:
  • A discounted premium
  • A $53 deductible
  • 15 percent of your drug costs until your prescription drug costs total $5,451 (and you have spent $3,850 out of pocket)
  • A co-payment of $2.15 for a generic drug or $5.35 for a brand-name drug, after you have spent $3,850 out of pocket on prescription drugs

**Your savings and investments count as assets. But your home, car, burial plot, and/or life insurance policies worth up to $1,500 each do not count as assets.

Pitfalls and Pratfalls of Medicare Part D Coverage

• The details - As we said, plans can charge you nothing, nada, nil. But there is no such thing as free drugs. You need to assess the following data points no matter what plan you are looking at.
  • The premium - In my state, this ranges from $9.70 to $80.90. There are many plans around the United States that charge more than $100 per month. Why the difference? The deductible, help with the doughnut hole, types of drugs you can get, and possible higher co-pays for some expensive drugs are what you will find. Look at this carefully because it probably changed from 2006 to 2007.
  • The deductible - Many plans now waive the deductible. This is really great if you have annual drug costs of less than $1,000. Otherwise, you may be paying for this in ongoing costs such as premiums.
  • Co-payments - This means that you can have one co-payment for generic drugs and another for branded drugs. It also means you can have higher co-payments for more expensive drugs so that your plan does not have to pay so much. This is a common practice of all plans to steer toward generics versus brands.
  • Doughnut hole - Help with the doughnut hole is available from some plans, but the amount can vary, and it is generally for generic drugs. It also may mean that other costs will be substantially higher.
  • Selection of drugs - Most plans show what they will allow out of the top 100 drugs. This can range from 99 to the low 70s. But many cancer drugs are not in the top 100, and plans do not have to have all cancer and supportive-care drugs on formulary, even though they will be required to provide you access to cancer drugs (see below discussion on formularies). This means you need to call and ask them before you sign up, unless your doctor is giving you your drugs.
  • The rest of Medicare - Make sure that the plan does not change your Medicare Part A and B, unless you want to change it. If you go on Medicare Advantage, you might lose your ability to choose a doctor. The flip side is you may pay less out of pocket. Just know what you are doing before you give up current benefits.

• Formularies - This is how Part D will restrict what drugs you get. In general, Medicare Part D plans are required to include at least two drugs within each therapeutic category and class of Part D drugs on their formulary. The drugs included in each class or category must include a variety of strengths and doses. In situations where there are only two drugs available in a category or class, and one drug is clinically superior to the other, the plan may limit the number of drugs in that category or class to the one clinically superior drug, if the Centers for Medicare and Medicaid Services (CMS) approves. CMS has directed potential Part D plan sponsors to include “all or substantially all” of the drugs in six categories that are often prescribed for Medicare beneficiaries — antidepressants, antipsychotics, anticonvulsants, HIV drugs, cancer medications , and immunosuppressants — on their Part D formularies. This may be good news for you, if we just understood what “substantially all” meant!

• True out-of-pocket Costs (TrOOP) -  What is counted in your doughnut hole is an interesting math exercise. Payments that count toward the yearly $3,850 out-of-pocket limit are referred to as true out-of-pocket expenses, or TrOOP. Only out-of-pocket costs for formulary drugs that are paid for by the beneficiary, a family member, or other person acting on his or her behalf or by a state pharmacy assistance program are considered TrOOP and are counted toward the $3,850 out-of-pocket limit. Payments made by other insurance, including employer-sponsored plans and AIDS Drug Assistance Programs (ADAPs), do not count toward the limit. Such payments work to increase the amount you must spend before the reduced cost sharing for high drug expenses kicks in for your costs. Thus, not only are beneficiaries responsible for paying the full costs of nonformulary prescriptions, they get no credit toward the Part D out-of-pocket limit for those expenses, even though they spent money. Pharmaceutical company programs and foundations can cover TrOOP, if they so desire.

• Actuarial equivalency - Check this out, folks. This is the mystery theater of Part D. As we outlined above, Part D drug plans are not required to offer a standard benefit, but can offer alternative prescription drug coverage. Alternative coverage must be “actuarially equivalent” to the standard benefit — and it is hard to figure what that means. Simply put (and it is not all that simple), it means that the value of the benefit package must be equal to or greater than the value of the “standard” benefit package as we described previously. This can mean different co-payments for some similar drugs. For example, a beneficiary’s share of the cost may be less for a generic or preferred brand-name drug than for a nonpreferred brand-name drug, if all drugs are the same basic ingredient. The good news is that a plan that has an alternative benefit package cannot impose a higher deductible ($265 in 2007) or require a higher out-of-pocket doughnut hole limit ($3,850 in 2007) than required by the standard benefit. But they can charge a higher premium and/or cover fewer drugs. It pays, literally, for you to really understand your choices and monthly and annual costs.

• Enhanced coverage by some plans - Enhanced alternative coverage might also include coverage of drugs that are excluded under Part D. A prescription drug plan (PDP) that offers this enhanced coverage in a certain area (along with a higher premium, in all probability) must also offer a standard plan in that region. The reason is that, for enhanced coverage, the premium might be too high for some patients.

Before you enroll in a plan, remember this … 

• This prescription drug law does not add a prescription drug benefit to the Medicare program itself. Instead, the act requires people who want drug coverage to select and enroll in a private plan in order to obtain prescription drug coverage.
  
• There is a late penalty for people who don’t enroll in a Part D drug plan when they are first eligible, unless they have creditable coverage. Creditable coverage includes coverage that is comparable to the new Medicare Part D prescription drug benefit, such as coverage provided under Medicaid or an employer-sponsored health plan.
  
• This is not a democracy (the Part D benefit, we mean). The law now requires people to remain in the drug plan they choose for a year, but allows drug plans to change the drugs they cover during the year with just 60 days notice to beneficiaries. This means that while you think you know what drugs you might get, you really don’t. Understand your appeal rights under whatever plan you choose so that you can appeal these ad hoc decisions.
  
• There is not a standard Part D premium amount. The monthly $27.35 premium amount used in discussions about the new plan is just an estimate of what the average premium may be. Further, the actual premium can vary by plan and by geographic area. This means you will have a short time to shop around for the best deal!
  
• The Part D law allows plans to vary from the “standard” drug benefit (as long as the benefit package offered is the actuarially equivalent (meaning that the total value is the same) as the basic benefit. Read the fine print as this can change your access to your prescriptions.
  
• Medigap does not cover your gaps - This can only be done with low-income subsidies or through pharmaceutical programs (which are also for low-income people).The TrOOP is a tricky calculation — you’ve got to know the formulary in your plan. The prices of nonformulary prescriptions are NOT included when calculating the annual $3,850 out-of-pocket (TrOOP) spending cap. Payments made toward the initial $265 and co-payments count toward the TrOOP, but only when paid for drugs on the plan formulary.
  
  Premium payments do not count toward the out-of-pocket requirement. Also, co-payments, deductibles, and other costs paid for by a retiree health plan (as opposed to by you) are not counted toward the out-of-pocket requirement. This means that some people will spend more than $3,850 before escaping from the doughnut hole.
  
• This is a lot for Medicare patients to absorb in a short time. Attend seminars in your area and discuss this with your doctors. There is not much time left!

CHECK OUT OUR WEBOGRAPHY AND MEDICARE LIBRARY FOR MORE INFORMATION ABOUT THE MEDICARE PRESCRIPTION DRUG BENEFIT!!! READ EVERYTHING YOU CAN!!!