Part D: prescription drug insurance.
Medicare Part D is the Prescription Drug Insurance program added to Medicare by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).
Prescription Drug Insurance is a voluntary program of health insurance that covers a portion of prescription drug costs not generally covered by other Medicare programs. Prescription Drug Insurance is offered through private health plans. Participants may stay with traditional Medicare and enroll in a drug-only plan or may choose a Medicare Advantage plan with comprehensive benefits. Prescription Drug Insurance is partially financed through premiums paid by participants, whether for drug-only plans or as part of a Medicare Advantage premiums.
During the transition period before the Prescription Drug Insurance program was implemented, a Medicare drug discount card was available for a small annual enrollment fee.
E-2. When did Medicare Part D become effective?
The Part D Prescription Drug Insurance program was effective January 1, 2006. Initial open enrollment for Prescription Drug Insurance began November 15, 2005 and ran for six months to May 15, 2006. In 2006 and future years, open enrollment runs from November 15 to December 31 for the following benefit year. The enrollment periods for drug-only plans and Medicare Advantage plans run concurrently.
E-3. Who is eligible for Medicare Part D?
Anyone who is entitled to Medicare Part A or enrolled in Part B is eligible to participate in Part D Prescription Drug Insurance. All Medicare participants were similarly eligible for the prescription drug discount card, excepting only those enrolled in Medicaid and entitled to Medicaid drug coverage.
E-4. What benefits does the Prescription Drug Insurance provide?
Prescription Drug Insurance offers a standard benefit to most participants. Participants with incomes below 135% and between 135% and 150% of the federal poverty guidelines will have lower cost sharing requirements than under the standard benefit.
Prescription Drug Insurance offers the following standard benefit in 2010:
Prescription Drug Beneficiary Medicare Expenses Costs Pays First $310 100% (up to $310) Nothing $310-$2,830 25% (up to $630.00) 75% (up to $1,890.00) $2,830-$6,440.00 100% (up to $3,610.00) Nothing Above $6,440.00 Up to 5% (based on income) 95% or more
Beneficiaries with incomes below 135% of the federal poverty guidelines have no cost-sharing obligation for prescription drug expenses above $6,440.00. Beneficiaries with incomes between 135% and 150% of the federal poverty guidelines have $2.50 and $6.30 co-pays for generic and name-brand prescriptions. Those with incomes above 150% of the federal poverty level have 5% co-pays.
For 2010, 135% of the federal poverty guidelines is $14,620.50 for a single person and $19,669.50 for a married couple; and 150% of the federal poverty guidelines is $16,245 for a single person and $21,855 for a married couple. (Under Section 1012 of the Department of Defense Appropriations Act of 2010, the federal poverty guidelines are frozen at the 2009 levels and remain in effect until updated poverty guidelines are published.)
Sponsoring organizations may offer alternative prescription drug coverage through plans that (1) provide coverage, the actuarial value of which is at least equal to the actuarial value of the standard prescription drug coverage, (2) offer access to negotiated prices, and (3) are approved by CMS.
Part D plans may also provide supplemental prescription drug coverage that offers cost-sharing reductions and optional drugs. A plan may charge a supplemental premium for the supplemental coverage. But a sponsoring organization offering supplemental coverage in an area must also offer a prescription drug plan in the area that provides only basic coverage for no additional supplemental premium. Basic coverage is either the statutorily-defined standard benefit or the alternative prescription drug coverage without any supplemental benefits.
E-5. What does the Prescription Drug Insurance cost?
Medicare Prescription Drug Insurance requires payment of a monthly premium that averages about $30 in 2010. The premium may be paid separately for a drug-only plan or as part of the premium for a comprehensive Medicare Advantage Plan.
Beneficiaries who choose not to enroll in Prescription Drug Insurance during their initial enrollment period may face a late enrollment penalty if they later choose to enter the program. The late enrollment penalty is the greater of "an amount that [CMS] determines is actuarially sound for each uncovered month" or "1 percent of the base beneficiary premium" (the national average premium for the year of late enrollment) per month. (This penalty is similar to the penalty currently in place for late enrollment in Medicare Part B, 10 percent per 12-month period.) For those enrolling in 2010, the penalty will be approximately $0.32 per full month in which they were eligible to enroll in Prescription Drug Insurance but did not.
Beneficiaries who have other sources of drug coverage may be able to maintain that coverage and not enroll in Prescription Drug Insurance without penalty. If a beneficiary's existing coverage is at least as good as Prescription Drug Insurance (i.e., considered "creditable coverage") then the beneficiary can avoid any late enrollment penalties if he later enrolls in Prescription Drug Insurance. Creditable coverage must be actuarially equivalent to Part D Prescription Drug Insurance. Failure to maintain creditable prescription drug coverage for a period of 63 days or long may subject an individual to a later enrollment penalty.
Entities (such as a former employer) offering prescription drug coverage to Part D eligible individuals must disclose to those individuals whether the coverage they provide is creditable coverage as defined by CMS. These entities must also inform CMS of the status of this coverage. See E-7.
E-6. What notice must an employer who maintains an accident or health plan provide to Medicare-eligible individuals?
Employers and plan sponsors who offer prescription drug coverage to individuals eligible for Medicare Part D must advise those individuals whether the offered coverage is "creditable." Eligible individuals who do not enroll in Part D when first available, but who enroll later, have to pay higher premiums permanently, unless they have creditable prescription drug coverage. See E-7.
To determine that coverage is creditable, a sponsor need only determine that total expected paid claims for Medicare beneficiaries under the sponsor's plan will be at least equal to the total expected paid claims for the same beneficiaries under the defined standard prescription drug coverage under Part D. The determination of creditable coverage status for disclosure purposes does not require attestation by a qualified actuary (unless the employer or union is applying for the retiree drug subsidy available under the MMA).
To assist sponsors in making the determination that coverage is creditable, the Center for Medicare & Medicaid Studies (CMS) issued guidance with example "safe harbor" benefit designs. A plan design will automatically be deemed creditable if it includes
1. coverage for brand and generic prescriptions;
2. reasonable access to retail providers and, optionally, for mail order coverage;
3. benefits payments designed to pay on average at least 60% of participants' prescription drug expenses; and
4. at least one of the following:
a. an annual prescription drug benefit maximum of at least $25,000,
b. an actuarial expectation that the plan will pay benefits of at least $2,000 per Medicare-eligible individual, or
c. for plans that cover both medical expenses and prescription drugs, an annual deductible of no more than $250, an annual benefit maximum of at least $25,000, and a lifetime maximum of at least $1,000,000.
Under the CMS guidance, once a sponsor determines whether coverage is creditable, the sponsor must provide notice to all Part D-eligible individuals covered by or applying for the plan, including Part D-eligible dependents. In lieu of determining who is Part D eligible, an employer sponsor may provide notice to all active employees, along with an explanation of why the notice is being provided.
The required notice to beneficiaries must, at a minimum:
1. contain a statement that the employer has determined that the coverage is creditable (or not creditable);
2. explain the meaning of creditable coverage;
3. explain why creditable coverage is important, and caution that higher Part D premiums could result if there is a break in creditable coverage of 63 days or more before enrolling in a Part D plan; and
4. if coverage is not creditable, explain that an individual may generally enroll in Part D only from November 15 through December 31 of each year.
CMS recommends that sponsors also provide the following clarifications in their notice:
* An explanation of a beneficiary's rights to a notice, i.e., the times when a beneficiary can expect to receive a notice and the times that a beneficiary can request a copy of the notice.
* An explanation of the plan provisions that affect beneficiaries when they (or their dependent) are Medicare Part D eligible. These options may include, for example
* that they can retain their existing coverage and choose not to enroll in a Part D plan; or
* that they can enroll in a Part D plan as a supplement to, or in lieu of, the other coverage.
* If their existing prescription drug coverage is under a Medigap policy, that they cannot have both their existing prescription drug coverage and Part D coverage, and that if they enroll in Part D coverage, they should inform their Medigap insurer of that fact, and the Medigap insurer must remove
the prescription drug coverage from the Medigap policy and adjust the premium, as of the date the Part D coverage starts.
* Whether the covered individuals and/or their covered dependents will still be eligible to receive all of their current health coverage if they or their dependent enrolls in a Medicare prescription drug plan.
* A clarification of the circumstances (if any) under which the individual could re-enroll in his prescription drug coverage if he drops the current coverage and enrolls in Medicare prescription drug coverage. (For Medigap insurers, this would be a clarification that the individual cannot get his prescription drug coverage back under such circumstances).
* Information on how to get extra help paying for a Medicare prescription drug plan including the contact information for the Social Security Administration (SSA).
The CMS guidance includes model initial notices and suggested language that a sponsor may choose to use. Sponsors were required to provide initial notices to all beneficiaries by November 15, 2005. The guidance and model notices are available on the CMS website at www.cms.hhs.gov/creditablecoverage.
Sponsors must also disclose to CMS whether the coverage is creditable. The disclosure must be made to CMS on an annual basis, and upon any change that affects whether the coverage is creditable. CMS has posted guidance on the timing and format of the required disclosure and a model Disclosure to CMS form on the CMS website at www.cms.hhs.gov/creditablecoverage.
PRESCRIPTION DRUG MARKETING RULES
E-7. What are the rules about the marketing of Medicare Prescription Drug plans?
In 2008, the Centers for Medicare & Medicaid Services (CMS) issued final regulations governing the marketing of Medicare Prescription Drug plans (Part D). Plans and agents must have been in compliance with the new regulations when they began their marketing activities on October 1, 2008 for the 2009 open enrollment period.
On May 16, 2008, CMS issued proposed regulations governing Medicare Part D, including new restrictions on the marketing of Part D plans to Medicare beneficiaries. On July 15, 2008, Congress enacted the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Section 103 of MIPPA, effective for plan years beginning on January 1, 2009, established new statutory prohibitions and limitations on sales and marketing activities, many of which were similar (or identical) to the CMS proposed regulations. The final regulations implemented those rules immediately.
Among other prohibitions, Section 103 of MIPPA and the final regulations significantly restrict the marketing of Medicare Part D plans:
* The rules broadly prohibit "cold calls" and other unsolicited contact. This prohibition includes door-to-door sales and unsolicited telephone calls. The rules do not prohibit plan mailings, but the final regulations prohibit calling to confirm that the beneficiary received the mailing. Agents may call in response to specific requests by beneficiaries to be contacted.
* The rules prohibit sales activities at educational events. Events designed to provide the public with objective information about Medicare must be free of any marketing materials or enrollment information for a specific plan or organization. Plans and agents may hold sales events that are clearly labeled as such, but they may not be disguised as educational events.
* The rules prohibit plans and agents from providing meals at Medicare sales meetings. CMS has not yet defined the terms, but light refreshments and "snacks" are permissible.
* The rules prohibit sales activities in settings where individuals receive healthcare services. This rule permits marketing in common areas such as waiting rooms, but prohibits marketing in treatment rooms. Plans may arrange meetings with residents in long-term care facilities as with any other private residence.
* The rules prohibit marketing any non-health insurance product (such as life insurance or annuities) during a Medicare marketing or sales meeting.
The rules also require agents to document that, prior to making an appointment, beneficiaries agree to the scope of products to be discussed at the meeting. Appointments made in person require written documentation; appointments made over the phone require recorded documentation. At a meeting in an agent's office or on the phone, additional products may not be discussed unless the beneficiary requests the information. In a meeting at a beneficiary's home, an agent may not discuss any product not within the originally-identified scope of the meeting. They must schedule a separate appointment at least 48 hours later.