GHDP 143-23: Medicare Part D - Prescription Drug Benefits Flashcards
Introduction
- The Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA) created Medicare Part D, a voluntary drug benefit for seniors and disabled persons
- It provided an opportunity for employers providing drug benefits to reduce their costs
- Prescription coverage is provided solely in the private sector but subject to extensive regulatory control by CMS
- Individual Medicare members can buy a Medicare Advantage prescription drug plan (MA-PD) in which a single plan provides both medical and drug coverage, or
- They may purchase a standalone prescription drug plan (PDP) - Individuals purchasing a PDP will also enroll in one of the following medical plans
- The plans are integrated so there is no duplication of coverage
- Part A which covers inpatient care (hospital, SNF, HHC, hospice) & Part B which covered outpatient care (physician services)
- Part C covers both IP and OP services as part of a Medicare Advantage plan
6. Both PDP and MA-PD plans must meet the following requirements
- Must offer a basic drug benefit called the “defined standard benefit”
- May offer supplemental benefits called “enhanced benefit”
- Can be flexible in benefit design
- Must follow marketing guidelines
- Must meet fairly restrictive formulary guidelines
- Mandatory mail-order is not permitted
- Most members will ay a PDP premium but members in certain MA-PD plans might have $0 premium for the entire Medicare Advantage plan
- Premium subsidies are available for low-income seniors
- Dual eligible (members with Medicare and Medicaid) automatically enroll in a PDP
Enrollment and Creditable Coverage
- There is an annual enrollment period from October 15th to December 7th each year
- There is a 63-day initial enrollment period when an individual turns 65 years old
- Medicare eligible members must sign up for Part D coverage when they are first eligible
4. Medicare eligible members who leave an employer plan mid-year must wait until the late fall open enrollement period unless one of the exceptions existis:
- Beneficiaries who permanently move out of a plan service area
- Individuals entering or leaving a long-term care facility
- Involuntary loss of creditable coverage (generally job elimination)
5. Late enrollment penalty if individuals do not sign-up for Part D when first eligible
- The penalty is 1% of standard plan base beneficiary premium per month for each month they wait to enroll (rounded to nearest 0.10 PMPM)
- Example:
2018 Base beneficiary premium = $35.02
If person is without coverage for 24 months, and she first enrolls for 1/1/18, her penalty will be 24 * 0.01 * 35.02 = 8.40 PMPM
- No late enrollment penalty if individual has creditable coverage, generally through an employer plan
- Drug coverage is creditable if it is at least as good as Part D
Employer Group Options
Employer Retiree Rx Coverage
1. Direct Contract EGWP
2. 800-series EGWP
3. Medicare non-EGWP
4. Group Rx plan with RDS subsidy
- Employers can either keep their retirees in their drug plan and out of Part D or put their retirees into a Part D plan
- Employers and unions have several choices around retiree Rx coverage:
a. Direct Contract EGWP (Employer Group Waiver Plan)
- Employer or union contract directly with CMS (called “Direct Contract EGWP”) as a self-insured PDP or MA-PDP
- Due to large regulatory and administrative demands, this is uncommon
- These are self-administered group Medicare PDP plans
b. 800-series EGWP
- The employer or union contracts with an insurance carrier to set up a custom Medicare PDP fully insured plan, and the carrier sets the premium
- CMS provides a subsidy that lowers member premiums
c. Medicare Non-EGWP plan
- The employer or union provides funds for members to enroll in an individual PDP plan
- CMS provides a subsidy that lowers member premiums
d. Group Rx plan with RDS subsidy
- An employer can provide Rx coverage that is not a Medicare part D plan
- For example, it could be the same Rx benefits as for active employees
- If benefits are determined to be creditable coverage, then subsidized by CMS
- The most common options selected are the RDS subsidy and EGWP
- For the RDS plan, the subsidy was set in MMA as 28% of the annual drug spending (ingredient cost plus dispensing fee less rebates) that would otherwise have been covered by Part D and is between the deductible and RDS cost limit - For EGWP, the cost savings for this option are estimated at 19%-35%
- CMS ecourages use of the EGWP option for the following reasons
(1) For the employer, there are less burdens as compared to RDS since they are borne by the insurance carrier
(2) All risk is shifted to the carrier in the fuly insured plan
(3) The cost (as premium) is fully tax deductible
- EGWPs can no longer offer enhance alternative plans, and the Medicare component of the EGWP plan is limtied to be the defined standard benefit
Standard Benefit Design
- The standard benefit design is the minimum allowable Part D plan coverage
- Part D plans are permitted to offer variations, “enhanced benefits”
- There are 4 main plan design components, each is indexed annually
a. Deductible
- After the deductible is met, the member pays 25% of the covered cost up to the initial coverage liit
b. ICL - Initial Coverage Limit
- Amount over which the member paid 100% of drug spending
- This is the start of the donut hole
- Starting in 2010, there is a donut hole discount (amount varies between brand and generic) that is applied to the cost of drugs
- The discount changes annually until it reaches 75% in 2020
- The member cost share will then be 25% from the deductible up to the TrOOP and the gap will disappear to the member
c. TrOOP - True Out-of-Pocket Limit
- This is the maximum cost sharing that must be attributed to a member before entering the catastrophic phase
- It includes deductible + copay to initial coverage limit + attributed cost share in donut hole
- Only payments for formulary drugs count toward the TrOOP
d. Catastrophic Coverage Benefit
- Cost sharing of greater 5% of drug costs or copays
- Two other values are often displayed in association with Part D benefits
a. Total covered out-of-pocket Rx spending
- This is the accumulated drug costs (plan funded or member funded) at which member moves into the catastophic phase
- It is the TrOOP + the 75% plan coinsurance between deductible and ICL
- Prior to 2010, this value defined the end of the donut hole
b. Estimated Covered Rx Costs
- Prior to 2010, this equaled the total covered oout-of-pocket Rx spending
- After that, it can be estimated based on CMS averages of usage (about 88% brand and 12% generics) in the donut hole and average drug costs
- This is equivalent to the total allowed costs at which the TrOOP is reached in a normal medical plan description
5. Donut Hole discount
a. In 2019, Part D members receive a 75% discount on the cost of brand-name drugs purchased in the donut hole
- 70% funded by the drug manufacturer
- 5% funded by the PDP plan
b. The 70% funded by the manufacturer is attributed toward the Out-of-Pocket Threshold
- If a drug’s real retail cost is $100, the members cost share is $25
- The plan’s cost is $5. The cost attributed to the OOP threshold is $95
Comparison Part D Standard Design Parameters
Project Drug Cost in Each Category 2020
