Medicare and Part D

Overview of the new Medicare
prescription drug program

Drafted by Project Inform and San Francisco AIDS Foundation. Revised: July 21, 2005.

With the passage of the Medicare Modernization Act of 2003 (MMA), Congress created the first Medicare prescription drug benefit, which will take effect January 1st, 2006 and is called Medicare Part D. This represents the largest shift in public benefits in forty years and consequently it will have a substantial impact on the HIV/AIDS community. Nationally, there are 60,000 to 80,000 Medicare beneficiaries with AIDS, 70 to 85% of whom also qualify for Medicaid (dual eligibles). In California, there are roughly 13,500 dual eligibles.

Beginning November 15, 2005, beneficiaries can enroll in one of two types of private insurance policies to receive Medicare Part D prescription drug coverage. Beneficiaries will enroll in either a prescription drug plan (PDP), providing only prescription drug services or a managed health care plan (known in Medicare as Medicare Advantage plans) with a prescription drug benefit (MA-PD). The Centers for Medicaid and Medicare Services (CMS), the agency that administers Medicare and Medicaid, has required that there be a minimum of two plans to choose from in each region. However, it is likely that most beneficiaries will have a variety of plans from which to choose. People who do not enroll in a plan by May 15, 2006 face a financial penalty for late enrollment.

People who are dually eligible face a different situation than the “standard” beneficiary. They must enroll in a Medicare Part D plan because their Medi-Cal prescription drug coverage will end January 1, 2006. They will be auto-assigned to a random plan in October, 2005. If no plan changes are made, dually eligible individuals will be automatically enrolled in that plan by January 1, 2006.

Each of the plans will create a formulary (list) of prescription drugs available to Medicare beneficiaries. Formularies are required to include at least two drugs from each Part D covered therapeutic class of drugs. There are some drugs that are often covered by Medicaid but have been excluded from Part D coverage including benzodiazepines, over the counter drugs, weight loss and weight gain drugs (not including anti-wasting drugs) and vitamins and minerals. Medicaid programs will decide if they will continue to cover these drugs for those who are dually eligible.

CMS has issued guidance stating that plans should cover all or substantially all of six classes of drugs, including anti-retroviral drugs, antidepressants, anti-psychotics, anticonvulsants, anticancer agents, and immunosuppressants. CMS has further said that anti-HIV drugs should not be subject to prior authorization, with the exception of Fuzeon, which can be put on prior approval only for those not currently on the drug.

Plans are only asked to fully cover anti-retrovirals; other drugs essential to HIV care such as medication management drugs, drugs for the treatment and prophylaxis of opportunistic infections or co-morbidities, will not necessarily be fully covered. All drugs, including those in the “protected classes”, approved after January 1, 2006 will go through the standard plan approval process. Plans are not required to provide reimbursement for the use of off-label drugs, although CMS is reviewing the process by which reimbursement is requested to ensure that it is not “burdensome”. Plans are allowed to “tier”, or charge higher co-pays for certain drugs. A prescription drug plan can also change its formulary at any time. It is required to provide 60 days notice, in writing, to individuals enrolled in the plan.

Many in the Medicare population, particularly the dual eligibles, may be hard to reach and could be confused by the benefit and the information intended to help them understand it. Thus, it is essential to ensure that clients keep all paperwork received from CMS, SSA or California DHS related to their prescription drug coverage and, if possible, review it with a case manager, benefits counselor, or other health care advocate.

Below you will find information, much of it specific to Californians, about how Medicare Part D will affect Medicare-only clients, clients that are Medicare and ADAP eligible and clients who are dually eligible for Medicare and Medi-Cal. For each of these groups, you will find information about how much a client will have to pay for his or her prescription drugs under the new benefit, if and how a client can receive a low-income subsidy (known as extra help), some information about how a client’s Medi-Cal services may be affected, how the AIDS Drug Assistance Program (ADAP) may interact with Medicare Part D and other important information.

It is important to note that all of the cost sharing obligations under Part D, with the exception of the plan premiums, are tied to the cost of the benefit, so all dollar amounts mentioned are estimated for plan year 2006. It is projected that these costs will rise each year. Additionally, some of the information included in this document, particularly the information regarding how ADAP may interact with Medicare Part D coverage, has not yet been completely decided and could change as more decisions are made about benefits coverage. Accordingly, the document will be updated as significant changes occur.

How Part D will affect
Medicare-only clients (Standard Benefit)
Clients who currently receive their primary medical care through Medicare only can (but are not required to) enroll in a Medicare part D prescription drug plan or managed care health plan between November 15, 2005 and May 15, 2006. People who do not enroll during this period are subject to a financial penalty. Once a Medicare only client enrolls in a plan, they can switch plans only once each year during an open enrollment period.

1. What will Medicare-only clients have to pay?

• Clients will pay an estimated average annual premium of $420 or $37 monthly in 2006.
• Clients will also pay an annual $250 deductible for all prescription drug costs in 2006.
• Between $251 and $2250 in prescription drug costs, beneficiaries will fall into the initial benefit level. Here, individuals will pay a 25% co-pay for prescription drugs. For example, if a drug costs $100, the individual will pay $25.
• Between $2251 and $5100 in drug costs, individuals receive NO coverage. This is often referred to as the “doughnut hole.”
• Once a person meets $3600 in True Out Of Pocket expenditure (TrOOP), or the money they spend on their own, and overall drug costs are greater than $5,100, individuals will pay a 5 % co-pay. In other words, if a drug costs $100, the individual will pay $5. This coverage is referred to as “catastrophic coverage.”

2. Medicare only clients may be eligible and can apply for “extra help” through Medicare Part D’s Low Income Subsidy (LIS)

• If Medicare-only clients earn below 135% of the federal poverty level (FPL), $12,919.50 for a single and $17,320.50 for a couple, and have assets at or below $6,000 for a single person and $9,000 for a couple, they are eligible for the full Low-Income Subsidy.
• With the full subsidy, clients will pay no premium and no deductible. They will have no gap in their coverage (doughnut hole).
• Clients earning below 100% of the FPL ($9,570 for singles, $12,830 for couples) will pay a co-pay of $1 for a generic and $3 for a brand name drug.
  Those earning above 100% of the FPL will pay a co-pay of $2 for a generic and $5 for a brand name drug.
• If Medicare-only clients earn below 150% FPL ($14,355 for a single and $19,245 for a couple) and have assets at or below $10,000 for a single and $20,000 for a couple, they will receive a partial low-income subsidy.
• With the partial subsidy, clients will pay a sliding scale premium (not higher than $420 a year), a $50 deductible, a 15% co-pay up to $3,600 in TrOOP (out of pocket costs), and a co-pay of $2 for a generic and $5 for a brand name drug after reaching $3,600 in out of pocket costs.
• Clients who would potentially qualify for either of the Low Income Subsidies should receive a letter and an application from the Social Security Administration (SSA) informing them that they may be eligible for “extra help” and instructing them on how to apply. A copy of this letter can be found in the packet of information distributed during the forum.
• It is very important for everyone who might be eligible to apply for the benefit. It is also essential that the client keep the application and seek assistance with applying, if necessary.
  Clients who are potentially eligible for LIS should also be screened for Medi-Cal or Medicare Savings Programs (MSP)

3. Other important information for Medicare-only clients

• Individuals should enroll in a prescription drug plan (PDP) or managed health care plan (MA-PD) by May 15, 2006. If they enroll after this date, they will likely be charged a 1% late enrollment fee per month. This fee will continue to accrue until they have enrolled. For example, if an individual enrolls in May, 2007 they will face a 12% increased premium.
• Once enrolled in a particular plan, beneficiaries in the Medicare only category can change plans only once per year, during an open enrollment period.
• If a particular drug is not covered, beneficiaries can file an exception with the PDP or MA-PD to get coverage. A standard exception takes 72 hours, while an expedited exception requires a physician’s involvement and takes 24 hours to get back to the physician. If a plan denies an exception, the beneficiary may file an appeal, which has a much longer time frame. The plans are not required to dispense an emergency supply of drugs during the exceptions or appeals process.

How Part D will affect Medicare-only clients who
use ADAP to obtain prescription drugs
In California, most Medicare-only beneficiaries use ADAP to obtain prescription drugs. All of the information above applies to Medicare only clients who use ADAP. These clients can and should apply for the LIS as well if they may qualify. However, Medicare/ADAP eligible clients may receive a portion of their prescription drug coverage from both programs as you will see below.

1. What will Medicare and ADAP eligible clients have to pay under the Part D prescription drug benefit?

• Medicare only clients will likely have to buy into their Medicare prescription drug benefit (Part D) before ADAP can cover expenses. This means that in order to continue receiving ADAP benefits, clients will have to enroll in and pay premiums under the Medicare part D drug benefit.
• Currently, it appears that these clients will have to pay the premium for Medicare Part D out of pocket.
• Advocates are working to identify other sources of coverage to pay premiums.

2. What will ADAP pay for Medicare and ADAP eligible clients?

• Under Medicare Part D, ADAP will likely pay the deductible for a Medicare-only client ($1-$250 in drug costs)
• ADAP will also likely pay the 25% co-pay, not covered by Medicare during the initial coverage period (between $251 and $2250 in drug costs).
• Once the client reaches $2251 in drug costs (beginning of the doughnut hole) ADAP will provide the rest of the annual drug coverage. Because ADAP can’t count toward out of pocket expenses, the individual will never reach the catastrophic level of coverage under Medicare Part D.

3. What will Medicare cover for Medicare and ADAP eligible clients?

• Medicare will cover 75% of drug costs during the initial coverage period, when the client has between $251 and $2250 in prescription drug costs. The remaining 25% co-pay will likely be covered by ADAP.

4. Other important information for Medicare and ADAP eligible clients

• Clients will have to use ADAP participating pharmacies in their Prescription Drug Plan to receive cost-sharing assistance.
• ADAP can only provide cost-sharing assistance for the drugs included on the ADAP formulary.

How Part D will affect dual-eligible
(Medicare/Medi-Cal) clients
Individuals who are eligible for both Medicare and Medi-Cal are referred to as dual eligibles. These clients currently receive much of their primary medical care through Medicare and prescription drug coverage and some other health care services through Medi-Cal. As of December 31, 2006, dual eligibles will lose Medi-Cal drug coverage and will be required to enroll in the Medicare prescription drug program. They can continue to receive all other Medi-Cal services to which they are eligible.

1. What will dual eligible clients have to pay?

• People who are dually eligible are deemed eligible for the full Low Income Subsidy.
• Clients earning below 100% of the FPL ($9,570 for singles, $12,830 for couples) will be required to pay a co-pay of $1 for a generic and $3 for a brand name drug, except those who are institutionalized. They will have no co-pays.
• Those earning above 100% of the FPL will be required to pay a co-pay of $2 for a generic and $5 for a brand name drug.
• Dual eligible clients are subsidized for “cost-average” plans. If they wish to enroll in a higher cost plan, they will have to pay the difference between the average premium, as deemed by CMS, and the premium cost of the more expensive plans.

2. What dual eligibles will NOT have to pay:

• Premium (as long as plan is considered “cost average”)
• Deductible
• Gap in coverage (no doughnut hole)
• Co-pays, after $5,100 in drug costs. (This has yet to be clarified by CMS.)

3. How will ADAP interact with Medicare Part D for dual eligibles?

• As of now, ADAP will likely pay co-pays for those drugs that are also on the ADAP formulary.
• ADAP may also cover a drug that is not covered under the client’s Prescription Drug Plan if it is on the ADAP formulary.
• People will have to use a pharmacy that is in their plan and also participates with ADAP to access co-payment assistance.

4. What will people who are dually eligible and have a Share of Cost (SOC) under California’s Medically Needy program have to pay?

• People who are responsible for a SOC (the amount of income over Medi-Cal eligibility level that a client must spend down or pay to Medi-Cal before accessing benefits each month) must incur one monthly SOC to become eligible for the full LIS under Medicare for one full plan year.

5. How will ADAP interact with dual eligibles who currently have a share of cost under Medi-Cal?

• Currently, ADAP pays share of cost for many who receive prescription drugs through Medi-Cal.
• As of January 2006, ADAP will no longer be permitted to pay Medi-Cal share of cost for dual eligibles.
• ADAP will likely cover the co-pay obligations for those drugs that are on its formulary if the client uses and ADAP participating pharmacy, just as it may with full dual eligibles

6. Other important information

• Dual eligible clients will receive letters from CMS starting in June, 2005 deeming them eligible for the Low Income Subsidy
• Dual eligible clients will receive another letter from CMS assigning them to a drug plan starting in October, 2005. If no change is made, they will be automatically enrolled in that plan by January 1, 2006.
• Dual eligible clients can change plans every month
• Dual eligible clients will continue to receive all Medi-Cal services for which they are eligible with the exception of the prescription drugs that can be covered by Medicare Part D. There are some drugs that have been excluded from Part D coverage and are covered under Medi-Cal. Medi-Cal will continue to provide those drugs to the dual eligibles.
• All dual eligibles who have a SOC and have incurred it in any ONE month from March 2005 – December 2005, will be eligible for the LIS for the plan year 2006.
• Most California dual eligibles living with HIV will qualify for LIS for the plan year 2006, as ADAP will have paid SOC in one of the qualifying months.
• In order to be eligible for LIS for plan year 2007, clients will have to incur a full SOC in one month of year 2006.
• Since SOC payment through ADAP for dual eligibles will end on January 1, 2006, clients who have a Share of Cost (SOC) that has previously been met by ADAP will have to be individually counseled about how to maintain access to any necessary Medi-Cal services. It is unclear what, if any resources, can be used to meet that obligation
• Other clients who have a SOC may want to consider moving to a Medicare Savings Program, which does not require SOC payments but provides coverage for Medicare premiums and makes one automatically eligible for the LIS under Medicare Part D. However, this client would likely lose access to Medi-Cal services therefore, such a move requires individual counseling and decision making.

**This document is a draft. We would appreciate any feedback to help make this document most helpful and useful for service providers. If you have comments or questions about the format or content of this document, please email them to akasdan@sfaf.org.

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