There has been much talk in this year’s Presidential Election about the Medicare Prescription Drug Law. Passed in December 2003, the Medicare Modernization Act, as it is being called, provides for a temporary benefit, the Prescription Drug Discount Card Program which is in effect now until December 2005. Beginning in January 2006, the Medicare Part D Prescription Drug Benefit will be available to all persons eligible for or currently enrolled in Medicare Part A and/or Part B. The following is some information about how the Medicare Part D benefit will work.
How will the prescription drug plan work?
Medicare beneficiaries will be able to sign up for a private Medicare approved prescription drug plan that will provide them with the Medicare prescription drug benefit, irrespective of income levels. The benefit will not be provided by Medicare itself but by private companies under contract with Medicare.
What will the prescription drug benefit cover?
The “standard” prescription drug plan will be required to cover two FDA approved prescription drugs from each therapeutic class. Which exact drugs are covered will differ by private plan. All plans are encouraged to use formularies (lists of available drugs) to limit the drugs that are covered and other techniques to control their costs.
What will the beneficiary pay for prescription drugs? The standard prescription drug benefit has a monthly premium which will differ by plan. There will also be an annual deductible set by the statute of approximately $250 for 2006. After that, the consumer will pay a 25% co-payment on covered drugs until he/she has received $2,250 worth of drugs. After the consumer has received $2,250 in covered medications, he/she must pay 100% of the cost of covered medication until his/her total out-of-pocket expenditures on covered drugs comes to $3,600. This is what is referred to as the “doughnut hole.” After having spent $3,600 on covered medications, the consumer will have coverage again. At this point, he/she will pay a co-pay of $2 each for a generic or preferred drug or $5 or 5% of a drug that is not generic or preferred, whichever amount is more. These costs are not fixed; they are estimated for year 2006 and are expected to rise every year.
Note further that the money a Medicare beneficiary spends on medications that are not covered by his or her private insurance plan will not count towards his/her “total out-of-pocket costs” and will not help him/her get to the deductible or get out of the doughnut hole. Only drugs that are covered by the private plan will count towards the costs described above.
How will consumers enroll into Medicare Part D Plans?
Consumers will enroll directly through the private insurance companies that offer the Part D benefit.
Enrollment into Medicare Part D Plans:
Medicare will contract with Prescription Drug Plans and Medicare Advantage Plans (formerly called Medicare + Choice), most typically Medicare HMO’s, to provide prescription drug coverage to Medicare consumers. Consumers who are enrolled in a Medicare Advantage Plan that offers drug coverage must obtain drug coverage through that plan. Other Medicare consumers can enroll in any Prescription Drug Plan that covers their service areas. Each Prescription Drug Plan is required to enroll any person eligible for Part D who wants to enroll.
Those who want to enroll in a Part D plan must apply directly to the entity offering the plan they want to join. The initial enrollment period is November 15, 2005 to May 15, 2006. With few exceptions, once consumers enroll in a Medicare Part D plan, they are locked-in to their plan choice for a year. Plans, however, can change their coverage at any time throughout the year.
Late Enrollment Penalty
Consumers who are eligible for Part D but who choose to not enroll in a Part D plan during the enrollment period will incur a substantial penalty if they enroll in a Part D plan at a later time unless they had creditable coverage (this is defined as coverage that is actuarially equivalent to the standard benefit coverage under Part D). Specifically, the consumer will have to pay a higher premium for their Part D coverage forever.
Is there any help for Medicare beneficiaries with lower incomes?
Yes. People with lower incomes will be able to get a subsidy that will cover many of the costs described above, depending on their income and assets. Generally, consumers with income less than 150% of the federal poverty level ($1164/mo/single) and assets less than $10,000/single or $20,000/married will be eligible for some degree of lower-income subsidy benefit.
— J. Ken Butera