Medicare Part D History

HISTORY AND BASICS OF MEDICARE Presented by John J. Campbell, Esq. What Is Medicare? Created in 1965 as America’s National Health Insurance Original Medicare modeled after traditional medical insurance i.e., “fee for service” (FFS) Completely funded and administered at federal level Eligibility based on age or disability status (not means tested) Age 65 or older SSDI after 24 months (waiting period waived for patients with Amyotrophic Lateral Sclerosis (ALS)) ESRD patients – 3 months after dialysis begins Part A – No premium if sufficient work credits (“qualifying quarters”) i.e., beneficiary qualifies for Social Security or Railroad Retirement. Otherwise, available by paying premium Part B - Available by paying premium if eligible for Part A Premium is $78.20 for 2005. In 2007, premium will be based on income. Open enrollment from 3 months before Part A eligibility to 6 months after. Part C - Those eligible for Part A and enrolled in Part B may enroll. Part D - Those eligible for Part A may enroll. History of Medicare 1965 – Congress enacts Title XVIII of the Social Security Act, establishing the Medicare program. Medicare administered under the Social Security Administration (SSA); Section 1862 of the Social Security Act (42 U.S.C. §1395y) establishes Medicare as secondary payer to WC and GHP’s; 1972 - eligibility extended to disabled individuals under age 65 and to individuals with ESRD; 1977 - HCFA established under HEW to administer Medicare & Medicaid (enrollment continues to be handled through SSA); 1980 - Medigap insurance first comes under federal oversight; the MSP statute is broadened to include automobile, liability and no-fault insurance (including self-insurance) as third party payers; HEW breaks up into Department of Education and Department of Health & Human Services (HHS); HCFA goes under HHS History of Medicare (cont.) 1988 - Medicare Catastrophic Coverage Act – the first attempt to introduce out-patient Rx coverage. Repealed in 1989 because of complaints about high premiums for beneficiaries with higher incomes (QMB program and Medicaid spousal impoverishment protections remain) 1990 - additional standards for Medigap policies; first NAIC model regulation establishing A-J policies 1993 - Omnibus Budget Reconciliation Act of 1993 (OBRA ’93) changes to the MSP statute’s treatment of large GHP’s for working disabled and working aged – Medicare primary if GHP not due to “employment status” 1995 - First Medicare Set Aside Trust is submitted to and approved by the Dallas RO 1996 - Health Insurance Portability and Accountability Act (HIPAA) Provisions on GHP portability; also provisions regarding privacy, Medicare Integrity Program (paved the way for contractors such as COBC and WCRCJV) History of Medicare (cont.) 1997 - Balanced Budget Act establishes Medicare Part C (Medicare+Choice) and managed care is introduced officially into the provision of Medicare covered services 2000 - Benefits Improvement and Protection Act (BIPA) increased payments to Medicare HMO’s; also reduced some copayments and increase in coverage for preventive care services; HCFA announces establishment of COBC 2001 –HCFA becomes CMS; “Workers’ Compensation Commutation of Future Benefits” is CMS’s first policy memorandum on WCMSA’s; New regulations waive 24-month waiting period for SSDI beneficiaries with ALS 2003 - Medicare Prescription Drug, Improvement and Modernization Act (MMA) Medicare Part D; Medicare Part C renamed Medicare Advantage and new appeal procedures; New Medigap K & L; Revision to MSP statute invalidating Thompson v. Goetzman and expanding US authority to recover MSP overpayments from employers who sponsor or contribute to GHP’s for their employees History of Medicare (cont.) 2003-2004 - CMS publishes subsequent memoranda (FAQ’s) on WCMSA’s 2004 - COBC becomes the central submission point for all WCMSA’s; WCRCJV becomes contractor to assist RO’s with processing overload of WCMSA’s 2004-2005 - Medicare Rx discount cards 2006 - Medicare prescription drug benefits begin, no more Rx discount cards; No more Medigap Rx coverage on new policies; All provisions of the new Medicare Part D go into effect Roles of Agencies & Contractors Agencies U.S. Department of Health & Human Services (HHS) – Parent Agency Centers for Medicare and Medicaid Services (CMS) Sub-agency under HHS-Administers Medicare (and Medicaid) Central Office – Baltimore 10 Regional Offices –authority for final approval of all WCMSA’s CMS Regional Offices Region I: Boston - Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont Region II: New York - New Jersey*, New York, Puerto Rico, Virgin Islands Region III: Philadelphia - Delaware, District of Columbia, Maryland, Pennsylvania, Virginia, West Virginia Region IV: Atlanta - Alabama, North Carolina, South Carolina, Florida, Georgia, Kentucky, Mississippi, Tennessee Region V: Chicago - Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin Region VI: Dallas - Arkansas, Louisiana*, New Mexico, Oklahoma, Texas Region VII: Kansas City - Iowa, Kansas, Missouri, Nebraska *For WCMSA’s, New Jersey and Louisiana are under Region IV (Atlanta) CMS Regional Offices (cont.) Region VIII: Denver - Colorado, Montana, North Dakota, South Dakota, Utah, Wyoming Region IX: San Francisco - American Samoa, Arizona, California, Commonwealth of Northern Marianas Islands, Guam, Hawaii, Nevada Region X: Seattle - Alaska, Idaho, Oregon, Washington Contractors Fiscal Intermediaries and Carriers – coverage decisions; tracking Medicare payments; collection of reimbursements for Medicare overpayments. Both will be referred to as “Contractors” after 2006 Fiscal Intermediaries - Part A Carriers - Part B (Also conduct Part B redeterminations) Coordination of Benefits Contractor (COBC) – identifies third party payers who may be liable for Medicare covered services; prevents Medicare overpayments; central clearinghouse for third party liability information; central submission point for all WCMSA’s; Forwards WCMSA’s to . . . Worker’s Compensation Review Center Joint Venture (WCRCJV) - Reviews WCMSA submissions and forwards with recommendation to appropriate Regional Office Medicare Coverage “Reasonable and necessary for the diagnosis or treatment of an illness or injury or to improve the functioning of a malformed body member.” (One exception: hospice.) Part A- Hospital Insurance for the Elderly and Disabled In-patient hospitalization; hospice; skilled home health; SNF (limited) Part B- Supplementary Medical Insurance for the Elderly and Disabled Physician visits; outpatient care; clinical lab services; DME; physical & occupational therapy; skilled home health; some preventive services (e.g. mammograms, pap smears, influenza vaccine, etc.) Part C- Medicare Advantage – HMO’s, PPO’s, PFFS plans Part D- Prescription Drug Benefits Rx benefit under Medicare Part D not directly administered by CMS Provided through private prescription drug plans (PDP’s) and by Medicare HMO’s and PPO’s under Medicare Advantage prescription drug plans (MA-PD’s). Rx benefits under Medicare Part D available by paying a premium. The average premium for the basic benefit is estimated at $37 per month. Will vary from provider to provider. Providers will offer plans with additional prescription drug coverage, so long as they also offer the basic plan. Premiums for these more comprehensive plans will be higher. Due to the complexity of Part D Rx benefits, prescription drug costs are the only Medicare covered item not required to be considered in a WCMSA. Part D- Prescription Drug Benefits (cont.) Basic Benefit: The beneficiary must pay 100% of the Part D deductible amount of $250. For annual prescription costs from $251 through $2,250, Medicare will pay 75%. For prescription costs after the beneficiary reaches the annual out of pocket amount ($3,600 per year in 2006, and subject to increase annually thereafter), Medicare will pay up to 95%. All beneficiary payments will count toward the annual out of pocket amount. The annual out of pocket amount will not be reached until the beneficiary's total annual prescription drug costs equal $5,100 (in 2006). There is no Medicare Part D coverage for annual prescription costs from $2,251 up to $5,100. The “donut hole.” Part D Basic Benefit – Summary Table Total Annual Rx Cost Range Cost-sharing Percentage What the Beneficiary Pays $250 $500 $2,850 Medicare Part D Plan Payment Percentage 0% 75% 0% 95% What Medicare Pays $0 $1,500 $0 $0 - $250 $251 - $2,250 $2,251 - $5,100 Over $5,100 100% 25% 100% 5% Part D Low Income Benefit To be considered a “subsidy eligible individual,” the individual must meet an income test and a resource test. “Full subsidy eligible individuals” Monthly income may not exceed 135% of the Federal Poverty Line; may not have resources greater than 3 times the resource limit for SSI ($6,000 in 2005), including resources of the individual’s spouse. The following individuals are automatically considered to be full subsidy eligible individuals: individuals receiving SSI benefits; individuals eligible for Medicaid under the QMB, SLMB and QI; and “full-benefit dual eligible individuals” – eligible for both Medicare and full Medicaid benefits under any state program or demonstration waiver Full premium subsidy; $250 annual deductible waived; continuing coverage into the “donut hole.” $2 co-pay for generic and preferred multiple source drugs; and a $5 co-pay for all other drugs. If monthly income under 100% of the Federal Poverty Line the co-pays are limited to $1 and $3, respectively. No further co-pays after annual out of pocket amount. No co-pays for full-benefit dual eligible individuals in nursing homes. Part D Low Income Benefit (cont.) “Other subsidy eligible individuals” Monthly income less than 150% of the Federal Poverty Line; resources of less than $10,000 for individuals, or $20,000 for married couples Premium subsidy, calculated on a sliding scale. The annual deductible amount is reduced from $250 to $50; coverage into the “donut hole.” Coinsurance of 15% and co-pays of $2 for generic and preferred drugs, and $5 for other covered drugs. No co-pays or coinsurance after annual out of pocket limit. Part D Open Enrollment & Guaranteed Issue Initial enrollment period (IEP): November 15, 2005 through May 15, 2006. For individuals not eligible for Medicare part D during the IEP, their IEP’s will begin 3 months before they become eligible for Part D and will continue for 6 months after initial Part D eligibility. Full benefit dual eligible individuals will be involuntarily enrolled as of January 1, 2006 Annual coordination election periods from November 15 through December 31 each subsequent year. Special enrollment periods for special circumstances (e.g. full benefit dual eligible individuals, involuntary loss of creditable coverage, etc.). Beneficiaries are guaranteed the ability enroll in a PDP or MA-PD, to switch from one plan to another, or to disenroll from Medicare Part D altogether at any time during their IEP’s and during annual and special enrollment periods. A beneficiary cannot be denied enrollment during any enrollment period on the basis of age or health. Medicare beneficiaries who fail to enroll in Part D during their IEP’s are subject to a premium penalty, unless they had creditable prescription drug coverage without a gap in coverage of more that 63 days. Medicare beneficiaries will also be subject to the late enrollment penalty if they lose creditable prescription drug coverage after their IEP’s and do not enroll in Medicare Part D within 63 days. Part D Creditable Coverage Two tests, must satisfy both: Prescription drug coverage that is “actuarially equivalent to Medicare Part D;” and Must be one of the following 1) a PDP or MA-PD plan; group health plan (GHP); or private health insurance; 2) Medicaid; 3) a PACE program; 4) a military plan, including TRICARE; 5) health plans for federal and state employees; 6) State Pharmaceutical Assistance Programs (SPAP’s); 7) coverage for veteran’s, survivors and dependents; 8) a Medicare supplemental policy with prescription drug coverage; or 9) certain other types of coverage enumerated under the regulations. Liability insurance, worker’s compensation, no-fault insurance and disability insurance are not creditable coverage under the MMA. Medigap H, I & J policies are not “creditable coverage” because not “actuarially equivalent to Medicare Part D.” Part D Preexisting Condition Exclusions “Preexisting condition” is one which is first diagnosed or for which the beneficiary has received treatment within 6 months before enrollment in a PDP or MA-PD. PDP’s and MA-PD’s may not impose preexisting condition exclusions upon beneficiaries who have maintained at least 6 months of creditable coverage without a gap in coverage of more than 63 days. If a beneficiary has not maintained creditable coverage for the full 6 month period prior to enrollment, preexisting condition exclusions may not be imposed for a period of time longer than the period during which the beneficiary was without creditable coverage for more than 63 days. Part D Special MSP Provision Medicare is always the primary payer in situations involving Medicaid beneficiaries who enroll or could enroll in Medicare Part D. Medicaid is not permitted to pay for any prescription medications covered under Part D for dually eligible persons. In every other situation, Medicaid is primary to Medicare. As a consequence, individuals who are eligible to enroll in Medicare Part D will lose Medicaid benefits for their prescription medications as soon as their Part D eligibility is determined, whether they are actually enrolled in Part D or not. Part D Drug Formularies Each PDP and MA-PD permitted to follow its own drug formulary. PDP’s and MA-PD’s permitted to use a tier cost-sharing system in their formularies, based on generic or preferred status, and upon cost. If a beneficiary requires a medication that is not on the formulary or that is in a lower cost-sharing tier than a replacement drug approved by the provider, the beneficiary can request a formulary or cost-tier exception. An exception requires a physician’s statement that the non-formulary or lower cost-sharing tier medication is medically necessary; and that medication either will not be as effective as any other formulary medications (or medications on the same or a higher tier), or will actually cause harm to the patient. Current Trends In Medicare Managed Care “Cost sharing” Means testing for determining premiums and for relief from benefit limitations Benefit Limitations -- Local & National Coverage Determinations MSP enforcement WCMSA’s Future medical expenses in TPL settlements Actions against insurance carriers & employers Medicare fraud enforcement Conclusion This course has covered what Medicare is; the history of the Medicare program; how Medicare is structured; and what Medicare covers. This information will form the basis of knowledge you will need to complete the course. Good Luck!