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On December 8th 2003, President Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. This legislation adds new benefits including prescription drug coverage through the new Medicare Part D program. This program will be integrated with enhanced benefits. This voluntary program will begin in January 2006.
The following Question and Answer overview highlights key elements of the legislation that will affect Medicare and Medicaid beneficiaries. The following links will help you navigate this page.
Q: How does the prescription drug benefit in this bill affect the care of older adults currently covered under Medicare?
A: Since the new prescription drug program is voluntary, it will not materially affect traditional fee-for-service Medicare.
Q: Are there changes within the bill that will change the current Medicare benefit.
A: Yes, in several ways. First, starting in January 2005, the yearly deductible for Medicare Part B will increase from $100 to $110. Second, beginning in 2007, people with Medicare who have higher incomes will pay higher premiums for Medicare Part B coverage. Currently, the premium is about 25% for all beneficiaries. The following sliding scale demonstrates how the new premiums will be phased in starting in 2007:
Q: Are there changes to the Medicare Managed Care Plans?
A: Medicare Part C, the Medicare managed care program will now be called Medicare Advantage. Medicare Advantage will provide Medicare coverage through a private health plan. Starting January 1, 2006, all companies offering Medicare Advantage plans must offer at least one plan with drug coverage
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Q: What are the Medicare-Approved Prescription Drug Discount Card and Transitional Assistance Program?
A: Starting in June 2004, discount cards will be available. This card is optional. This will be a transitional effort to provide some relief to older persons by reducing their drug costs if they choose to use these cards. Discounts will vary by card and each plan will be slightly different. For example, some cards can only be used at certain pharmacies listed in your plan to receive discounts
Q: Who can sign up for the discount card?
A: Persons enrolled under Part A or Part B are eligible to enroll. Persons who have drug coverage through an employer or former employer may not need to enroll this program.
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Q: Will people with low incomes be able to participate in this program?
A: Yes. Eligible seniors with low income will receive $600 for prescription drugs in both 2004 and 2005. Persons who receive drug benefits from the federal government, Medicaid or are in an employer's group health plan are not eligible for the special low-income features of the Discount Card.
Q Will people with low incomes have to pay a premium for the discount card?
A: Medicare will pay the enrollment fee.
Q: Do I have to pay any drug costs if I have a low income?
A: A low co-pay (between 10% to 5% based on income) will be required until the $600 subsidy has been spent.
Q: What happens if I spend all of the $600 on my medications?
A: When the costs reach $600, people may continue to use the discount card and will continue to get the 10% to 5% discount. State Pharmacy Assistance Programs may offer additional support. This will vary from state to state.
Q: What happens if I don't spend the $600? Will I lose it?
A: Any remaining funds at the end of 2004 will be added to the 2005 $600 allocation. At the end of 2005, this allocation can be transferred and used in the new Medicare Part D plan starting January 1, 2006.
Q: Are there restrictions on who can get a Discount Card?
A: People who have drug benefits through Medicaid are not eligible for the $600 credit discount card.
Q: When can I get this card?
A: There will be a sign-up period that begins in May 2004.
Q: How long will this discount be available?
A: These discount cards and the assistance program for low-income persons will end on December 31st 2005 when the new Medicare prescription drug benefit goes into effect.
Q: Who will offer the discount cards?
A: The discount card will be offered by private companies and will be approved through the Medicare program. People will have a choice of at least two card programs from two different sponsors.
Q: Are there drugs that I cannot get with the Discount Card?
A: Drugs covered by Medicare Part A are not covered. Drugs that do not meet Medicare's definition of medically necessary or was not prescribed in accordance with the plan or Part D will not be covered.
Q: What will this card cost per year?
A: The cost of the card will be no more than $30.
Q: How much will I save by using the discount card?
A: It is anticipated that prices for prescription drugs will be lower for those who have enrolled in the Drug Discount program.
Q: How long will the discount card be available?
A: These Discount Cards and the assistance program for persons with low income will end on December 31, 2005 when the Medicare Prescription Drug Benefit goes into effect.
Q: How will I get new insurance to cover my prescriptions after December 31, 2006?
A: You will have to apply to a Medicare Prescription Drug Plan through the new Medicare Part D program.
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Q: What is the Medicare Prescription Drug Benefit?
A: For the first time, there will be insurance to help cover prescription drugs.
Q: Will I have to give up my current fee for service Medicare to get this new insurance?
A: No, you can have an option to buy "drug-only" insurance policies, called Medicare Part D. This is a voluntary program.
Q: When will this insurance be available?
A: The program will start on January 1, 2006. The first sign-up period will be from November 15, 2005 to May 15, 2006.
Q: Will this affect people who are not presently Medicare beneficiaries?
A: New Medicare beneficiaries have six months to sign up for Medicare Part D. There may be a penalty if you sign up later.
Q: Who will run this program?
A: Private groups/companies will oversee the plans. Medicare will approve these plans.
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Q: Is there a premium for new drug coverage?
A: In 2006, a $35 monthly premium ($420 for the year) will be charged.
Q: Will there be a deductible?
A: Yes, people will be required to pay the first $250 for drugs in 2006.
Q: What will the Medicare Part D insurance cover?
A: Medicare Part D will pay three-fourths of drug costs from $251 to $2250.
Q: What happens when costs reach $2250?
A: Individuals will have to pay all of the next $2,850 costs. No insurance will be provided. This will represent a total of $3,600 for out-of-pocket costs (The Medicare Part D $35/month premium, $420, is not included in these costs.)
Q: What happens when I've paid total out-of-pocket costs totaling $3,600.
A: Medicare Part D will again provide coverage. This 'catastrophic drug coverage' will pay 95% of all prescription drug costs.
Q: What will I have to pay if I reach the 'catastrophic drug coverage' threshold?
A: Most people in Medicare and Medicare Advantage programs will pay $2 for generics, $5 for brand names, or 5% coinsurance, whichever is higher.
How to Determine My 2006 Medicare Drug Benefit?
Medicare
Coverage
Spending
Points |
Annual
Cost of
Drugs |
Maximum
Annual
Cost to
Patient |
Insurance
Pays
Annually |
Premium
($35x12months) |
N/A |
$420 |
$0 |
Initial deductible
to be met |
$250 |
$250 |
$0 |
| After deductible |
$251-
$2250 |
$500 |
Up to $1500 |
Coverage gap,
'donut hole' |
$2251-
$5100 |
$2850 |
$0 |
*Catastrophic
Coverage |
>$5100 |
5%
of cost |
95%
of cost |
*When the patient has surpassed the coverage gap or 'donut hole' in their annual expenditures for 2006, they will have paid $3600 in drug costs plus the plan premium of $420 for a total of $4020, before catastrophic coverage kicks in.
To calculate whether the pharmacy benefit makes sense for you check out http://www.kff.org/medicare/rxdrugscalculator.cfm.
People with low incomes will get additional financial help within the Medicare Prescription drug benefit, Medicare Part D. See Prescription Benefits for People with Low Income.
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Q: How will I know if the plans will provide drugs that I will need?
A: Under the law Medicare Part D plans must provide a standard benefit package or another package that is financially equal even if benefits differ. In addition, Medicare is required to develop a list of therapeutic areas (treatment areas) and classes of drugs that must be included in all plans.
Q: Will every plan have the same drugs available?
A: No, while all plans will be required to include drugs in required therapeutic areas and classes, the drugs in those classes may differ. Some plans may provide additional drugs to enhance their benefit package.
Q: Will I get to see what drugs that a plan offers?
A: Yes, by law the plans are required to list the drugs for your review.
Q: How will the plan select drugs? I am worried that plans may pick only the cheapest drugs.
A: Each plan will have an expert committee that includes practicing physicians and pharmacists to select drugs who must have expertise in the care elderly persons. These professionals must not have a conflict of interest and must have expertise in caring for older adults. Medicare will approve each plans list of drugs.
Q: Can a plan make changes to the available drugs?
A: Changes to the list of drugs can only be made at the beginning of the plan year except when new drugs are added.
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Q: How will I know that the plan is providing a discount?
A: Enrollees will be given information on the plan's discounts with drug companies. This will show what plans paid for drugs.
Q: Will brand name drugs be included?
A: Yes, plans will include brand names that will have a higher co-pay.
Q: Will I know what the price difference is between a brand name and a generic?
A: Plans are required, by law, to provide the prices for brand name and the generic drugs. This way you and your doctor can decide whether to get the lower priced, generic.
Q: What will happen if I want a drug that is not listed by my plan?
A: If you purchase a drug not listed in the plan, it will not be covered and won't count against the $3,600 out-of-pocket ceiling.
Q: What should I do if the plan insists that I get a drug that my doctor thinks would have adverse reaction for me?
A: People will be able to appeal if the doctor who prescribed the drug determines that the formulary drug for treatment of the same conditions was not as effective for the person or had adverse effects for that individual.
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Q: What is the "donut hole" I keep hearing about?
A: This refers to a period when no insurance for prescription drugs will be available. After total drug costs reach $2,250, you will pay an additional $2,850 out-of-pocket before Medicare Part D will continue coverage. This coverage gap is called the "donut hole." After this point Medicare pays for 95% of your drug costs; you will pay the remaining 5%.
Q: What will happen to existing Medigap policies?
A: People currently enrolled in a Medigap policy without a drug benefit will not be affected. The Medigap plan will continue to cover Medicare's cost sharing for physician and hospital services.
People currently enrolled in a Medigap policy with drug coverage will have two choices:
- They may keep their current Medigap plan with drug benefits and would not enroll in the Medicare Part D program. But, if they later decide to enroll, a late enrollment fee may be charged.
- They may enroll in the Medicare Part D plan. People who choose to do this can either enroll in another Medigap plan without a drug benefit to cover Medicare's cost sharing for physician and hospital services, or keep their current Medigap plan but drop its drug benefits, and pay a lower premium to the plan.
Q: When will I know whether my Medigap policies have changed?
A: Companies issuing Medigap policies with drug coverage will be required to alert beneficiaries 60 days before the open Medicare Part D enrollment begins in 2006. They will be required to describe changes in policies so people can decide whether to sign up for Medicare Part D.
Q: Will Medigap policies with drug benefits be available after January 1, 2006?
A: People who turn 65 after January 1, 2006 will not be able to purchase traditional Medigap policies that include drug benefits. For people enrolled in a Medigap drug benefit program before that date, policies can be renewed, but the plan must be in effect before this date.
Q: Will it be possible to purchase a supplemental policy to help cover gaps in coverage under Medicare Part D?
A: You may be able to. Private companies that offer a Medicare drug plan (the Part D benefit) can, if they choose, sell policies to pay some of the out-of-pocket costs. The supplemental policy must be sponsored by the same plan that provides your Medicare drug benefit.
Q: What does the legislation do about public retiree health benefits?
A: Eighty-eight billion ($88 billion) is allocated to provide Federal subsidies to employers (both public and private), to encourage companies to continue offering retiree drug coverage that meets or exceeds the level provided by Medicare Part D. You should carefully examine your retiree benefits and compare them with the Medicare drug benefits to be sure you sign up for the best plan for your needs.
Q: What happens if my retiree benefits are cancelled?
A: If your retiree benefits are cancelled and you want to sign up for a Medicare drug benefit, no penalty will be applied.
Q: What is employer "wrap around" coverage?
A: Employers can decide to wrap their benefit around the Medicare program to fill in gaps in coverage.
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Q: Will people with low incomes that qualify for Medicare and Medicaid be able to participate in Medicare Part B Prescription Drug Benefit?
A: People with the lowest incomes - the people who are dually eligible for both Medicare and full Medicaid benefits - will pay no premiums, deductibles, small or no co-payments and will have no coverage gap. Medicare will provide benefits to people as follows:
| Incomes below $9,630/individual; $13,000 married couples: |
Income below $13,000/single; $17,550/married couple with assets* below $6,000/single; $9,000/married couple: |
Income between $13,000 to $14,450/single; $17,550 to $19,500 married couple with assets below $10,000/single; $20,000 married couple: |
|
|
|
|
|
|
|
|
|
- $3 co pay for brand names
|
|
|
- No co-pay after spending $3,600
|
- $5 co pay for brand names
|
- $2 generic after spending $3,600
|
| |
- No co-pay after spending $3,600
|
- $5 co-pay for brand names over the $3,600 out-of-pocket
|
* Assets include savings and investments. Assets do not include a primary residence, car, burial plot and/or a life insurance policy up to $1500. An additional $1500 may be kept for burial fees.
After January 1st 2006, Medicaid will not provide drug coverage.
Q: Will there be supplemental insurance for people with low incomes?
A: For people with low incomes, supplemental insurance through state prescription drug assistance programs may be offered. States are the only entities that can choose to supplement the drug costs for their state prescription drug assistance program members. These policies would reduce the $3,600 out-of-pocket costs when "catastrophic coverage" begins. Not all states offer these programs.
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Q: What is the Health Savings Account?
A: The bill calls for tax-preferred "Health Savings Accounts" (formerly Medical Savings Accounts). These high, deductible policies are available to individuals not covered by Medicare. Individuals can put aside funds pre-tax that can be used to cover their expenses up to the deductible. In addition these funds grow tax-free and can eventually be used by those on Medicare to cover expenses not covered like the "donut hole" or long-term care insurance.
Q: What other benefits have been added to Medicare?
A: The legislation also adds preventive services. These include coverage of an initial preventive physical examination when you first become eligible for Medicare, cardiovascular screening blood tests, diabetes screening tests, and improved payment for certain mammography services.
We thank Dr. Richard G. Stefanacci, DO, MGH, MBA, CMD, Center for Medicare and Medicaid Services Health Policy Scholar through Thomas Jefferson University Department of Health Policy for contributing to this overview.
Other sources for information:
Medicare Rights Center
http://www.medicarerights.org
Centers for Medicare and Medicaid Services
http://www.cms.hhs.gov/medicarereform
The Henry J. Kaiser Family Foundation
http://www.kff.org
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