Medicare Part D:
The new Prescription Drug Plan
By:
Alicia Whye
10224445
Business Communications 270
Table of contents:
Table of contents: 2
Introduction 3
Basic Information 3
Regions (refer to chart #1) 3
Premiums: 4
The Formulary: 4
Standard Benefit: (refer to chart below) 5
Effects on the Senior Market: Advantages and Disadvantages 6
Beneficiaries with Original Medicare Only: 6
Beneficiaries with Medigap Coverage: (refer to chart #2) 7
Beneficiaries with Medicare Advantage: 7
Beneficiaries with Medicare and Medicaid: Dual Eligibles 8
Beneficiaries with Employer Benefits: 9
Conclusion 10
Works Citied: 11
Introduction
For many years, the prices of Health Insurance steadily increased to a point were many Americans could no longer afford it. This included Prescription drugs. Prescription Drugs rose so high that many Americans without coverage choose to go either out of the country or on the internet for their Prescriptions. This created some problems for the pharmaceutical companies so a solution was devised. This solution is The Medicare Part D Prescription Drug Plan. The Prescription Drug Plan was introduced in 2003 through the Medicare Modernization Act. This act consists of laws and regulation changes in all aspects of Medicare, but the biggest change was the new plan. Now there are over 27 million Medicare beneficiaries enrolled in a Prescription Drug Plan.
Basic Information
Regions (refer to chart #1)
There are 34 PDP regions throughout the United States. An Insurance plan can either offer a plan in that one region or have a national plan. In a national plan, the insurance carrier can offer plans in all the regions. They may set different prices for premiums and have different benefits depending on the region. There are several plans that offer national drug plans. These are AARP, Humana, and Aetna---to name a few. If the insurance carrier decides to offer a plan in one region and that region consists of more than one state, the plan must provide the prescription drug plan to all states.
Premiums:
A premium is a monthly payment that the beneficiary pays for their insurance coverage. Each Prescription Drug Plan carrier has an average of at least two plans and they all have different premiums. The premium is based off a benchmark amount that the Centers for Medicare and Medicaid Services (CMS) calculated from bids provided by the insurance plans. The benchmark or national premium average came to be $32 and plans fell either above or below that average. Some plans, like Humana, fell significantly below this average with one of there plans being $6.44 in Maryland.
The Formulary:
A formulary is a list of drugs that is offered by a plan. This list can consist of thousands of different drugs under different categories. It gives different Medication Therapy Management and Tier levels. For the Prescription Drug plan, CMS created a formulary that included almost all drugs with some exceptions. The insurance carries could only use on their formulary the drugs that was apart of CMS’s. They have the option of only offering some of the drugs on the list, but they cannot include any drug that CMS does not have on their list.
The formulary is the major benefit for this plan. When a beneficiary decides what plan to choose, the first thing they need to look for is if their drug is covered under the plan. Fortunately, many plans offer almost all of the drugs on CMS’s list. Only a few plans, such as PacifiCare, have less than 90% of the drugs on their formulary.
Standard Benefit: (refer to chart below)
The standard benefit was created by CMS as a base for the carriers. All the carriers must have plans that are as good as or better than this base plan. This plan is a $250 deductible that must be paid before any other benefit is received. Once the $250 deductible is paid, the beneficiary must then pay 30% of their drug cost, plan pays 70%, until they reach a True Out-of-Pocket (TrOOP) of $2,500. After the beneficiary reaches $2,500, they must next pay 100% of the drug cost. This is called the coverage gap or donut hole. Fortunately, some beneficiaries will not reach this coverage gap because of the co-pays offered by the plans. The beneficiary pays 100% until their TrOOP is $3,600 and then after this TrOOP pays only 5% of the drug cost, the insurance plan pays 95%.
Effects on the Senior Market: Advantages and Disadvantages
Beneficiaries with Original Medicare Only:
Beneficiaries with Original Medicare only had to join this plan starting November 16, 2005 if they were eligible. These beneficiaries could choose from any plan in their area and they had until May 15, 2006 to do so. If they didn’t choose a plan by May 15, 2006, they would have to pay a 1% penalty for every month they missed. CMS takes this percentage, multiplies it to the national benchmark and then adds that number to the plans premium. The beneficiary must pay the higher premium the entire time they are signed up in a Prescription Drug Plan…the percentage even travels with them if they switch plans or carriers later on.
A huge Advantage for this group is the money they can save with this plan. Beneficiaries with Original Medicare have no prescription drug coverage at all. They pay 100% for all their drugs. Joining this plan can lower their cost significantly. The biggest savings would come if the beneficiary chose generic drugs and a 3-month supply of that drug. This choice would allow them to pay the cheapest price available for a particular drug and only have to pay for it once every 3 months.
A disadvantage (as mentioned in the paragraph above) is the penalty. The idea of having a penalty on their premium is causing some seniors to rush into choosing a plan. They are not taking the time that is necessary to make the best decision for themselves. This penalty is also a problem because it makes it seem that the beneficiary must join this plan. Some people feel they do not have a choice on this Prescription Drug Plan.
Beneficiaries with Medigap Coverage: (refer to chart #2)
Medigap is a supplement to Original Medicare. It covers the cost that Medicare does not. There are 10 standardized plans and insurance companies must choose which plans they want to offer to their customers. The only difference from these plans between carriers was the premium.
In 2006, the Medigap plans with drug coverage were re-done so that the coverage was taken out. People with the Medigap plans with coverage could both stay in the plan and not take the new plan or they could stay in their plan and pick up Part D as a part of it. The beneficiaries have the choice of choosing any plan to join---even if the drug plan carrier they choose is different from their Medigap carrier. The advantages and disadvantages are the same for people with Original Medicare.
Beneficiaries with Medicare Advantage:
Medicare Advantage is plans offered by insurance companies that cater only to the senior market. The plans cover the same benefits as original Medicare with some extra offers. Beneficiaries with Medicare Advantage do not have to choose a prescription drug plan if there carrier decides to offer the new plan. These individuals get the prescription drug coverage added to their Medicare Advantage plan automatically. If these individuals decide they do not like the coverage that is offered through their plan, they can change either the carrier or the Medicare Advantage plan (They can choose the plan without drug coverage or with better drug coverage). These individuals have the same advantages and disadvantages as Original Medicare and Medigap beneficiaries.
Beneficiaries with Medicare and Medicaid: Dual Eligibles
These beneficiaries fall under a certain income level and had Medicaid cover their drugs. The beneficiaries must now sign up for a drug plan through an insurance carrier because Medicaid is not paying for their prescriptions anymore. These beneficiaries, when they join a plan, will be placed in one of nine categories. These categories have different co-pays and premium cost depending on income and assets of the individual. Many Dual Eligibles, depending on their category will not have to pay a premium or any drug cost, while others may have to pay a small premium and $2 or $5 for their drugs.
An advantage for these individuals is that some may not have to pay for their drug cost at all. For those that fall is the lowest income level. They will not pay anything for their premium or drug cost. They also receive the same benefits as any other person in the plan.
Another advantage is that the beneficiaries get to switch plans whenever they feel, as many times as they like. Everyone else can only switch plans during the Annual Open Enrollment Period. This period last from Nov 15 to Dec 31 and during this time a beneficiary can either switch a plan or enroll in a plan if they are eligible.
There tends to be more disadvantages for dual eligible than advantages. One disadvantage is that they are auto-assigned into any plan whose premium is under the benchmark. These beneficiaries had until December 14, 2005 to choose their plan---everyone else had until May 15, 2006. Beneficiaries were auto-assigned into the appropriate plan, if they did not choose a plan or they did and did not tell CMS about the plan they choose. If there are no plans in a region whose premium is under the national benchmark then dual eligibles are still auto-assigned into these plans. This takes away the beneficiaries opportunity to choose a plan that is best for them.
The next disadvantage ties in with the one in the first paragraph. In some areas, there are no plans under the national benchmark---Dual eligibles are still auto-assigned in these plans. They are forced to pay the difference between the benchmark and the plans premium. When these individuals had Medicaid, they may not of had to pay for their the prescription drug coverage or the cost of their drugs. Now some are forced to pay a premium; no matter how small, this is an inconvenience to people with lower incomes.
Beneficiaries with Employer Benefits:
Many seniors still have employment and under this employment, they receive coverage through a group plan. These groups have many options under the Prescription Drug Plan.
Option 1-the employer can drop the insurance coverage and cover the drugs themselves. If they make this choice, they receive a subsidy from CMS for each individual they cover.
Option 2- the employer can keep the insurance coverage and pay for partial the drug cost. The insurance plan will pay a percentage the employer will pay the rest. This choice also receives a subsidy from CMS.
Option 3-keep the insurance plan drug coverage and have the plan tell them if the plan they have is creditable---as good as or better than part D, or not. The plan is required to do test of the prescription plan offered to the group. When they find out whether or not the plan is creditable, the plan must then send a notice to the group representative. The representative then receives this notice and hands it out to the people in the group. What a person does with this information is up to them. If the beneficiary finds out their coverage is creditable, they can stay in that plan. Once they make the choice to switch to Part D they will not be penalized that 1% penalty. Once the beneficiary finds out their plan is not creditable, they can again stay, but they will be penalized the 1% if they switch to Part D later on.
Conclusion
Since its introduction, this plan has been all over the news. Some feel that it will cause more problems then it solves. Others feel that it was not the correct solution to the rising drug cost. However, the final decision is up to the senior. Yes, there are disadvantages but there are also advantages and if the right decision is made, a person can save money. This plan still has some changes that will be made, but for now, it is better than nothing at all.
Works Citied:
1. Centers for Medicare and Medicaid Services. Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare. Ed. Centers for Medicare and Medicaid Services. Publication Booklet ed. Vol. 02110., 2006.
2. . "Prescription Drug Coverage: Common Situations." Medicare.gov. November 16 2005 <http://www.medicare.gov/pdp-common-situations.asp>.
3. Dealing with "Duals". Vol. 26., 2006.
4. Department of Health and Human Services. Federal Register Part II: Medicare Program; Medicare Prescription Drug Benefit, Final Rule. Trans. Centers for Medicare and Medicaid Services. Final Rule ed. Vol. 42 CFR., 2005.
5. Knowing Your Medicare ABC. Vol. 150., 2006.
6. Knowing Your Medicare ABC. Vol. 150., 2006.
7. Leavitt, Michael, and Mark McClellan. Medicare & You 2006 10050 (2006) . 31, May 2006 <www.medicare.gov>.
8. M. Jackson, Paul. "The Side Effects: Prescription-Drug Plan Daunting to some Seniors." Journal Reporter Sunday, May 14 2006May 29, 2006 <www.journalnow.com/servlet/Satellite?pagename=WSJ%2FMGArticle%2FWSJ_BasicArticle>.
9. Senators Debate Standardizing Medicare Part D Drug Plan. Vol. 110., 2006.
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