What is Medicare Part D?

Medicare is a federal program that provides health insurance for people over 65 and many people under 65 who have a disability. It used to only help people pay for hospital care, doctor visits, and some other medical costs. In December of 2003, Congress passed the Medicare Modernization Act, which created Medicare Part D. This new program went into effect in 2006 and added prescription drug coverage to Medicare. It’s also known as Medicare Prescription Drug Coverage or Medicare Rx.

In the Part D program, private companies offer prescription drug coverage to people on Medicare. You must enroll in one of these private plans to get prescription drug coverage through Medicare. These plans have a list of drugs that they will help pay for if you sign up with their plan. Unless you qualify for help, you will generally have to pay a certain amount each month to be on the plan, a certain amount before the plan will help you pay for your drugs, and a certain percentage of the rest of the costs of your drugs. If you pay these costs, the plan will help pay for your prescription drugs when you buy drugs that are on the list. People who cannot afford these costs may get help paying for them through Low Income Subsidies. Every plan has to follow rules laid out by the Center for Medicare and Medicaid Services (CMS), but there’s a great deal of variety among the specifics of each plan.

People who are eligible for both Medi-Cal and Medicare have special rules for signing up, switching plans, and paying for costs.

What's Covered

Each prescription drug plan will have a list of drugs that they will help pay for if you sign up for that plan. This list is called a formulary. There are rules for types of drugs that must be on every plan’s formulary. CMS reviews formularies to make sure they have drugs to treat a wide range of conditions. Plans organize their formularies by categories of drugs, and they have to have at least two drugs from each category. They must include the majority of antidepressants, antipsychotics, anticonvulsants, antiretrovirals (HIV drugs), immunosuppressants, and antineoplastics (cancer drugs). They generally do not cover over-the-counter drugs, barbiturates, benzodiazepines, Valium, Xanax, non-prescription drugs, weight regulation drugs, or hair loss drugs. The prescription drug plans will not cover drugs that are covered under Medicare Parts A and B. An organization called the U.S. Pharmacopoeia has a set of guidelines that meet CMS’ formulary requirements, and many plans use these guidelines to construct their formularies.

Cost

Unless you qualify for the Low Income Subsidy, you will still have to pay part of the costs of your prescription drugs in this program. CMS has created guidelines for what it calls a basic plan. Every month you have to pay a certain amount of money to be enrolled in a prescription drug plan. This is your premium, which you pay every month, regardless of whether or not you buy any drugs. When you do buy prescription drugs, you first have to spend a $275 deductible, which is the amount of money you pay on an insurance policy before it begins to pay for your costs. After you’ve spent that $275, the plan will pay most (75%) of your drug costs until your total drug costs reach $2,510. You will then be responsible for paying for the entire costs of your drugs until your total drug costs reach $5,726.25. This period is sometimes known as the donut hole because of the gap in coverage. After that, you will either pay a small amount of money ($2.25 for generics, $5.60 for brand names) for each prescription or 5% of the cost of the drug, whichever is greater. When you pay a small fee for each prescription, it’s called a copayment, and when you pay a certain percentage of the cost, it’s called coinsurance. Click here to see how a basic plan would work in a real life situation. Note: The figures above and those in the example are for 2008.

Companies that sponsor Part D plans might offer a number of different plans. Each company has to offer at least one plan that either meets the above guidelines for a basic plan or works out to costing the same amount of money. Most plans do not structure their cost-sharing as described above.

Help Paying for Part D: Low Income Subsidy

There is help available for people who cannot afford the costs of a Part D prescription drug plan. This help is called the Low Income Subsidy or simply “Extra Help”. It is automatically available to people who are on Medi-Cal (except Medically Needy Medi-Cal) or those with countable incomes of less than $15,600 (through 3/31/2009). There are three levels of subsidies. Each covers different groups of people and each offers a different amount of help. The State of California is required to help identify those on Medicare and Medi-Cal and also to help people apply for the Low Income Subsidy.

If you are on Medically Needy Medi-Cal (also known as "Share of Cost Medi-Cal"), you need to pay your share of cost to qualify for the Low Income Subsidy (LIS). If you meet your share of cost in any one month between January and June, you'll qualify for the LIS for the rest of that year. If you meet your share of cost in any one month between July and December, you'll qualify for the LIS for the rest of that year plus the following year. If you do not meet your share of cost, you can apply directly for the LIS through Social Security.

The Low Income Subsidy will pay costs for basic plans that have a premium below a certain level. These plans are called benchmark plans. The premium for a benchmark plan in California is $19.80 in 2008. In 2008, there are 9 benchmark plans offered in California. For a listing, click here. Companies may also offer plans that have higher costs and offer more comprehensive coverage. If you are eligible for one of these subsidies, but choose to enroll in a plan with costs above the benchmark plans, you will have to pay the difference. The Subsidy will also not pay for drugs that are not on your plan’s formulary.

Some people will automatically receive the Subsidy while others have to apply for it through the Social Security Administration. To see a description of all of the subsidy groups, click here. Otherwise, click on the link that best describes your situation to see what subsidy you are eligible for and what you need to do to apply.

Keep in mind that the income limits described below are countable income amounts. Not all of your income is counted when your Low Income Subsidy eligibility is evaluated. The counting rules are very similar to those used by the Supplemental Security Income program. The income limits are based on on the Federal Poverty Level and change each year. The ones listed below are valid until 3/31/2009. If your family size is greater than two, your income limits will be higher.

I am on both Medi-Cal and Medicare and:

• I have $10,210 or less a year in countable income ($13,690 if you are a couple).
• I have more than $10,210 a year in countable income ($13,690 if you are a couple).
• I am enrolled in the Medically Needy Medi-Cal Program (also known as Share of Cost Medi-Cal)

I am not on Medi-Cal and:

• I am enrolled in a Medicare Savings Program.

I am not on Medi-Cal or a Medicare Savings Program and I have the following yearly income and assets levels:

• I am an individual with...
  • Countable income between $10,210 and $14,040 and assets less than $7,790.
  • Countable income between $14,040.01 and $14,560 and assets less than $11,990.
  • Countable income between $14,560.01 and $15,080 and assets less than $11,990.
  • Countable income between $15,080.01 and $15,600 and assets less than $11,990.
• We are a couple with...
  • Countable income between $13,690 and $18,900 and assets less than $12,440.
  • Countable income between $18,900.01 and $19,600 and assets less than $23,970.
  • Countable income between $19,600.01 and $20,300 and assets less than $23,970.
  • Countable income between $20,300.01 and $21,000 and assets less than $23,970.

Choosing a Plan

There are two types of Part D coverage. One is through plans that only offer drug coverage. These are called Prescription Drug Plans (PDP) or stand-alone plans. You have to be enrolled in either Medicare Part A, Part B, or both to enroll in a PDP. In 2008, there are 56 PDPs in California, and they are available throughout the state.

The other way to get Part D coverage is through Medicare Advantage plans. These are Medicare plans that are run by private insurance companies. Some of these plans now offer prescription drug coverage as part of their benefit. These are known as Medicare Advantage – Prescription Drug (MA-PD) plans. Be aware that some MA-PDs allow you to have a separate stand-alone plan, while others don’t. Check the details of your plan before enrolling in a stand-alone plan. You have to be eligible for Medicare Part A and enrolled in Part B to be eligible for an MA-PD. In 2008, there are a total of 181 MA-PD plans in California. The number offered varies by county.

Because of the number of plans offered and the complexity of the rules, it can be difficult to choose the plan that is right for you. There are a number of things to keep in mind when deciding whether to sign up for a Part D plan:

• If you are eligible for both Medi-Cal and Medicare, you can choose a plan when you are first eligible. If you don’t, you will be automatically assigned one. This plan might not have the drugs you need.
• If you are not on both Medi-Cal and Medicare and you receive the Low Income Subsidy, you have two months after you become eligible for the Subsidy to sign up for a plan, otherwise you will be automatically enrolled after those two months. This is known as facilitated enrollment.
• For others, Medicare Part D is voluntary, which means that you don’t have to sign up.
• You may already have drug coverage through your own private health coverage plan. You may be better off staying on that policy rather than switching to Part D.
• If you have other coverage that is at least as good the basic coverage offered under Medicare Part D, it’s what is called creditable coverage. If you don’t have creditable coverage and don’t sign up during your initial enrollment period, there is a penalty. In some cases, it is worthwhile to sign up for an inexpensive plan so that you can avoid these penalties.
• If you have creditable coverage, you can switch to Part D after the initial enrollment period without paying any penalties.
• Each plan is different. You can see which plan best meets your needs by figuring out what drugs you are currently on. It can be helpful to make a list of the brand name, generic name, dosage amount, dosage schedule, cost, and possible substitutes for each drug you take.
• One place where you can compare drug plans is on the CMS website’s Prescription Drug Plan Finder.

Signing Up for a Plan and Switching Coverage

Once you choose a plan, you can sign up on the CMS website, by calling 1-800-MEDICARE, or by contacting the plan directly. For those who are not on Medi-Cal, you can sign up in the three months before, the month of, or the three months after you become eligible for Medicare. This is called your initial enrollment period. If you don't have creditable coverage, and sign up after this period, you may have to pay a penalty. You will have to pay an extra 1% of your premiums for every month past your initial enrollment period that you didn’t sign up for Part D. You can switch (or sign up) for plans every November 15 to December 31. This is called the annual election period.

If you are on both Medi-Cal and Medicare, the rules are different, and depend on which Medi-Cal category you’re enrolled in.

• For those on most types of Medi-Cal, you will be automatically enrolled in a PDP in the month that you become dually eligible. You will be enrolled in a benchmark plan without regard to what medications you are taking. You can, however, switch drug plans at any time, and that switch will become active in the following month.
• If you are on Medi-Cal with a share of cost, you will be automatically enrolled in the month following the first month you meet your share of cost. You can only switch plans during months when you meet your share of cost. If you lose your Medi-Cal because you don’t meet your share of cost, you have a special three month enrollment period when you can switch plans.
• If you are participating in a Medicare Savings Plan, you will be automatically enrolled, but you will first have a two month window when you can choose your plan. This is known as facilitated enrollment.

There may also be certain situations in which you are entitled to a special enrollment period. You would be allowed to change plans outside of the periods outlined above under such circumstances.

Getting the Drugs You Need

The drug plans can change the drugs that are on their formulary as long as they give 60 days notice. If you and your doctor think that you need a drug that’s been taken off of your formulary, or need a drug that isn’t currently on your formulary, you have a few options. You can ask the plan to cover the drug for you. This is called an exception. Your doctor will have to prove to the plan that you need that particular drug. If the plan denies your application for an exception, you can appeal that decision. Your appeal will first be heard by another person within the health plan. If they deny your appeal, you can take it to an Independent Review Entity, which is a person outside of the plan. If they deny your appeal, you can appeal that decision to an Administrative Law Judge. If the Judge denies your appeal, you appeal that decision to the Medicare Appeals Council. If they deny your appeal, you can appeal that decision to Federal Court. Under certain circumstances, you may ask for an expedited (faster) review. The plan you are enrolled in is required to give you details about the appeals process.

Another option is to switch to a plan that has the drug you need on its formulary. If you are on Medi-Cal and Medicare or on a Medicare Savings Program, you are allowed to change plans every month. If you are not on Medi-Cal and Medicare, you can usually only switch drug plans from November 15 to December 31 of each year.

Even if a drug is on a formulary, you may not be able to use it right away. Drug plans have rules for how you can get drugs so that they can keep costs down. These rules are called utilization controls. Some examples include:

• Prior Authorization Requirements: The plan has to approve a certain drug before they will pay for it.
• Tiered drug levels: It may be cheaper to buy certain drugs than others.
• Rules on dosages and quantities: They may limit how much of a certain drug you can buy.
• Fail-First Rules: You may have to try a less expensive version of a certain type of drug before trying more expensive options.

For claims filed between May 17, 2006, and January 31, 2007, those eligible for both Medi-Cal and Medicare who had a difficult time getting prescriptions filled at the correct price may be able to have the pharmacist bill Medi-Cal rather than Medicare. This emergency assistance program from the State of California has ended, so claims filed after 12:00 am on February 1, 2007, are not eligible. More detailed information about the program is available in a document from Medi-Cal’s website.

Sources

The following links are provided for those who want detailed information on Medicare Part D. For those looking for more general information, please go to DB101’s Medicare Resources page.

The National Health Law Program (NHelp) publishes an excellent Medicare Part D and Dual Eligibles: A Guide for California Advocates. It includes a page that refers to where to find the laws that govern Part D.

The National Senior Citizens Law Center has extensive information for advocates and publishes Medicare Part D for Low-Income Advocates in California: The Basics. It is another excellent source of information.

Calmedicare.org is a website that gives detailed information for both consumers and advocates on all aspects of the Medicare program, including Part D. They also have information on how to get one-on-one counseling through the State Health Insurance Counseling and Advocacy Program (HICAP).