The Basics of the Medicare Drug Benefit

1
The Basics ofthe Medicare Drug Benefit

• Loretto Cowhig
• Northeastern Illinois Area Agency on Aging
• [phone] and [phone]

2
Medicare background

• Medicare adopted in 1965 as Great Society
  measure -- no Rx benefit provided
• Serves 65 younger disabled adults
• Financed by payroll tax, premiums, deductibles,
  copays, and general revenue
• Currently about 43 million beneficiaries,
  including 6 million disabled people
• Dont confuse Medicare with Medicaid

3
Medicare structure

• Part A, hospitalization -- in original law
• Part B, general medical care -- original law
• Part C, Medicare Advantage (previously called
  Medicare Plus Choice) -- managed care, added by
  1997 Balanced Budget Act
• Part D, new prescription drug benefit added by
  Medicare Prescription Drug, Improvement,
  Modernization Act of 2003 (known as MMA)

4
Medicare Modernization Act (MMA)

• MMA adopted in 2003, most provisions took effect
  January, 2006
• Relies on private market to offer Rx insurance
• Projected 10-year budget originally 400
  billion, revised to 535 billion for 2004-2013
• Fills one of Medicares biggest gaps lack of
  comprehensive prescription drug benefit
• Goals generous benefits to people with low
  incomes or very high drug costs, and some
  benefits for everyone -- all within budget

5
Major MMA features

• Full drug benefit began January 1, 2006
• All Medicare enrollees eligible for Part D
• Participation is optional, but think carefully!
• Private insurers contract with Medicare to serve
  specific areas meet MMA standards
• Extra help for low income beneficiaries
• Subsidy encourages employers to offer Rx benefit
  to workers retirees on Medicare -- they cant
  also join a stand-alone drug plan

6
MMA defines standard benefit

• Premiums set by plans, vary widely
• Maximum deductible is 265 in 2007
• 75 benefit between 265 and 2,400 in 2007
  enrollee pays up to 25
• Donut hole between 2,400 and 5,450 in total
  drug costs in 2007 -- benefit pays nothing,
  enrollee pays 100
• Above 5,450 in total drug cost, benefit pays 95
  of costs, enrollee pays 5 -- catastrophic
  benefit level

7
Private plans vary considerably

• Plans must be as good as the standard benefit,
  may be considerably more generous
• Formularies (list of covered drugs) vary
• All plans must cover at least two drugs per
  therapeutic class -- most plans cover more
• Plans set own premium deductible
• Most plans have tiered payment flat copays for
  generics, preferred name-brands, others
• Most states have 40 plans

8
Stand-alone plans in Illinois

• 23 companies offer total of 56 plans
• 17 of those plans are nationwide
• Many other plans serve several states
• 2007 premiums range from 17.10 to 106
• 18 plans have 265 deductible, 4 have reduced
  deductible, 34 have none
• 15 plans cover generics in donut hole, one cover
  generics brands (no donut hole)
• Mail order offered in most but not all plans

9
MAPD Medicare Advantage, Rx benefit

• Managed care alternative to fee-for-service
• E.g., HMOs, PPOs, special needs plans,
  demonstrations, private fee-for-service
• Some Medicare Advantage plans have Rx benefit
  you may pay some/all of premium
• You may not join separate stand-alone drug plan
  if youre in a Medicare Advantage plan with drug
  benefits

10
Employer-sponsored Rx benefit for workers,
retirees

• Employers receive 28 tax credit for their Rx
  insurance costs for Medicare workers retirees
• Credit offered only if Rx benefit is as good as
  or better than standard Medicare Rx benefit
• Employers must notify workers retirees whether
  Rx benefit meets this standard of creditable
  coverage
• Workers retirees receiving Medicare-subsidized
  Rx benefit from employers may not also join a
  standalone Rx plan or Medicare Advantage plan
• Creditable coverage from an employer exempts
  recipients from delayed-enrollment penalty

11
Initial and annual enrollment periods

• November 15, 2005, to May 15, 2006
• Enroll by mail, online through plan site or
  Medicare web site, or phone call you make
• Starting in 2006, annual enrollment period Nov.
  15 to Dec. 31, effective January 1
• Limited ability to switch plans mid-year
• New Medicare enrollees have 7 months to join Part
  D plan (same period as for Part B)
• Those eligible for federal extra help (subsidy)
  can enroll at any time, with no late penalty

12
Think carefully before delaying enrollment

• Late enrollment penalty Part D premium goes up
  by 1 of base premium for each month delayed
• E.g. wait 2 years before enrolling and pay an
  extra 24 -- permanently
• Exception no penalty if you had creditable
  drug benefit from other source -- as good as
  Medicare Rx benefit, not necessarily identical
• Insurers must notify you whether your Rx benefit
  meets standard of creditable coverage

13
Base choice on cost, coverage, convenience

• Cost premium, deductible, copayments, coverage
  gap. Consider the total of all these.
• Coverage how many of drugs you take now does the
  plan cover? Any restrictions prior
  authorization, quantity limit, step therapy?
• Convenience What pharmacies in plan network?
  Mail order option? Service area?
• Medicare website Find Compare Plans tool
  identifies plans that cover your drugs at lowest
  total cost
• Consider your drug needs could change

14
Federal extra help for low-income beneficiaries

• 19 million application forms mailed by Social
  Security in mid-2005 -- response low
• 2007 income limit 15,315 (20,535 couple)
• Asset limit 11,710 (23,410 couple), not
  including home, car, personal property
• Covers part or all of premium deductible
• Reduces participants copays, no donut hole
• 3 groups get extra help automatically, need not
  apply Medicaid Medicare Savings Program
  participants, SSI recipients

15
Glitches, problems for low-income enrollees

• Even modest copayments (up to 5) may be
  burdensome to those who had none before
• Assigned plans not custom-selected, may not cover
  all drugs Medicaid had covered
• Many low income members are frail, have language
  difficulties, forgetful, bewildered by new
  procedures, otherwise overwhelmed
• Initial 30 day transitional coverage extended to
  90 days to cover all drugs enrollee had been
  using even if not in plans formulary

16
Illinois Cares Rx coordinates with Medicare D

• Pharmaceutical Assistance SeniorCare merged
  with new name Illinois Cares Rx, that wraps
  around Medicare drug benefit
• Goals Program participants wont lose benefits
  or have significantly higher costs, Illinois
  shouldnt pay drug costs that Medicare would
  should cover
• Recent increase in income limit, to 22,793
  single, 30,594 couple. No asset limit. Two
  benefit tiers Basic (covers Rx for most common
  diseases) Plus (covers most drugs) )

17
Illinois Cares Rx members enrolled in Rx plan

• All enrollees must apply to Social Security
  Administration for federal extra help
• 3 plans coordinate with Illinois Cares Rx
  United Health Rx Basic, AARP Medicare Rx, and
  Wellcare Signature plans
• State randomly assigned enrolled Illinois Cares
  Rx members in coordinating plan they can switch
  among these three
• 25/month rebate for those in with creditable
  coverage from other source or in non-coordinating
  plan

18
Benefits of Medicare D plus Illinois Cares Rx

• Illinois Cares Rx pays members Part D premium
  most of copay. No deductible.
• Member pays 2.15/generics, 5.35/preferred name
  brands, 15/nonpreferred brands
• After 2,400 worth of drugs, member pays 20 of
  drug cost plus standard copayment
• Beyond 5,451, member pays only 5
• Other Circuit Breaker benefits unchanged

19
Medicare Advantage (MAPD) Illinois Cares Rx

• 6 coordinating Medicare Advantage plans Group
  Health Plan (Advantra), Health Alliance, OSF
  Health, Secure Horizon (United Healthcare),
  WellCare, and HealthSpring
• Limited availability -- plans serve specific
  geographic areas
• In a non-coordinating Medicare Advantage plan,
  you either accept its Rx benefits (forfeiting IL
  Cares Rx except 25/month rebate), or leave plan
  and get Illinois Cares Rx benefit in
  fee-for-service care

20
U.S. enrollment on June 11, 2006

• 10.37 million joined PDPs (standalones)
• 6.04M in Medicare Advantage (MAPDs)
• 6.07M dual eligibles, mostly in PDPs
• 6.90M with employer Rx benefit
• 3.55M federal retirees
• Total 32.84M with Part D creditable coverage
• 5.38M with other creditable coverage, e.g. VA
• About 3/4 of those without creditable coverage
  are probably eligible for extra help

21
Illinois enrollment on June 11, 2006

• 545K in prescription drug plans
• 82K in Medicare Advantage plans with Rx
• 262K dual eligibles
• 345K in retiree plans
• 72K federal retirees
• 1.341 million total with Part D creditable
  coverage
• Illinois total 1.735 million Medicare
  beneficiaries
• 280K in Illinois Cares Rx late in 2006, now about
  230K -- mostly in standalone drug plans

22
Federal information sources

• Call the Center for Medicare Medicaid Services
  (CMS) tollfree 1(800)MEDICARE
• CMS web site www.medicare.gov
• CMS publications 10050 Medicare You 2007
  (state editions) 11109, Your Guide to Medicare
  Prescription Drug Coverage
• Social Security 1 [phone] or
  www.socialsecurity.gov for assistance with extra
  help application

23
State and local information sources

• Illinois Cares Rx info at www.cbrx.il.gov
• Illinois Senior Health Insurance Program (SHIP)
  [phone]
• Illinois Department on Aging [phone]
• Health Benefits Hotline [phone]
• Northeastern Illinois Area Agency on Aging (800)
  528-2000 and [phone]
• To contact AAAs and state units on aging anywhere
  in U.S., call Eldercare Locator [phone]
  www.eldercare.gov