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Medicare Prescription
Drug Program (Part D)
Review
Medicare

4 parts of Medicare
• Part A: Hospital Insurance
• Part B: Medical Insurance
• Part C: Medicare Advantage Plans
• Part D: Prescription Drug Coverage

Part A & B= Original Medicare
• Automatic enrollment if getting SS benefits, must enroll if not
• Premiums always for Part B, only for A if not enough credits
• Not comprehensive coverage, has coverage gaps
• Out-of-pocket costs for A & B change yearly- see chart
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Medicare


Pays for reasonable and medically necessary services
There are coverage gaps in Medicare including:
 Part A in-patient hospital deductible
 Part A daily co-payment for in-patient hospital days 61-90
 Part A daily co-payment for in-patient hospital days 91-150
 Part A daily co-payment for SNF days 21-100
 Part B annual deductible
 Part B co-insurance (usually 20%)
 First three pints of blood
 Coverage outside the United States
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Medicare Advantage



Alternative option to Original Medicare
• Offered by a private company that contracts with Medicare
to provide a beneficiary with their Part A & B benefits
• One way for a beneficiary to get additional Medicare
coverage to cover the gaps in Original Medicare
The plan must offer Part D drug coverage – members who
want drug coverage may only take drug plan offered by the
Medicare Advantage plan (except for PFFS)
• If enroll in stand alone PDP, will be dis-enrolled from Part C
and returned to Original Medicare
Different plan types available
• HMO, HMO-POS, PPO, SNP, PFFS
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Medicare Prescription
Drug Program
(Part D)
Part D Overview
 Medicare offers prescription drug coverage to everyone with
Medicare
 Provides outpatient prescription drug coverage
 Beneficiaries with Part A and/or Part B are eligible
 2 ways to get prescription coverage:
1. Medicare Prescription Drug Plans (PDPs); also known as
stand alone plans
2. Medicare Advantage (Part C) Plans with drug coverage
 Part D is voluntary, but eligible beneficiaries who do not enroll
may be subject to a penalty
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Part D Plans



May differ on many levels but must meet both pharmacy
access and formulary standards set by CMS
PDPs and MA-PDs may vary based on:
• Benefit Design
• Monthly Premium
• Co-payments
• Formulary
• Drug Prices
• Pharmacy Network
All plans must offer the standard prescription drug benefit or
its equivalent
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Formulary

The prescription benefit includes a list of “covered drugs” and
this list is called the “formulary”

If the insurer is very selective about which drugs are to be
covered, then it is sometimes referred to as a “closed
formulary”. If the formulary is open to all drugs but places
drugs into different cost sharing categories or “tiers”, it is
referred to as an “open formulary”

Each plan must meet formulary standards. The formulary
must include and cover certain drugs or certain classes of
drugs. Medicare has established a category of excluded drugs
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Examples of Part D Excluded
Drugs

Drugs for anorexia, weight loss or weight gain

Drugs for the symptomatic relief of cough and colds

Prescription vitamins and mineral products, except
prenatal vitamins and fluoride preparations

Non-prescription drugs (over the counter)

Drugs that could be covered under Medicare Part A
and/or Medicare Part B
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Coverage Rules

Plans may have coverage rules to make sure certain drugs are used
correctly and only when medically necessary. These rules may include the
following 3 restrictions:
1. Prior Authorization
• Before the plan will cover a certain drug, the prescriber must first
contact the plan and show there’s a medically-necessary reason why
the beneficiary must use that particular prescription drug
2. Step Therapy
• Must first try certain less expensive drugs that have been proven
effective for most people with their condition before the beneficiary
can move up a “step” to a more expensive drug
3. Quantity Limits
• For safety and cost reasons, plans may limit the amount of
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prescription drugs they cover over a certain period of time.
Formulary Issues

Beneficiaries can take the following steps when a drug they are
taking is not covered under the formulary or has restrictions
• Ask prescriber if she/he meets prior authorization or step
therapy requirements or if there are generic, over-thecounter or less expensive brand name drugs
• Request a coverage determination (including an
“exception”) that the plan cover the drug
• Try to find a SEP in order to switch Part D plans to one that
has a formulary that covers all of the drugs
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Generic Vs. Brand Name Drugs

Massachusetts is a generic-mandated state in which
all pharmacists have to dispense generic if available
unless the physician indicates: no substitution

Generic drugs contain the same active ingredients,
have the same strength and dosage as the brand
name drug and must meet the same government
quality control standards
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Four Enrollments Periods
• Initial Enrollment Period (IEP)
• Open Enrollment Period (OEP)
• Special Enrollment Period (SEP)
• Medicare Advantage Disenrollment Period
(MADP)
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Initial Enrollment Period

65+: Mimics that of Medicare Part B (7 month period)

Under 65: Mimics that of Medicare Part B; beneficiaries who
become eligible for Medicare due to a disability can join
during period 3 months before through 3 months after 25th
month of Social Security Disability Income

MassHealth members: When eligible for Medicare, primary
prescription coverage under MassHealth ends. MassHealth
notifies Medicare of member’s dual status and individual has
60 days to enroll in Part D plan or will be auto-enrolled in a
plan chosen at random
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Open Enrollment Period

October 15th - December 7th, coverage effective January 1st

During this period beneficiaries can:
• Join a plan for the first time (If late enrollee, would be subject
to late enrollment penalty)
• Switch plans (including changing MA plans)
• Drop a plan

To switch a plan:
• Simply enroll in new plan. No need to cancel old Medicare
drug plan as the coverage will end when the new drug
plan begins
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Special Enrollment Period

Certain conditions make beneficiaries eligible for a SEP during
which they can enroll in a Part D plan outside of the initial
enrollment period. They include:
• Moving out of their plan’s service area
• Involuntary loss of creditable coverage
• Having dual eligible status (enrolled in MassHealth &
Medicare or enrolled in a Medicare Savings program)
• Being a member of Prescription Advantage (a State
•
Pharmaceutical Assistance Program known as a SPAP)
Leaving creditable coverage (including COBRA coverage)
• Switching to a 5-star rated plan
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Medicare Advantage
Disenrollment Period

January 1st – February 14th

During this period, beneficiary CAN:
• Dis-enroll from a MA plan and return to original Medicare and
enroll in a stand-alone Medicare Prescription Drug Plan (PDP)
• Dis-enroll from a MA plan without drug coverage and enroll in
a PDP. May be subject to a late enrollment penalty

During this period, beneficiary CANNOT:
• Switch from Original Medicare to a MA plan
• Switch from one MA plan to another
• Switch from one Medicare Prescription Drug plan to another
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Late Enrollment

If a Medicare beneficiary does not join a Medicare
Prescription Drug Plan when first eligible and didn’t have
other creditable prescription drug coverage that met
Medicare’s minimum standards, they could incur a late
enrollment penalty

All Medicare beneficiaries (including those who are still
working) must have creditable coverage to avoid the late
enrollment penalty
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Creditable Coverage

Coverage that is at least as good as Medicare Part D

Protects a beneficiary from the Part D penalty

Employer or retiree coverage, union coverage, VA coverage:
Need proof of coverage to avoid penalty

Beneficiaries still working:
• Benefits administrator has information about whether the
employer coverage is creditable
• Beneficiaries should be encouraged to ask the benefits
administrator about their creditable coverage status if
they have not been notified
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Late Enrollment Penalty

Penalty is 1% of the benchmark (the national base beneficiary
premium) for EACH MONTH the beneficiary:
• Did not enroll in a Medicare PDP when they were first eligible
AND:
Had no prescription drug coverage
OR
 Had coverage that was not considered “creditable”
OR
 Had a lapse in creditable coverage of 2 full months (63 days)

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Late Enrollment Penalty

The penalty is added to the premium at the time of
enrollment and is a lifetime penalty except for:
• A beneficiary under age 65 who is enrolled in Part D and
subject to a late enrollment penalty will have the penalty
waived at age 65
 This waiver mirrors the “clean slate” provided to
Medicare enrollees subject to a Part B penalty prior to
turning age 65
• Beneficiaries enrolled in Extra Help will have the penalty
paid for by Extra Help. If the beneficiary loses her/his
Extra Help, she/he would need to pay the Part D penalty
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Supplement Two
(aka Medex Gold)

Considered creditable coverage

No penalty if beneficiary dis-enrolls and joins a Part
D plan within 2 months (63 days)

Beneficiary can join a Part D plan during the Open
Enrollment Period or if they qualify for a Special
Enrollment Period
• Dis-enrolling from the plan is NOT in of itself a SEP
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Part D Costs

Must pay monthly premium to the plan
• Those with a Medicare Advantage Plan with drug
coverage pay a monthly premium to the plan that
includes the premium for their health care coverage
and their Part D coverage

Premiums indexed according to income (same as Part B)

Premium can be deducted directly from Social Security
check

Deductible amount changes yearly and varies from plan
to plan
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Co-payment VS. Co-insurance

Co-payments: Set dollar amount that is paid at the
pharmacy, e.g., $8 for a 30-day supply at a retail
pharmacy. Usually, generic drugs have lower copays than brand drugs

Co-insurance: Percentage of the retail cost, e.g.,
25% for a 30-day supply. This is the amount the
beneficiary would be required to pay
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2015 Standard Medicare Part D
Level
Deductible
Description
Annual deductible paid by the Beneficiary: $320 max
Initial Coverage After deductible, beneficiary pays 25% of the drug costs
and Medicare pays 75%
Initial coverage limit is $2,960
Coverage Gap
“Donut Hole”
Begins once initial coverage limit is reached
Beneficiary pays percentage of the cost for brand name
(45%) and generic drugs (65%)
Beneficiary’s out of pocket reaches $4,700= catastrophic
Catastrophic
Begins when catastrophic limit is reached
Beneficiary pays 5% of the drug costs and Medicare pays
95%
ACA Closing the Coverage Gap

The Affordable Care Act
reduces the costs to
beneficiaries who reach
the coverage gap.
Effective January 2011
beneficiaries receive
discounts on both brand
and generic drugs in the
gap. These discounts
will increase each year
until the coverage gap is
eliminated in 2020
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Enrolling into Part D

Review plan options
• Plan Finder Tool on www.medicare.gov
• Determine PDP plan vs. MA-PD plan
• Consider cost, coverage, quality, and convenience
• Try to avoid drug restrictions using:
 Step Therapy
 Prior Authorizations
 Quantity Limitations

Contact plan directly or call 1-800-Medicare
• Enrollment can take place on the phone, online, or
through a mailed in paper application
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Extra Help /
Low Income Subsidy
&
Prescription Advantage
Extra Help/Low Income Subsidy
(LIS)

Extra Help is a federal assistance program to help low-income and
low-asset Medicare beneficiaries with costs related to Medicare
Part D

Extra Help subsidizes:
• Premiums
• Deductibles
• Copayments
• Coverage Gap “Donut Hole”
• Late Enrollment Penalty

Does NOT subsidize non-formulary or excluded medications

Apply through Social Security Administration
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2 Levels of Extra Help

Full Extra Help
• 135% of the Federal Poverty Level (FPL) and asset limits
• Full premium assistance with no deductible
• Low, capped co-payments
 Partial Extra Help
•
•
•
150% of the FPL and asset limits
Reduced premiums (sliding scale – between 25% -75%
assistance dependent upon income)
Reduced deductible and 15% co-payments
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Extra Help Eligibility

Resources counted:
• Bank accounts (checking, savings, CDs)
• Stock, bonds, savings bonds, mutual funds, IRAs
• Real estate other than a primary home

Resources NOT counted:
• Primary home, car
• Property one needs for self-support, such as a
rental
property (rent payments are considered as income)
• Burial spaces owned by a beneficiary
• Personal belongings
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Dual-Eligibles

Medicare beneficiaries who are also enrolled in
Medicaid/MassHealth, Supplemental Security
Income (SSI) or a Medicare Savings
Program/MassHealth Buy-in) are known as dualeligibles

These beneficiaries do not have to apply for Extra
Help as they are “deemed eligible” and will be
enrolled automatically
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Extra Help Coverage Period

If an individual loses their Extra Help coverage due to no
longer meeting the eligibility requirement, the end of the
benefit coverage will depend upon when the individual
loses their Extra Help coverage
• If the Extra Help benefit is lost PRIOR to July:
Coverage will end by December 31st of that SAME
year
• If the Extra Help benefit is lost AFTER July:
Coverage
will end by December 31st of the FOLLOWING year
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Prescription Advantage

Massachusetts’ State Pharmaceutical Assistance
Program (SPAP)

Provides secondary coverage for those with Medicare or
other “creditable” drug coverage (i.e. retiree plan)

Benefits are based on a sliding income scale only – no
asset limit!

Level of assistance provided is determined by gross
income

Different income limits for under 65 and 65 and over
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Benefits for Individuals on Medicare or
With Creditable Coverage

Helps pay for drugs in the gap (for most members)

May help pay all or part of the Medicare prescription drug
plan's drug co-pays (All medications must be covered by
primary plan)

Those in top income category (S5) must pay $200 annual fee
for limited benefits

Members are provided a SEP (one extra time each year outside
of open enrollment to enroll or switch plans)

Prescription Advantage does NOT pay the late enrollment
penalty fee
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Benefits for Individuals NOT on
Medicare

Offers members who do not qualify for Medicare,
primary prescription drug coverage

Coverage has no monthly premium

Depending on income, members will pay a co-pay for
prescription drugs and will have an annual out-ofpocket spending limit and quarterly deductible. Once
annual out-of-pocket limit is reached, Prescription
Advantage will cover drug co-pays for the remainder
of the plan year
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Part D Review

Review
1. What is Medicare Part D and how is it offered?
2. Who is eligible?
3. What is creditable coverage?
4. How is the late enrollment penalty calculated?
5. When is the Open Enrollment Period?
6. When does the coverage gap or “donut hole” begin?
7. What programs are available to reduce drug costs?
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