What you need to know about Medicare Part D:

Overview
Starting January 1, 2006, Medicare will begin to offer prescription drug plans to help with paying rising drug costs. If you currently have Medicaid drug coverage, you will lose it and automatically be enrolled in a new plan through Medicare.   You will still have your other Medicaid benefits.   Medicare Part D is a private part of Medicare and will be provided and run by private insurance companies.   There are a number of different prescription drug plans (called "PDPs") available and all of them are different.   You should be able to compare plans starting in October 2005 either by calling 800-MEDICARE or going online to www.medicare..gov.   Some PDPs offer drugs that other PDPs do not so it is important to carefully select the right PDP for you to make sure that your medication is included under the plan.

Individuals have the option of choosing either the traditional fee-for-service Medicare and then choosing a Part D plan, or choosing a Medicare private plan (Medicare Advantage) like an HMO or PPO plan.   If you have a Medicare Advantage plan, you will receive drug coverage through your plan which means you cannot purchase a separate Part D plan. In order to enroll in a Part D prescription drug plan, you must have either Medicare Part A or Part B coverage.    It is important to realize that participation in Medicare Part D is completely voluntary.   If you currently receive health insurance through your employer or union, you might be better off by staying with your current plan.

Also, the Medicare discount card program will be phased out once the Part D prescription drug benefits begin.   The program will be discontinued either when your Part D plan takes effect or at the end of the initial enrollment period on May 15, 2006, whichever comes first.   Therefore, it is crucial that you are informed of the changes in your prescription drug benefits in order to ensure a steady supply of your necessary drugs without experiencing a lapse in coverage.

Furthermore, out of 1.6 million nursing home residents, about one million receive help from Medicaid.   As a result, these individuals are defined as dual eligibles (have both Medicaid and Medicare eligibility) and will lose their Medicaid drug coverage as of January 1, 2006.   Nursing home residents who are dual eligibles will be randomly assigned a PDP if they do not enroll and choose one before January 1, 2006.   They have the option of changing their plan if they want but changing a plan once it has started may take time and they risk possible lapses in coverage.   Many residents suffer from Alzheimer's and others are incompetent which limits their decision making abilities.   Therefore it is very important that these individuals are educated and knowledgeable about the changes in their prescription drug coverage.                                               

Enrollment
There is a six-month initial enrollment period starting on November 15, 2005 and continuing until May 15, 2006.   If you enroll before or on December 31, 2005, your new plan will start on January 1, 2006 and you will see no lapse in coverage.   If you choose to enroll after January 1, 2006, your plan will start on the 1st of the following month.

If you do not enroll by May 15, 2006, you will be charged a premium penalty if you decide to enroll later.   The penalty is equal to 1% for each month of delay.   For example, if you decide to enroll 15 months later, you will have to pay an extra 15% premium for as long as you have the plan.   This penalty will also increase in the later years as your premium increases.   In order to avoid a large penalty, it is important that you make the right choices and decisions now so you do not later get penalized.   If you decide to change or switch plans, you can only do it during an annual enrollment period from November 15 through December 31 of each year.  

If you currently have coverage that is of equal or greater value than the Medicare standard drug coverage (called "a creditable prescription drug plan"), then there is no late penalty for deciding to switch to a Part D plan in the future.   If you are unsure whether your current coverage is creditable, please check with your employer or insurance company because they are required to tell you.   If your creditable insurance ends, you must enroll in a Part D plan within 63 days in order to avoid the higher premium charge.

If an enrollee is currently incapacitated or incompetent, state laws will determine who is authorized to enroll the individual and make decisions on their behalf.   If you have a power of attorney, this person should be able to enroll you in Medicare Part D and make any decisions on your behalf.   In addition, an authorized representative can act on behalf of an enrollee through the exception and appeal processes.   It is the state's job to determine who qualifies to be an authorized representative.   Because Medicare Part D is a new program, states do not currently have any laws in place to determine who qualifies.   It is expected that states will follow their Medicaid statutes in creating guidelines for Medicare Part D.   Therefore, it is important to check with your individual state concerning determinations of authorized representatives for incapacitated beneficiaries.

Cost of Prescription Drug Coverage
In addition to the Part B premium, there will be an approximate drug coverage premium of $37 a month.   You also have to pay a $250 deductible and then 25% co-insurance for drug costs.   If your drugs cost more than $2,250 for the year, you will have to pay 100% of the cost until the cost of covered drugs reaches $5,100 (called a "doughnut hole").   After $5,100 you will receive catastrophic coverage and will only have a 5% coinsurance or a co-payment of $2 for generic drugs or $5 for brand name drugs, whichever is greater.

In total, you will have to pay $3,600 a year before you reach catastrophic coverage.   Only true out of pocket expenses will count toward your annual Part D out of pocket threshold.   Only the cost of Part D covered drugs that are included on a plan's formulary (list of covered drugs that it offers) will count toward your out of pocket limit.   If a particular drug is not on a plan's formulary, you will have to pay full price for that drug and in addition, the cost will not count toward your out of pocket expenses.   Therefore it is very important to carefully select a plan that matches your needs.

Only out of pocket costs for formulary drugs that are paid for by you, a family member, or another person acting on your behalf, or a state pharmacy assistance program such as EPIC count toward your annual out of pocket limit of $3600.   Payments by other insurance (such as employer or union plans) do not count and charitable contributions are eligible as long as they are unaffiliated with your employer or union.

However, this is only the basic benefit and actual PDPs are given flexibility as long as the total value of their plan is the same as the basic benefit.   Therefore some plans may have higher co-payments than others while others have lower premiums.   For example, a plan may offer a $50 deductible and higher co-insurance than the basic benefit does.   PDPs are given the option to provide alternative enhanced coverage which may include additional drugs on their formulary or even covering drugs that would be otherwise excluded.   This is why is it important to carefully select a plan that is right for you.

In addition, the costs associated with Medicare Part D are set to increase every additional year.   By 2014, the monthly premium is expected to rise to approximately $65 while annual deductibles should almost double from $250 to $450.   Finally, the coverage gap between partial and catastrophic coverage will jump from $2,850 in 2006 to $4,984 in 2014.   Because of these increases in drug coverage costs, it is important to choose a plan early and wisely since the penalty for waiting to choose a plan will also increase substantially.

Low Income Assistance
People with low income will be able to apply for help paying drug coverage expenses through Social Security.   The people who are currently eligible for both Medicare and Medicaid (dual eligible) will be automatically enrolled.   In addition, if you have a Medicare Savings Program (MSP) or receive Supplemental Security Income (SSI), you automatically qualify for help. Other low income seniors must apply directly to Social Security (www.ssa.gov) or through New York's Medicaid office.   Both offices began accepting low income subsidy applications    on July 1, 2005.   Social Security began mailing out applications in May 2005 to 20 million Medicare beneficiaries informing them that they may be eligible for low income subsidies to help pay for their Part D expenses.  

The application for low income subsidies is straightforward and you only have to list your income and assets, no proof is necessary.   If your application is denied, you have 60 days to request administrative review by Social Security.   If your application is denied by New York's Medicaid office, the appeal is subject to the normal Medicaid appeal procedures.   It may be beneficial to apply directly to New York's Medicaid office since the state is duty-bound to screen for MSP eligibility which automatically qualifies individuals for the low income subsidy.

If you qualify for a full low income subsidy because you are a dual eligible individual, you will have no premium and no deductible to pay.   If you have an income below 100% of the federal poverty level (FPL; $9,810), you only have a co-payment of $1 for generic drugs and $3 for brand name drugs.   If your income is greater than 100% of FPL then co-payments are $2 for $5, respectively.   In addition, you have no co-payment after $3,600 in out of pocket drug costs.

Also, if you are institutionalized (in a nursing home, etc.) and currently have Medicaid, you will pay no premium, deductible, or co-payment..   This will help many seniors since they no longer will have to pay for prescription drugs, but they must become active in selecting a plan that is tailored to their needs.

Dual eligibles will be automatically enrolled in a random plan if they do not select one.   In October 2005, letters will be mailed out to dual eligibles alerting them which plan they will be enrolled in if they do not choose one by December 31, 2005.   In order to make sure that your drugs will be covered, you should select a plan that suits your needs.   Normally if you want to change your plan, you must wait until the following year to do so but if you are a dual eligible, you have a special enrollment period that will allow you to change your plan at any time.

People who qualify for MSP or SSI will also have a full subsidy.   These individuals will pay no premium or deductible.   The only cost is a co-payment of $2 for generic drugs or $5 for brand name drugs until $3600 in out of pocket drug expenses.   After $3600, catastrophic coverage begins and there is no co-payment.

If you have an income less than 135% of the federal poverty level ($13,160/year or $17,561 for a couple) and limited resources ($6,000 or $9,000 for a couple), you will also qualify for a full low income subsidy.   You will pay no premium and no deductible.   The only costs will be a $2 and $5 co-payment for generic and brand name drugs up to $3,600 in drug costs.   After costs of $3,600 you will pay nothing.

If you do not qualify for a full low income subsidy, you can still receive a partial subsidy if you have an income less than 150% of the federal poverty level ($14,595/year or $19,485 for a couple) and limited resources($10,000 or $20,00 for a couple).   Your premium will be based on a sliding scale relative to your income.   There is also a $50 deductible and a 15% co-insurance until your out of pocket expenses reach $3600.   For catastrophic coverage, there is a $2 and $5 co-payment for generic and brand name drugs.

There are a few other areas of interest with regard to low income subsidies.   Full subsidy-eligible individuals will have a reduced late penalty fee.   The penalty will be 20% of any applicable late enrollment penalty for the first five years, after which no penalty will be imposed.   In addition, when calculating whether you are eligible for a low income subsidy, liquid resources that can be converted to cash within 20 days (savings and checking accounts, etc.) and real estate that is not your primary residence will be counted to determine whether you meet the resource threshold to be eligible for a subsidy.   Also, you are allowed to set aside up to $1,500 ($3,000 for a couple) for burial expenses that do not count toward your assets for eligibility.

Drug Coverage
PDPs have considerable discretion to decide which specific drugs to include on their formularies.   Therefore, PDPs do not necessarily have to pay for many drugs that are covered by Medicare Part D.   Many individuals will not have the prescription drug coverage for the medicine they need because of decisions by private PDPs.  

In order to obtain a non-formulary drug, you must file a request (or exception) that your plan cover a medically necessary drug that is not on its formulary.   You must get a statement from your doctor stating that no formulary drug will work.   Plans must grant these requests when it is medically appropriate to do so.   Plans will all have their own procedures for filing a request and are required to respond to your request within 72 hours.   You can also ask for an expedited request when your life or health is in jeopardy.   In that case, plans must answer your request within 24 hours.   If a plan denies your request, you will be able to appeal its decision.

The request process for each plan will be different and as a result, nursing home staffs will have to do a lot more work since each plan will have its own requirements and procedures.   Nursing home staffs will become overloaded with problems since the staffs previously only dealt with one single entity, Medicaid.   Moreover, nursing homes currently get their drugs for their residents from a single long-term pharmacy.   After January 1, nursing home residents will have different PDPs and many of the PDPs will not be accepted at the pharmacy that the facility uses.   Therefore, there will be an increased burden on nursing home staff and pharmacies to ensure that no resident loses their prescription drug supply.

In addition, there are a number of drugs that are excluded from coverage under Medicare, particularly those categories of drugs for which Medicaid payment is optional.   These drugs include drugs for weight gain or loss, over-the-counter drugs, drugs used for cosmetic purposes or hair growth, and prescription vitamins and mineral products.   In addition, barbiturates and benzodiazepines (used to treat seizures, anxiety, and insomnia in elderly people) are not covered by Medicare.   In these cases where Medicare explicitly excludes these drugs, New York's Medicaid program can cover them.   New York must be fair and partisan and cannot exclude any category of Medicaid eligible people and include others while choosing whether to cover any excluded drugs.

Medicare drug plans can also stop covering certain drugs at any time and take them off of their formulary, provided they let their members currently taking the drug know 60 days before it happens.   Notice must include the name of the drug being removed, why it is being removed, alternative drugs in the same category, and the necessary steps to appeal for the drug.   If a plan does not provide written notice through the mail, it must give a beneficiary a 60-day supply of the drug along with written notice when a beneficiary goes to a pharmacy for a refill.    If a beneficiary is not taking a discontinued drug, a drug plan has no responsibility to inform him or her of the drug's removal from the formulary.   Because plans can remove drugs from their coverage, people are concerned that they can only change drug plans once a year during the annual enrollment period.   To alleviative some concerns, plans will have appeal procedures using coverage determinations and exception processes to make sure that medically necessary drugs are still available to their members.

Many elderly individuals take as many as 10 or 12 drugs at once.   Problems may presentthemselves if a PDP does not cover all the drugs an individual might take.   If a plan does not cover a particular drug, many beneficiaries will be forced to try a substitute drug.   Experimenting with different drugs, particularly with seniors, can be quite dangerous if the human body is used to the same medication day in and day out.   Individuals must take the time and effort needed to make sure that they are selecting the right prescription drug plan because of possible health concerns associated with trying new medication.

In addition, the government is requiring all Part D plans to cover a temporary supply of non-formulary drugs for nursing home residents.   By requiring plans to have an emergency supply of these drugs, seniors will be able to ensure that medicine will be available to them.   The supply is supposed to be used during any appeals or request process.

Supplemental Plans
Individuals who enroll in Part D prescription drug coverage can still supplement their coverage from other sources.

EPIC -   One option is help through a state pharmacy assistance program.   In New York, help is provided by Elderly Pharmaceutical Insurance Coverage (EPIC).   Payments by EPIC count toward a beneficiary's out of pocket expenses and will help lower the cost of prescription drug coverage.   EPIC wraps around various Part D plans and provides supplemental drug benefits.   EPIC must be available for all plans and cannot discriminate against any plans.   By requiring that EPIC does not discriminate, beneficiaries are ensuring that regardless of what PDP they select, they will be offered help from New York.   It is also important to take advantage of EPIC if possible since it can pay for all or some of an enrollee's Part D cost sharing.

New York has already authorized a bill that will allow EPIC to help pay for drug coverage through Part D. The bill has a provision that allows the EPIC participation fee to be waived if an individual is enrolled in a Medicare Part D plan.   The bill also authorizes EPIC to help individuals to enroll in a PDP and to help in pursuing appeals and requests.

Employers and Unions - Another option that will give you supplemental drug coverage is through your employers and unions.   Your employer may choose to offer more comprehensive coverage than Medicare or it may choose to wrap around the Medicaid Part D benefit and help with cost sharing.

Supplemental coverage with Part D - A PDP may have an enhanced alternative drug plan for a higher premium.   Therefore, you may be covered for a larger amount of drugs or have less out of pocket expenses to pay in exchange for a higher premium.   Since information on PDPs have not been made available yet, it is important to thoroughly choose a plan tailored to your needs.

Charities - Charities are another choice where you can look for supplemental coverage if you qualify.   Charities can pay all or some of an individual's Part D cost sharing which counts towards the out of pocket expense.   As long as the charity is unaffiliated with your employer or union, it may aid you in paying for the Medicare Part D benefit.

Medigap
Starting January 1, 2006, any person enrolled in Part D cannot buy or renew Medigap plans H, I, and J.   If you have a Medigap H, I, or J plan and want to keep its prescription drug coverage, you cannot enroll in Part D.   But, if you choose to later enroll in a Part D plan and lose your Medigap drug coverage, you will be charged a penalty premium.   Under the current system, Medigap drug coverage is not considered creditable coverage and will have a penalty attached to it.   Therefore, it is important to act now and decide whether Medicare Part D prescription drug coverage is right for you in order to avoid large penalties down the road.

If you plan to enroll in Medicare Part D and you want to keep your Medigap plan H, I, or J , your Medigap plan will be modified to exclude prescription drug coverage after Part D becomes effective and your premium will be modified accordingly.   If you are enrolled in a Part D plan, you can still continue to purchase Medigap plans A, B, C, F, K, or L to supplement your other health insurance needs.

Most important issues to take away
If you have Medicaid drug coverage, you will lose it and automatically be enrolled in Medicare Part D. It is important that you understand the options available to you in order to ensure you make a well educated decision about choosing a PDP.   When selecting a PDP, be careful to check their formulary and make sure that the drugs you need are covered.   If not, you will bear the full cost for any drugs not on your plan's formulary.

Because Medicare prescription drug coverage is new, there are still many uncertainties involving what private plans will be available and how to determine which plan is right for you.   There are a number of available options and it is important that you select the right choice.   A knowledgeable Elder Law attorney aware of all the intricacies of Medicare law can show you the best way to choose a plan and keep your assets and can assist you in making sure you are taking full advantage of the new Medicare drug coverage.

Disclaimer : This is not a legal document.   The official Medicare program provisions are contained in the relevant laws, regulations, and rulings.

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