DECEMBER 1, 2003 VOLUME 11, NUMBER 22
With the U.S. Senate’s approval of sweeping new Medicare provisions the public discussion has focused on whether the changes will be good for the program, its beneficiaries and the nation as a whole. Much controversy has also centered on the politics of the changes—including whether Republicans or Democrats won or lost, whether drug and insurance companies benefited at the expense of seniors, and whether senior advocacy groups sold out their members for temporary political gain. Not enough attention has been given to the actual provisions of the new law and the many questions raised by its enactment.
Under the new Medicare law, “Part D” coverage will be the primary payor for prescription drugs for seniors and the disabled, but the new law does much more than just adopt a new drug benefit. We answer many of the questions about the prescription drug benefit here, but in a companion issue of his newsletter Elder Law Fax, our friend and colleague Tim Takacs, a Hendersonville, Tennessee, elder law attorney, answers questions about the non-drug related provisions in the new law.
Q: What benefits will be available before Medicare’s full prescription drug program begins in 2006?
A: Starting sometime early in 2004, Medicare recipients will be offered a discount drug card costing $30. The card should entitle them to receive discounts of as much as 15% to 25% on drug costs. Low-income Medicare recipients will pay nothing for the drug discount card, and will receive $600 credit toward the cost of their drugs—though they will have to pay a co-payment of 5% to 10% of each prescription. The drug card program will end when the full prescription drug benefit takes effect in 2006.
Q: Will Medicare beneficiaries automatically receive the new drug benefit when it becomes available in 2006?
A: Apparently not. What is being called Medicare “Part D” will require enrollment and a monthly premium, currently set at $35 (but subject to changes before the 2006 effective date). This payment will be in addition to the Part B premium ($66.60 beginning next month). Medicare recipients with incomes below about $12,000 (or, for married couples, about $16,000) will pay no premiums for Part D.
Q: Once a beneficiary signs up for Part D, what drug savings should he or she expect?
A: Part D beneficiaries will still pay the first $250 of prescription medications out of their own pockets each year. The beneficiary will pay 25% of the next $2,000 of drug costs, and the entire cost of drugs between that level and $5,100.
Q: What does this mean for a real-life beneficiary’s drug benefit?
A: To take one example, a beneficiary with $500 in monthly drug costs today will pay about $335 per month under the new plan—if the premiums do not increase and the cost of drugs remains fairly stable. A beneficiary with current drug expenses of $50 per month will actually pay a little more than $60 per month under the new plan—but will be insured against catastrophic medication costs for the slight increase in payments. Neither of those examples will apply, incidentally, to poorer Medicare recipients, who will pay less for their drugs. Calculating the actual cost of drugs for a given beneficiary can be difficult; the Kaiser Family Foundation has prepared an internet page to give individuals a better idea of their own savings (or costs) under the Part D coverage.
Q: Are there other limitations on Part D coverage?
A: Yes, there are several other ways in which the drug benefit is limited. For example, after reaching the $5100 level in total drug costs, the participant will still have a co-payment for additional drugs of 5% of the drug costs.
Q: Will private insurance plans pay for the uncovered portion of drug costs?
A: Yes and no. Anyone who already has a “Medigap” (supplemental Medicare) policy that provides a drug benefit can continue to receive that benefit–provided that they choose to opt out of the new Medicare drug benefit program. No new Medigap policies with drug coverage can be sold, and no other private insurers will be permitted to sell policies that cover the deductibles and co-payments in the Medicare drug program.
Q: Will low-income seniors and disabled Medicare beneficiaries receive any additional benefits after 2006?
A: Yes. In addition to the waiver of premiums described earlier, there are also reduced co-payments for poorer participants. They will pay $1 to $2 (depending on income levels) for generic and $3 to $5 for brand name and “non-preferred” drugs. The “donut hole” (the uncovered portion of drugs costing between $2,250 and $5,100 each year) does not exist for poorer beneficiaries. Existing Medicaid coverage for drugs, however, will end—except for benzodiazepines and some other drugs that will not be covered by Medicare’s Part D program.
Q: Who will actually provide the Part D drug coverage—Medicare or private insurers?
A: The new law encourages individual insurance companies to enter the marketplace and provide coverage options under government supervision but without direct government management. In areas where no insurance programs are offered, however, Medicare will provide better subsidies to what the new law calls “fallback” insurance plans. The goal is to make sure that every Medicare beneficiary has at least two choices of drug coverage available. Incidentally, no “fallback” plan is permitted to offer drug coverage for the entire country.
Q: What effect will the new drug benefit have on state budgets?
A: The states are now paying a significant portion of drug costs for poorer Medicare beneficiaries who simultaneously qualify for Medicaid coverage—although the federal government does pay about half of Medicaid costs in most states. States will see some savings as those costs are shifted to Medicare, but the law requires the states to pay most of those savings back to Medicare.
Q: How will eligibility be determined for Medicare’s new needs-based benefits?
A: Medicare has never had a financial eligibility test before, though the little-known QMB and SLMB programs have provided premium assistance for poorer Medicare beneficiaries. The new law provides several additional benefits for Medicare recipients with low income and limited assets. In addition, the Medicare Part B premium will for the first time be increased for wealthier participants. State governments will be responsible for determining eligibility and enrolling low-income, low-asset beneficiaries in the new subsidized programs—probably utilizing the same eligibility staffs now employed to make Medicaid determinations.
There is much more to be considered in the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Some of the changes include provisions to reduce the cost of care in rural areas, a rollback of planned cuts in doctors’ reimbursement rates and an expansion of options available for health care coverage for younger citizens. For answers to questions about some of those other provisions, visit colleague Tim Takacs’ companion explanation in his weekly newsletter, Elder Law Fax.