Posts Tagged ‘prescription drugs’

Medicare Changes Will Include Prescription Drug Coverage


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.

Federal Court Approves State’s Medicaid Drug Savings Plan


Like other states, Florida is experiencing runaway cost increases in Medicaid, the federal/state program which provides medical care for the poor. One particular area of concern has been the cost of prescription drugs (unlike the Medicare program, Medicaid covers medication costs). Last year the Florida legislature took steps to control those drug costs by establishment of a state “formulary,” or list of approved drugs.

The concept of a formulary is not really new. Managed health care plans (including HMOs) often maintain similar lists of approved drugs. Any physician wanting to prescribe a medication not on the list must either get approval before writing the prescription or change to a drug that is on the approved list.

Florida’s approach is different in two regards. First, the formulary is advisory rather than mandatory. While a prescription for any drug on the list is approved automatically, any drug not on the list requires the prescribing physician to first call the state to request permission. The pharmacist suggests drugs that are on the formulary instead, but if the physician insists he or she is permitted to issue the prescription for a non-formulary drug.

The other difference in Florida’s approach to a formulary is that drugs are included on the list based not on tests of efficacy, or reports of limited side-effects, but on the willingness of the manufacturer to pay a “supplemental rebate” (usually at least 10% of the drug’s cost) to the state. In other words, Florida’s formulary lists only those drugs which will cost less than the pharmaceutical manufacturer is entitled to charge according to federal regulations.

In the first three months of the new program, the state reported that over half of the prescriptions that would have been written for a non-formulary drug were switched to the approved, lower-cost alternative. Concerned about the effect of this approach on its members, a national pharmaceutical trade group brought suit to enjoin the state from operating its formulary program.

After the Florida program was upheld by the Federal District Court, the industry appealed. The Eleventh Circuit Court of Appeals, sitting in Atlanta, Georgia, agreed with the District Court and dismissed the pharmaceutical industry’s challenge to the Florida formulary law.

Florida’s inclusion of cost effectiveness in its drug program did not violate federal law, ruled the Circuit Court of Appeals. In fact, Florida’s program is not really a “formulary” at all, but merely a “prior authorization program.” Since doctors are guaranteed the right to prescribe the drug of their choice after talking to the state pharmacist, Florida’s plan is permissible under federal Medicaid law. Pharmaceutical Research and Manufacturers of America v. Meadows, September 6, 2002.

Court Win For Innovative Drug Cost Control Program In Maine


Medicare is a federal program providing medical care to millions of seniors and disabled individuals. Although beneficiaries may pay some portion of their own care costs those contributions are in most cases modest. By any reckoning, however, there are two important medical needs not covered by the Medicare program—long term nursing care costs and prescription drugs. While about half of the national cost of long term care ends up being paid by other government programs (primarily Medicaid, a federal/state program for the poor), prescription drugs are paid for by individual Medicare recipients in most cases.

With medication taking a more central role in medical care, and in the face of rapidly rising drug costs, advocates and governments seek to make drugs affordable to individuals without forcing them to qualify for Medicaid coverage. One innovative approach was adopted by the State of Maine last year, and the State was promptly sued by representatives of the drug industry.

Maine’s approach was to establish a state-sponsored group purchasing plan. The “Maine Rx Program” would create a state fund from rebates collected from participating drug companies, allowing Maine residents to effectively wield the same group purchasing power enjoyed by Medicaid programs, HMOs and other large, organized groups.

Any drug company which declined to participate in the Maine Rx Program would be publicly identified, and could presumably expect to see its sales shrink. More powerfully, uncooperative drug companies would have their products removed from the list of drugs which are automatically approved for use in Maine’s Medicaid program.

The Pharmaceutical Research and Manufacturers of America, an industry group, sued to enjoin Maine from implementing its new program. Federal Judge Brock Hornby granted the injunction, and the State appealed to the First Circuit Court of Appeals in Boston.

The drug industry argued that the federal Medicaid program preempts Maine or any other state from adopting its own drug plan that includes Medicaid penalties for noncompliance. Not so, ruled the appellate judges: “We perceive no conflict between the Maine Act and Medicaid’s structure and purpose.”

The drug industry also argued that the Maine Rx Program is an impermissible attempt by Maine to control companies located outside its own borders. Once again the Court of Appeals disagreed, saying that the program does not “regulate” the drug companies’ interstate commerce, and that the effect on the drug industry is not excessive in relation to the benefits sought to be obtained. Pharmaceutical Research and Manufacturers of America v. Concannon, May 16, 2001

The Court of Appeals permitted Maine’s experimental program for controlling drug prices to go forward. It remains to be seen whether the Maine Rx Program will actually be effective at controlling prices.

Worthless Policy Costs Insurer; Air Ambulance Not Covered


Medicare Won’t Pay For Air Ambulance

After Dr. Francis Keefe (age 82) broke his hip while traveling in Missouri, his wife decided that she wanted him to be closer to their New York home. Dr. Keefe was flown to a hospital near his home by air ambulance.

Mrs. Keefe submitted a bill for $3,456 for the air ambulance to her husband’s Medicare Part B provider. The carrier denied coverage, and an administrative law judge agreed.

Mrs. Keefe had argued that federal regulations require Medicare providers to pay for transportation “to the nearest hospital” and to the recipient’s home from the hospital. She asserted that the hometown hospital was the “nearest available” because family involvement is so important in discharge planning. Furthermore, she argued that the air ambulance flight was actually transportation “home” from the Missouri hospital.

The U.S. Court of Appeals agreed with the Medicare carrier and the administrative law judge. It held that the transportation requirement did not include air ambulance, and that transportation to the nearest acute care facility did not require travel to the family home, notwithstanding the value of family involvement in discharge planning. Keefe v. Shalala, Second Circuit Court of Appeals, Dec. 13, 1995.

Worthless Medigap Policy

Alabama resident Daisey L. Johnson (age 84) was covered by Medicaid for her medical needs. Nonetheless, the Life Insurance Company of Georgia was only too happy to sell her a Medigap policy to supplement her Medicare coverage. Ms. Johnson even presented her Medicaid card to the agent when he signed her up; for the next three years, Ms. Johnson paid over $3,000 in insurance premiums.

When Ms. Johnson figured out that her policy was worthless, she sued the insurance company. An Alabama jury awarded her $250,000 in compensatory damages and $15 million in punitive damages.

After the trial judge reduced the punitive damages award to $12.5 million, the Alabama Supreme Court further reduced it to $5 million. The Court noted that the insurance company had followed a pattern of selling Medigap policies to Medicaid recipients, and that its conduct “was egregious and reprehensible and resulted in a great financial hardship to some of the most vulnerable members of our society.” However, said the judges, the conduct was not “the most odorous this Court has been required to review,” and the award should therefore be reduced.

Furthermore, the Court used this case to change the way Alabama handles punitive damages awards. After payment of court costs and attorneys’ fees, the balance of Ms. Johnson’s award will be split between her and the State’s general fund. Life Insurance Company of Georgia v. Johnson, Alabama Supreme Court, Nov. 17, 1995.

Biggest-Selling Drugs

Industry sources report that the top five selling drugs (and the approximate value of sales) for last year were:

Drug      Purpose      Sales   
Zantac    ulcers      $2 bil   
Procardin heart       $1 bil   
          pain and             
Mervacor  high        $1 bil   
Vasotec   high       $895 mil  
Prozac    depression $875 mil  

Elder Law Q&A


Question: What is the difference between guardianship, conservatorship, power of attorney and representative payee? Which is “better” for my clients and family members?

Answer: Guardianship and conservatorship are court proceedings. The former gives the guardian power over health care and placement decisions, the latter over financial matters. Both require that the subject of the proceeding be incapacitated or unable to handle matters without assistance. Neither can be done voluntarily, in the sense of signing up for guardianship or conservatorship (though the subject of the proceedings may choose not to object).

Power of attorney is the simple act of appointing someone else to handle one’s financial and/or medical matters. By definition, one must be competent to execute a power of attorney, and must be willing to delegate authority. By signing a power of attorney, one does not relinquish any control but merely designates another with overlapping authority; guardianship and conservatorship transfer authority to the guardian or conservator.

Representative payee is a designation given by some pension and other benefits programs. The most familiar of these, of course, is the Social Security Administration, which may determine that a beneficiary is unable to handle his or her own checks based on a doctor’s letter. “Rep payee” status does not require a court proceeding, and is therefore less intrusive and expensive.

Which of these choices is “better” for someone with diminished capacity usually makes no difference. Competent people can not have guardians or conservators appointed, and incompetent patients can not execute powers of attorney. Representative payee status is usually preferable to conservatorship, but will not work for bank accounts or other financial matters; representative payees are also not bonded or required to report in as much detail as conservators.

Send your legal questions to us for future discussion in Elder Law Issues.

Wrong Medications Cost Seniors Billions

Results of a study on elder care conducted by the U.S. General Accounting Office show that 17.5% of older Americans are prescribed inappropriate or questionable medications resulting in more than $20 billion of unnecessary medical costs. The GAO also said that older Americans are six times more likely to be prescribed the wrong medication than are their younger counterparts, and that 3% of all hospitalizations result from adverse drug effects.

The study concluded the reason for this phenomenon is that doctors in every field of specialization see some elderly patients on a regular basis, but are not necessarily versed in the unique needs of the elderly. The report calls for education and awareness of the specific needs of older Americans through:

  • counseling for patients about the proper drug usage;
  • managed care systems and primary physicians who monitor drugs prescribed by others treating the same patient; and
  • drug utilization and review systems, possibly through a pharmacy monitoring program.

HMOs and Hospice

MAY 8, 1995 VOLUME 2, NUMBER 44

In recent years HMOs have come to dominate the Medicare field in Arizona. Although marketing sometimes suggests that Medicare recipients “give up” their Medicare benefits to join an HMO, it is important for consumers to realize that the HMO is simply an alternative method of delivering Medicare services.

“Medicare HMOs” (those HMOs providing coverage to Medicare recipients under special arrangements with the federal government) are required to provide the same range of services available to traditional Medicare participants. Of particular significance to many seniors is the requirement that Medicare HMOs provide full hospice benefits.

Medicare Hospice Benefit

Traditional Medicare does not pay for prescription drugs at all and has limited benefits for counseling. In addition, Medicare patients must pay an annual deductible and (in most cases) 20% of the cost of their care. For those enrolled in traditional “fee for service” Medicare plans, these limitations do not apply to hospice benefits.

For the past decade, Medicare has provided full coverage for hospice patients, including prescription drugs, supportive care and counseling (including grief counseling for family members). There is no deductible or copayment for these services. Eligibility does require a diagnosis of terminal illness, with less than approximately six months to live and a desire to “forego curative treatment options.”

The HMO Connection

For those patients who have elected to join a Medicare HMO, the rules may seem to have changed. Since prescription medications may now be partially covered (many plans provide coverage with a modest per-prescription copayment) and the HMO focuses on preventive care, the consumer may be misled into believing that Hospice benefits are treated differently as well.

In fact, Medicare requires that participating HMOs provide full Hospice benefits under the same terms as traditional Medicare coverage. Most HMOs contract with one of the private or non-profit Hospice organizations to provide the required services, and the patient will perceive the transition as having been moved “back on to” Medicare.

Medicare HMOs are discouraged from selecting only the healthiest Medicare beneficiaries. Consequently, they are required to accept nearly all applicants; one of the two major exceptions to this principle is that those already receiving Hospice benefits may not transfer to an HMO. Since the benefits are the same for Hospice patients, however, that should not present any problems for consumers.

White House Conference on Aging (Cont’d)

APRIL 10, 1995 VOLUME 2, NUMBER 40

More proposals considered by Arizona delegates to the White House Conference on Aging (by topic area):

Health Care and Mental Health

  • Permit reimbursement for direct care provided by nurse practitioners and physician’s assistants, for home care, preventive care and wellness programs.
  • Reduce duplication and coordinate services, particularly for those who access special services such as Veteran’s programs, Indian Health Services and Medicaid.
  • Control prescription medication costs.
  • Avoid rationing of health care by caps on service reimbursement and cost-benefit analysis of the true value of high-cost medical procedures.
  • Use excess hospital capacity for alternative services, such as extended care and assisted living.
  • Share medical resources, particularly high-tech equipment.
  • Consider means-testing Medicare (though a strong minority voice opposed any discussion of such a step).
  • Expand health programs to include mental health services.
  • Promote greater patient involvement in medical decisions.
  • Deal more creatively with substance abuse and suicide among the elderly.
  • Encourage medical professionals to work in rural and under served populations.
  • Institute a single-payor national health program (though this one did not make it into the final report).

Long Term Care

  • Shift emphasis from long term care in medical institutions to home care.
  • Provide tax incentives for family caretakers.
  • Encourage innovation in state and local programs by granting federal program waivers.
  • Promote prevention practices, among both elderly and young.
  • Encourage seniors to volunteer in their communities, to help them stay vital and involved.
  • Develop a wellness check program for homebound seniors.
  • Provide loans and incentives for home repair and adaptation for the homebound elderly.
  • Increase recreational programs for the elderly.
  • Expand case management programs.
  • Provide respite care for family care givers.
  • Promote congregate housing alternatives to reduce care costs.
  • Promote family and community responsibility for the elderly.

These are just a few of the myriad of suggestions considered by Arizona delegates. Next issue, we will discuss “special populations” and “elder rights.”

More AZ White House Conference on Aging


As mentioned in last week’s Elder Law Issues, the Arizona White House Conference on Aging held in Phoenix a week ago dealt with the issues facing the full White House Conference on Aging when it meets in May. Arizona’s delegation dealt with several issues expected to dominate the national aging agenda.

Health Care and Mental Health

In 1993, expenditures for health care totaled about $903 billion in the United States. Estimates indicate that the total cost of health care may exceed $1.7 trillion by the year 2000. While the overall cost of living increases at less than 5% per year, health care costs increase more than 10% each year.

Elderly citizens are more closely affected by medical problems than the general population. Those over 65 have an average of eight medical visits per year, as opposed to the five visits made by the rest of the population. The elderly are hospitalized more than three times as often as younger patients, stay half again as long in the hospital, and use twice as many prescription drugs. The disparity is widening; elderly patients are expected to increase their contacts with physicians by 22% (from 259 million contacts to 296 million) by the turn of the century.

The federal Medicare program provides medical care to most Americans over age 65 (about 5% of the elderly are not covered by Medicare). In 1995, Medicare recipients pay $46.10 per month(an increase of over 10%) in insurance premiums to secure coverage for most medical care. Costs not covered by Medicare include eye and dental care, most prescription medications, most nursing home care and most mental health care.

In addition to Medicare Part B premiums, many elderly patients pay substantial deductibles and co-payments for their medical coverage. Others (in increasing numbers) rely on managed care (HMO) programs to reduce or eliminate co-payments.

Mental health services are particularly limited by Medicare. While Arizona has one of the highest suicide rates for over-65 patients in the nation, depression and alcoholism (the leading precursors to suicide and other behavioral health problems) are often undetected and untreated. Reimbursement rates and coverages are not conducive to appropriate and prompt treatment.

Elderly patients in rural areas face particular problems with health care. In addition to the other health issues, rural Arizonans have particular difficulties with transportation. In addition, physicians in rural areas are much more likely to refuse to accept Medicare assignment for their services.

[Next issue: “Special” Elderly Populations]

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