Medicare Part D

By Pi-Yi Mayo

There For several years, our government struggled to pass a new benefit under Medicare that would assist seniors with the high cost of prescription medications. Most seniors on regular fee-for-service Medicare with the assistance of a Medigap policy were pleased with the Medicare system primarily because their Medicare and Medigap premiums covered practically all of their healthcare costs with no unexpected increases. The exception concerned the cost of prescription medications. The problem of ever increasing medication costs for seniors on fixed incomes became an important political issue and forced the government to create a new Medicare benefit to help seniors to pay for their medications.
On December 8, 2003, President Bush signed the Medicare Prescription Drug, Improvement, and Modernization Act of 2003; Public Law 108-173 (MMA) December 3, 2003, which created a Part D Medicare (Part D). In addition to providing prescription benefits to seniors, Part D restricts the sale of certain Medigap policies covering prescription drugs, and provides additional managed care options and new preventive care benefits and services to beneficiaries.1

The Medicare Prescription Drug Program
The prescription drug program under Part D is one of the most significant changes in the Medicare system since its inception. For most of its history, Medicare did not provide coverage for medications or drugs except under limited circumstances, such as intravenous administered medications in a hospital setting. Part D provides an actual benefit (payment) for medications that reduces the cost of medications to beneficiaries. Although the law did not create a prescription drug benefit under Medicare, it allows Part A or Part B Medicare beneficiaries to purchase prescription drug coverage from a private prescription drug plan (PDP) or through a Medicare Advantage plan (MA-PD).2

Eligibility and Enrollment
A. General Eligibility3
An individual is eligible for Part D if he or she is (1) entitled to Medicare Part A benefits or enrolled in Medicare Part B, and (2) lives in the service area of a Part D plan. Beneficiaries who become entitled to Medicare Part A or enrolled in Medicare Part B are retroactively Part D eligible as of the month in which a notice of entitlement to Part A or enrollment in Part B is provided.
Medicare beneficiaries who are members of an MA-PD must obtain qualified prescription drug coverage through that plan. MA-PD enrollees are not eligible to enroll in a PDP unless the beneficiary is enrolled in a Medicare Advantage private fee-for-service plan that does not provide qualified prescription drug coverage.

B. Enrollment Process4
A person who is Part D eligible and wishes to enroll in a PDP may enroll during the enrollment periods by completing the appropriate enrollment form with the PDP or through other mechanisms determined appropriate by the Centers for Medicare and Medicaid Services (CMS), a division of the Department of Health and Human Services charged with assuring health care security for beneficiaries. The enrollment period for current Medicare beneficiaries was November 15, 2005 to May 15, 2006. The initial enrollment period for a beneficiary who is first eligible to enroll in a Part D plan on or after March 2006 is the same as the initial enrollment period for Medicare Part B – three months before to three months after the month the beneficiary turns 65. If the beneficiary is not eligible to enroll in a Part D plan during his or her initial enrollment period for Medicare Part B, the initial enrollment period is three months before to three months after the month the beneficiary becomes Part D eligible.
There was an annual coordinated election period for 2006. This period began on November 15, 2005 and ended on May 15, 2006. For coverage beginning in 2007 or any subsequent year, the annual coordinated election period is November 15th to December 31st for coverage beginning the following calendar year.
A Part D eligible individual may enroll in a PDP, or disenroll from a PDP and enroll in another PDP or MA-PD plan, during special enrollment periods under certain circumstances such as the involuntary loss or reduction of creditable prescription drug coverage or where a PDP plan has been discontinued in the area where the individual resides.5

C. Enrollment of Full-Benefit Dual Eligible Individuals6
Full-benefit dual eligible individuals are those persons who are eligible for Medicare and Medicaid. The CMS must enroll full-benefit dual eligible individuals who fail to enroll in a Part D plan into a PDP that offers basic prescription drug coverage in the area where the individual resides. The PDP monthly premium must not exceed the low-income premium subsidy amount as defined in Sec. 423.780(b). In the event there is more than one qualifying PDP, individuals must be enrolled in such PDPs on a random basis. Full-benefit dual eligible individuals enrolled in a Private Fee for Service (PFFS) plan,7 a cost-based HMO or Medicare Cost Plans (MCP) that does not offer qualified prescription drug coverage, or a Medical Savings Account (MSA) plan and who fail to enroll in a Part D plan must be automatically enrolled into a PDP plan as described above. The regulations do not prevent a full-benefit dual eligible individual from declining enrollment in Part D, or from disenrolling from a Part D plan and enrolling in another Part D plan during the special enrollment period provided by Sec. 423.38 (f).

D. Late Enrollment Penalty
Part D is a voluntary plan. However, the law imposes a late penalty on beneficiaries that do not enroll in a plan on the first day they are eligible unless they have “creditable coverage.” Creditable coverage is coverage under another plan that is comparable to the benefits available under Part D.8 A Part D eligible individual must pay a late enrollment penalty if the beneficiary fails to maintain creditable prescription drug coverage for a period of 63 days following the last day of the individual’s initial enrollment period and ending on the effective date of enrollment in a Part D plan. The late enrollment penalty increases a beneficiary’s monthly premium for the remainder of the beneficiary’s life. The penalty is 1 percent of the base beneficiary premium for each uncovered month in the period.9

E. Information About Part D10
On an annual basis, and in a format and using standard terminology that the CMS may specify, each Part D plan must provide information that will enable the CMS to provide current and potential Part D eligible individuals with the information they need to make informed decisions regarding the available choices for Part D coverage.

F. Marketing Materials11
The CMS must review the marketing materials of any Part D plan prior to distribution to beneficiaries. The CMS must also develop a standard format which includes an adequate description of the rules (including any limitations on the providers from whom services can be obtained), procedures, basic benefits and services, fees and other charges, grievance and appeals process, and other information necessary to enable beneficiaries to make an informed decision about enrollment. For markets with a significant non-English speaking population, the materials must be provided in the language of these individuals.

II. Benefits and Beneficiary Protections
A. Standard Benefit12
A Part D plan is required to offer a standard benefit. Drug plan sponsors are allowed to offer additional benefits, or deviate from specific standards set forth in the regulations, but any benefit offered must be equal in value to the standard benefit. In 2006, standard coverage includes:

• Monthly premium estimated on average to be about $37 (a beneficiary may pay a higher or lower amount depending upon which PDP or MA-PD the beneficiary selects);
• $250 deductible;
• 25 percent coinsurance (or cost-sharing on average equal to coinsurance of 25 percent) up to an initial coverage limit of $2,250; and
• Protection against high out-of-pocket prescription drug costs, with co-pays of generally the greater of $2 for generics and preferred multiple source drugs and $5 for all other drugs, or 5 percent of the price, once an enrollee’s out-of-pocket spending reaches a limit of $3,600.

Drugs and biological products paid for by Medicare Part A or Part B are excluded. In addition, some drugs that may be covered under a state Medicaid plan are not covered under standard Part D coverage.

B. Low-Income Benefit13
Beneficiaries with limited savings and incomes below 135 percent of the federal poverty line (which in 2006 was $13,230 for individuals and $17,820 for couples) receive:

• $0 deductible;
• $0 premium;
• Continuation of coverage beyond the initial coverage limit; and
• Co-pays of $2 for generics and preferred multiple source drugs and $5 for all other drugs, up to the out-of-pocket limit; $0 co-pay for all prescriptions once the out-of-pocket limit is reached (the government subsidy for cost-sharing counts toward the out-of-pocket limit).

Beneficiaries with limited savings and incomes below 150 percent of the federal poverty level (which in 2006 was $14,700 for individuals and $19,800 for couples) receive:

• Sliding scale monthly premium that would be on average $18 for beneficiaries with incomes between 135 percent and 150 percent of the federal poverty level;
• $50 deductible;
• Continuation of coverage beyond the initial coverage limit;
• Coinsurance of 15 percent up to the out-of-pocket limit (the government subsidy for cost-sharing counts toward the out-of-pocket limit);
• Co-pays of $2 for generic drugs and preferred drugs that are multiple source drugs or $5 once the out-of-pocket limit is reached.

Alternative Prescription Drug Cover-age Sponsoring Organizations may offer coverage of Part D benefits through plans that provide the following: (1) coverage, the actuarial value of which is at least equal to the actuarial value of standard prescription drug coverage, (2) access to negotiated prices, and (3) are approved by the CMS.
Supplemental Prescription Drug Coverage Part D plans may provide supplemental prescription drug coverage consisting of cost-sharing reductions and/or optional drugs. However, a PDP sponsor that offers such a plan must also offer a prescription drug plan in the area that provides only basic drug coverage. In addition to offering plans with supplemental coverage for an additional premium, MA-PD organizations must offer plans with basic drug coverage or enhanced coverage for no additional supplemental premium. (Basic coverage is either the statutorily-defined standard benefit or the alternative prescription drug coverage without any supplemental benefits).

C. Establishment of Prescription Drug Plan Service Areas14
The CMS is directed to establish PDP regions so that Medicare beneficiaries living in underserved areas, such as rural areas, have access to the PDPs. Regions are established based on the number of eligible persons, pharmacy access, and estimated drug expenditures. To the extent practicable, the PDP regions should be the same as MA-PD regions. To date, CMS has created 34 regions.

III. Grievances, Coverage Determinations, and Appeals15
Due to the potential adverse health consequences that can result if medications are not immediately available to beneficiaries, reaching a swift decision on a coverage issue is critical. The procedures governing grievances, coverage determinations, redeterminations, reconsiderations and appeals are the same as those for the Medicare Advantage (MA) program, which was modeled after the old Part C Medicare procedures.

A. Grievances
A grievance is a complaint or dispute, other than one involving a coverage determination that expresses dissatisfaction with any aspect of the operations, activities, or behavior of a Part D plan sponsor, regardless of whether remedial action is requested.16 Grievances generally involve minor issues such as customer service complaints. Part D plans are required to establish a process for hearing and resolving grievances in a timely manner.

B. Exceptions Process17
Most plans maintain a formulary of covered drugs. Medications not within the formulary are not covered by the plan. In some instances, the formulary will have a cost-sharing tier aspect (co-payment). Each Part D plan sponsor that provides and manages prescription drug benefits through a tiered formulary must establish and maintain reasonable exception procedures for coverage determinations. The procedures must provide a straightforward process for a beneficiary to obtain a covered Part D drug at a more favorable cost-sharing level, or to obtain a Part D drug that is not on the plan’s formulary.
Beneficiaries may request an exception under the following circumstances:

• The beneficiary is using a drug covered on a plan’s formulary that has been removed during the plan year for reasons other than safety;
• The beneficiary’s physician prescribed a non-formulary drug for the beneficiary that the physician believes is medically necessary;
• The beneficiary is using a drug that has been moved during the plan year from the preferred to the non-preferred cost sharing tier; or
• The beneficiary’s physician prescribed a drug for the beneficiary that is included in a plan’s more expensive cost sharing tier because the prescribing physician believes the drug included in the less expensive cost sharing tier is medically inappropriate for the enrollee.

Generally, plans must grant exceptions when medically appropriate. If the beneficiary is requesting coverage of a non-formulary drug, the drug may be covered if the prescribing physician determines that the medications included in the plan’s formulary would not be as effective as the non-formulary drug and/or would adversely affect the beneficiary. In both cases, the plan would have to agree with the physician’s determination.
If a Part D plan sponsor maintains a formulary tier that includes high cost and unique items, such as genomic and biotech products, the sponsor may design its exception process so that these items are not eligible for a tiering exception.18
Part D plan sponsors are required to provide notice to beneficiaries explaining the exception and coverage determination process. Plans are not required to provide such information to beneficiaries who purchase medications from non-network pharmacies. In the event a plan does not cover a medication purchased at a non-network pharmacy, beneficiaries are required to contact the plan to obtain such information.19

C. Redeterminations20
If a coverage determination is un-favorable to a beneficiary, the beneficiary may request a redetermination by the Part D plan sponsor. There are two types of redeterminations: standard and expedited. A Part D plan sponsor has seven days to issue a decision in a standard redetermination. If a redetermination meets certain requirements, it is handled on an expedited basis and the Part D plan sponsor must make a decision within 72 hours. If the Part D plan sponsor does not make a coverage determination or redetermination within the required time frame, the decision is forwarded to the next level of appeal within 24 hours.

D. Reconsideration By Independent Review Entity21
The next level of appeal is reconsideration by an Independent Review Entity (IRE) that contracts with the CMS. A beneficiary must file a written request for reconsideration with the IRE within 60 days of the date of the redetermination by the Part D plan sponsor. The IRE is required to solicit the views of the prescribing physician. A written account of the prescribing physician’s views (prepared by the prescribing physician or the IRE) must be included in the IRE’s record. Before the IRE will accept a request for reconsideration, the prescribing physician must conclude that the medications included in the plan’s formulary would not be as effective as the non-formulary drug and/or would adversely affect the beneficiary.
The IRE must conduct the re-consideration as expeditiously as the beneficiary’s medical condition requires. For standard appeals, the IRE has seven days to make a decision. An expedited reconsideration must be decided within 72 hours. If the issue involves a question of medical necessity, the reconsideration must be made by a physician with expertise in the implicated medical field.

E. Administrative Law Judge Appeal22
A beneficiary who is dissatisfied with the IRE’s decision has a right to a hearing before an Administrative Law Judge (ALJ) as long as the amount in controversy meets the threshold requirement established annually by the CMS. The beneficiary must file a request for hearing within 60 days of the date of the IRE’s decision. If the basis for the appeal is the refusal by the Part D plan sponsor to provide drug benefits, the CMS uses the projected value of those benefits to compute the amount in controversy. The projected value of a Part D drug or drugs shall include any costs the beneficiary could incur based on the number of refills prescribed for the drug or drugs in dispute during the plan year. Two or more appeals may be aggregated to meet the amount in controversy if the following requirements are met: (1) the appeals have been reconsidered by the IRE; (2) the request for the ALJ hearing lists all appeals to be aggregated; and (3) the ALJ determines the appeals the beneficiary seeks to aggregate involve prescription drugs for a single beneficiary. Two or more appeals may also be aggregated by multiple beneficiaries in order to meet the amount in controversy if the ALJ determines that the appeals the beneficiaries seek to aggregate involve the same prescription drug.

F. Medicare Appeals Council Review23
A beneficiary who is dissatisfied with an ALJ’s decision may request the Medicare Appeals Council (MAC) review the ALJ’s decision or dismissal. MAC is an entity within the Department of Health and Human Services. A MAC review request must be filed within 60 days of receipt of the ALJ’s decision.

G. Judicial Review24
The beneficiary may request judicial review of a decision made by the ALJ if the following requirements are met: (1) MAC denies the beneficiary’s request for review; and (2) the amount in controversy meets the threshold requirement established annually by the CMS. The enrollee may request judicial review of the MAC decision if it is CMS’ final decision and the amount in controversy meets the threshold. The complaint appealing a Medicare denial must be filed in federal court within 60 days of receipt of the MAC decision. Also, the Secretary of the Department of Health and Human Services, in his or her official capacity, must be named as defendant.

Conculusion
The Medicare Program is one of the cornerstones of the safety nets of our society. Changes in the program affect more Americans than perhaps any other government-sponsored endeavor other than the Social Security System or Income Tax. Changes in the Medicare Program particularly affect our elder population and cause tremendous anxiety and worry to the frailest of our citizens. Elder law attorneys and advocates for the elderly have a responsibility to our seniors to help them to understand and make plans to cope with the changes in the program.

Pi-Yi Mayo is board certified as an Elder Law Attorney by the National Elder Law Foundation. His practice focuses on planning for long-term healthcare needs of the elderly and clients facing catastrophic diseases. He is a member of the National Academy of Elder Law Attorneys (NAELA), is past president of the Texas Chapter of NAELA, and is a member of the Houston Bar Association’s Elder Law Committee.

Endnotes
1. Chiplin, Jr., and Gottlich, The Medicare Act of 2003, Virginia CLE Virginia Law Foundation, 2004. 2. Stein, Gottlich, and Nemore, Medicare Act of 2003, Center for Medicare Advocacy, Inc. Virtual Seminar System (March 11, 2004), p. 2. 3. 42 C.F.R. §423.30 (2005). 4. 42 C.F.R. §423.32 (2005). 5. See 42 C.F.R. §423.32 (2005) for a complete list of circumstances under which a Part D eligible individual may enroll in a PDP or disenroll from a PDP and enroll in another PDP or MA-PD plan. 6. 42 C.F.R. §423.34(2005). 7. A PFFS plan is a Medicare Advantage health plan offered by a state licensed risk bearing entity, which has a yearly contract with the CMS to provide beneficiaries with all their Medicare benefits plus any additional benefits the company decides to provide. 8. Center News, Center for Medicare Advocacy, Inc. Winter 2004, Vol. XVII, No. 4, p. 4. 9. 42 C.F.R. §423.46 (2005). 10. 42 C.F.R. §423.48 (2005). 11. 42 C.F.R. §423.50 (2005). 12. 42 C.F.R. §423.100 (2005). 13. 42 C.F.R. §423.773 (2005). 14. 42 C.F.R. §423.112 (2005). 15. 42 C.F.R. §423.560 (2005). 16. 42 C.F.R. §423.560 (2005). 17. 42 C.F.R. §423.578 (2005). 18. 42 C.F.R. §423.578 (a) (7). 19. Medicare Part D Appeals: A Mixed Bag For Beneficiaries, Center for Medicare Advocacy website (2/10/2005). 20. 42 C.F.R. §423.568 (e) (2005). 21. 42 C.F.R. §423.600 (2005). 22. 42 C.F.R. §423.610 (2005). 23. 42 C.F.R. §423.620 (2005). 24. 42 C.F.R. §423.630 (2005).

Text is punctuated without italics.

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