To: Physician’s Rx Care Program Sponsors
From: Anne McCallum, PRC Program Manager
Date: November 9, 2005
Re: The Effect of the new Medicare Part D Pharmacy Benefit on the Physician’s Rx Care Discount Drug Program
Beginning in January of 2006, Medicare Part D will
provide a pharmacy benefit to Medicare beneficiaries.
Enrollment into Part D is voluntary and the initial enrollment runs from
Federal rules will allow seniors who have drug coverage from a former or current employer or any other source such as discount cards to keep that coverage instead of enrolling in a Medicare drug plan if that coverage is at least as good as Medicare’s (ie creditable coverage). If these seniors later want to enroll in a Medicare drug plan, they will not incur the premium penalty as long as they enroll within 63 days of terminating the former creditable coverage. To provide creditable drug coverage, a company must conduct a thorough actuarial value review of their current drug plan in order to ensure that their coverage is at least as good as Medicare’s. Pharma Futures, Inc. is not conducting such a review and therefore the Physician’s Rx Care card program cannot be considered creditable coverage for Medicare beneficiaries. Medicare beneficiaries who enroll in a Part D drug plan must stop using their Physician’s Rx Care card and any other discount drug card for their prescription drug plan’s covered prescription drugs once their Medicare drug plan becomes effective. Medicare beneficiaries may still use a Physician’s Rx Care discount pharmacy card for those drugs they take that are not covered by their Part D drug plan or to purchase a drug from an out of network pharmacy since they are responsible for the full cost of these drugs and the cost does not count towards their drug benefit expense calculations.
Given the financial penalty for not enrolling in Medicare Part D when eligible, Pharma Futures, Inc. encourages Medicare beneficiaries to enroll in a Medicare Part D drug plan for their prescription drug coverage. We also encourage beneficiaries to keep their Physician’s Rx Care cards for reducing the purchase price of those drugs that may not be covered by the drug plan they select and/or when they need to fill a prescription at a pharmacy outside their drug plan’s network.
Part D Highlights
Medicare Part D is not a simple plan and not everyone will benefit equally. The $32-35 monthly premium, which is waived for those also on Medicaid, is deducted from a beneficiary’s Social Security check or paid directly by the enrollee by check or EFT to their Medicare private drug plan. The drugs covered and participating pharmacies will vary by the drug plan selected and thus careful attention will be required by a Medicare beneficiary when choosing a drug coverage plan under Part D. For 2006, a beneficiary must spend $3,600 out-of-pocket for covered drugs before catastrophic coverage kicks in and their out-of-pocket costs are substantially reduced, this will occur if their annual drug expenses are at least $5,100. Of note is that the plan premium does not count toward the out-of-pocket maximum. Some states will have assistance programs so those with a very low income will not have to spend $3,600 out-of-pocket before catastrophic coverage kicks in. As with all insurance, premiums are expected to increase annually and those paying the premium penalty will see it increase as well.
Each Medicare drug plan will track out-of-pocket expenses for their Medicare beneficiaries and they will have to pay those out-of-pocket costs at the pharmacy at the time of purchase. Plans will provide monthly statements that show how much has been spent for the year and how close a beneficiary is to reaching the annual out-of-pocket maximum for catastrophic coverage ($3,600 in 2006).
Medicare beneficiaries will be able to compare the costs, formulary and pharmacy networks of the drug plans in their area online beginning in October of 2006 at www.medicare.gov.
How Part D works:
· Enrollees pay the first $250 (the deductible) and the monthly premiums ($384-$420)
· After satisfying the deductible, they pay 25% of the prescription costs up to $2,250
· They pay 100% of the prescription costs from $2,251 to $5,100
· If costs exceed $5,101 a year, Medicare pays 95% and they pay 5% of the additional costs
Scenarios:
1) A senior whose annual prescription expenses are less than $810 - the estimated break-even point given the deductible plus annual premium and any additional premium a private insurance company that offers a prescription drug plan may charge- will not save money if enrolled in a Part D drug plan.
2) A senior whose annual prescription expenses are $2,250 will have out of pocket costs of about $1,233 (includes deductible, premiums and co-pay) and thus savings of about $1,017.
3) A senior whose annual prescription expenses are $5,000 will have total* out of pocket costs of $4,082 ($1,233 of the first $2,250 and 100% of the next $2,849) and thus savings of $918.
*
The $3,600 out-of-pocket previously mentioned and used by Medicare to calculate
when a person triggers catastrophic coverage; only covers the cost of
prescription drugs and does not include the premium costs.
Senior Annual Drug
Use and Expense Information
In 2003, seniors made up 13% of the population but accounted for 34% of prescriptions dispensed and 42% of all prescription drug spending. To help explain the high drug use and spend of this group, Families USA, conducted a study of seniors that reported that 90% of Medicare beneficiaries took at least one prescription drug during the course of a year and 46% took five or more prescriptions daily. The Congressional Budget Office found that the average annual amount spent by beneficiaries on prescription drugs was $2,322 in 2003, with 10% of beneficiaries spending more than $5,000. Obviously, this segment of the population tends to be on a fixed income and can ill afford the escalating costs of prescription drugs, especially the newer, more expensive drugs aimed at maintaining the chronic conditions of the elderly.
According to the AARP, the average person on Medicare spends $966 out-of-pocket annually on prescription drugs. This indicates that many on Medicare already have help with lowering the costs of prescription drugs and that they will most likely continue to see similar out-of-pocket drug expenses, about 50% of their actual prescription drug expenses. The Centers for Medicare and Medicaid Services estimates that the typical person with Medicare who has no drug coverage will now save about 50% on their prescription drug expenses under Part D. So now across the board, a typical Medicare beneficiary will be responsible for paying about 50% of their drug costs.
When can a
Medicare Beneficiary still use the Physician’s Rx Care card?
Medicare beneficiaries can only change their drug plans once a year during the Annual Coordinated Election Period between November 15 and December 31. So if they enroll and they later develop a condition for which they need to take a prescription drug that is not on their current coverage’s formulary, they will have to pay out-of-pocket and will be responsible for the full amount. This is a scenario in which the Physician’s Rx Care card could be of benefit as they can use it to reduce the full retail cost of the prescription drug not covered by their current Part D drug plan.
If a senior selects a drug plan that covers most of their prescriptions but excludes one or more, they can use the Physician’s Rx Care card for the “off-formulary” drugs and avoid possibly paying the full retail price at the pharmacy.
If a beneficiary needs a drug excluded by law from Medicare coverage they can use the Physician’s Rx Care card to reduce their out-of-pocket expenses. Excluded drugs include those for anorexia, weight loss, weight gain, fertility, cosmetic purposes, hair growth, relief of symptoms of colds (like cough or stuffy nose), prescription vitamins or minerals and certain anti-anxiety and anti-siezure drugs. Some private Medicare drug plans may have enhanced coverage that includes some or all of these but they will not count toward meeting the out-of-pocket maximums so seniors will be able to use either the drug plan’s discount or the Physician’s Rx Care card discount, whichever is greater, for these prescriptions.
Medicare beneficiaries that use a pharmacy that is out of their plan’s network are responsible for the full cost of the prescription(s) filled at that pharmacy. Although Medicare has dictated that drug plans make their network pharmacies convenient for beneficiaries, some seniors will find themselves needing to fill a prescription at an out-of-network pharmacy if they travel. By using a Physician’s Rx Care card, these seniors may avoid paying the full retail price for these non-network prescription fills.
The Confusion has
only begun…
The Application for
Help with Medicare Prescription Drug Plan Costs, paper work to see if the
approximately 10 million Medicare beneficiaries nationwide qualify for extra
help with drug costs, was mailed out to Medicare beneficiaries earlier this year
with acceptance or denial letters returned to beneficiaries a few weeks later.
This paper work did not enroll them in Part D but many seniors thought
that this was the enrollment for part D and are now confused as to whether they
qualify or not.. This happened to
one of my relatives. My
mother-in-law received the above application from her Social Security office,
filled it in and was soon told by mail that she did not qualify for assistance.
She interpreted this as not qualifying for Part D.
It was only after I explained the difference between the assistance
program and the regular program that she understood that she could and should
enroll for Part D drug coverage. How
often will this be repeated in households across the
References:
Centers for Medicare and Medicaid Services website at www.cms.gov