Medicare Drug Plansand

Medicare Advantage Plans

Presentation to P1 and P2 ClassesSpring 2006

Medicare Study Guide• Know how Medicare Parts A, B and D differ in

terms of focus and determination of premium.– It is not necessary to know what is included and

excluded within Parts A, B and D.

• Know what is meant by “dual eligibles” and how they are treated under Part D.

• Know the difference between “medigap” and Medicare Advantage policies.

• Know what determines the patient’s Part D costs.

Medicare Decision Tree

Medicare Basics

• Who are eligible?– People 65 and older.– People who are not yet 65 but who have

received Social Security disability for 24 months.

– People with End-Stage Renal Disease.

Medicare Components-1

• Part A Hospital– No premium– Inpatient care in:

• Hospitals• Skilled nursing facilities (only after a 3-day

hospital stay)• Home health care• Durable medical equipment (wheelchairs,

hospital beds, oxygen and walkers)• Hospice

– Deductables

Medicare Components-2• Part B Outpatient

– Up to 2006, the premium was based on 25% of the cost to administer the program.

– Beginning in 2007, the premium will be based on a sliding scale with income calculated by an elaborate formula.

• Subtract income earned in American Territories (Puerto Rico) and education savings bonds.

• Add tax-free interest earned or accrued (IRA, 401k and tax-free bonds).

Levels progress from 25% of costs to35%50%65%80%

Part B Coverage• Bone mass every 24 months.• Lipid screens every five years.• Colonoscopy every 10 years (unless polyps

discovered in an earlier screen)• Diabetes-depending presence of risk factors• Flu shots,• Glaucoma Tests• Hepatitis B shots if at risk• Pap test and pelvic exam every 12 - 24 months• Pneumococcal shot• PSA every 12 months• Mamograms every 12 months• “Welcome to Medicare” Physical Exam (one-time).

Part B caveats• Coverage is optional• To avoid the 10% per year premium

penalty, the person must sign when first eligible.

• If eligible, but otherwise covered by employer paid medical insurance or covered under a working spouse’s policy, Part B can be delayed.– The employer or spouse’s employer must

provide a letter stating that the person was insured.

Part B Exclusions• Deductables, copayments, etc• Dental care• Cosmetic surgery• Custodial care• Eye refractions and glasses (“medical” part of the exam

covered)• Hearing exams and aids• Long-term care• Orthopedic shoes• Routine foot care• Annual physical exams• Most screening and laboratory tests.• Most vaccinations (except influenza, pneumococcus, Hepatitis

B)• Some diabetic supplies

– Syringes– Insulin

• Unless the insulin is used with an insulin pump or offered through a Part D Prescription Drug Plan

Medigap Insurance Plans-1• These plans cover

– Parts A and B deductables and limitations– Part B co-pays– They usually only cover Medicare-

approved procedures and conditions.

Medigap Insurance Plans-2• Part A Examples of Deductables (covered by

Medigap policies)– $952 for a hospital stay of 1-60 days each benefit period– $238 per day for days 61-90 of a hospital stay each benefit

period.– $476 per day for days 91-150 of a hospital stay each benefit

period.– All costs for each day of a hospital stay over 150 days.– $0 for first 20 days in a skilled nursing facility each benefit

period.– $119 per day for days 21-100 in a skilled nursing facility stay

each benefit period.– All costs for each day of a skilled nursing facility stay each

benefit period.

Medigap Insurance Plans-3• Part B Examples of Deductables

(covered by Medigap policies)– 20% of the Medicare-approved amount for

most doctor services, outpatient therapy, preventive services and durable medical equipment.

– 50% for most outpatient mental health services

Part D Prescription Drug Plans-1• Review

– Part A is entirely operated by the Center for Medicare Services (CMS) and automatically includes everyone receiving a Social Security pension.

– Part B is optional and is partially funded by premiums deducted from the person’s pension check.

– Parts A and B pay providers based on fees set by the Center for Medicare Services and varies with the region where the providers are located.

• Massachusetts: Medicare averages $7,000 per patient.• Oregon: Medicare averages $2,000 per patient.

Part D Prescription Drug Plans-2• Overview

– Part D does receive a Federal subsidies, but is operated by private insurance companies.

– The Center for Medicare Services is prohibited from negotiating drug prices for Part D plans.

• The Dept of Defense, Veterans Administration, Federal prison system do negotiate drug prices.

– Part D insurance plans are formulary dependent.• Recent regulations now prohibit an insurance company

from deleting a drug from its formulary. It may add a drug.

– Excluded drugs include:• Benzodiazepines• Prescription vitamins (calcitriol and sustained release

niacin added back).

Part D Prescription Drug Plans-3• Initial Coverage.

– Initial deductable ranges from $0 - $250– For the next $2,000

• Client pays 25% ($500)• Plan pays 75% ($1,500)• Summary: Client has paid $750 on the first $2,000

of drug costs.

Part D Prescription Drug Plans-4• Coverage Gap (“Donut Hole”)

– Clients pays $2,850 out-of-pocket costs for drug

• $750 + $2,850 = $3,600 out-of-pocket– Clients can take advantage of any

prescription discount program or state assisted programs while in the donut hole.

• Catastrophic Coverage– Clients pay

• $2.00 for each generic drug• $5.00 for each brand name drug• Or 5% of cost of each prescription – whichever is

higher.

Part D Late Enrollment Penalty-1

• Start with the National Average Premium (NAP) and assume an annual increase of $5.00/month

– 2006 $32.50/month– 2007 $37.00/month estimated– 2008 $42.00/month estimated– 2009 $47.00/month estimated

Part D Late Enrollment Penalty-2

• Calculation of the penalty.– Start with the National Average Premium– Penalty: 1% per month– After May 15, the person must wait 7

months (June – December)• Next open enrollment:

– Nov 15, 2006 for policies beginning Jan 1, 2007

• Calculation for 2006:– NAP x 1%/month x 7 months = penalty– $32.50 x 0.01 x 7 = $2.28/month added to

the 2007 premium

Low Income Subsidies• Definitions are complex and are dependent

on marital status.• Medicaid drug plans have been rolled into

Part D Medicare• Dual Eligible Clients

– Eligible for both Medicaid (Oregon Health Plan) and Medicare

– Automatically enrolled into a plan on May 1 unless the client has picked a plan.

• Low income clients greatly benefit from the Federal subsidies.

• With Part D, many PhRMA companies have discontinued or greatly restricted their drug availability programs.

Medicare Advantage Programs

• The insurance company receives:– Part B premium– An additional premium from the client– A Federal subsidy

• Types– With or without drug coverage

• If without, client must enroll in a Part D plan

– HMO with a primary “gateway” physician– PPO with larger co-pay for an out-of-

network physician