Transcript NJDEP`s Proposed New CAFRA/State Plan Regulations: Round 2 A

Medicare Prescription Drug
Improvement and Modernization Act
of 2003
David Adams, Evangelical Lutheran
Church in America
Jean C. Hemphill
Ballard Spahr Andrews & Ingersoll, LLP
November 30, 2004
2003 Medicare Act
• Creates New Medicare Part D for
Prescription Drug Coverage
• Effective January 1, 2006
• Pays Commercial Carriers to Offer
Prescription Drug Plans (PDPs)
• Authorizes Subsidy Payments to
Employers that Sponsor Retiree
Prescription Drug Benefit Plans
Medicare Part D – Prescription Drugs
• Eligible individuals may enroll to receive
“qualified prescription drug coverage”
under Medicare Part D
– Unlike Parts A and B, Part D coverage will
be provided through private vendor plans
– Enrollees will be able to choose between at
least two plans
– Private plans (PDPs) will receive a Federal
subsidy for a portion of their costs
Medicare Part D – Prescription Drugs
• Who is Eligible?
– Each individual eligible for Part A or
enrolled in Part B
• Enrollees will pay a monthly premium
for Part D coverage
– $35 month in 2006
– Special rules for low-income enrollees
• PDPs will be announced in Fall, 2005
Medicare Part D – Prescription Drugs
• Annual Deductible -- $250 (adjusted
after 2006)
• Cost-Sharing – individual pays 25% of
the costs above the annual deductible,
up to the initial coverage limit
Medicare Part D – Prescription Drugs
• Initial Coverage Limit – $2,250 (adjusted after
2006)
– Part D reimburses 75% of costs up to $2,250,
subject to the annual deductible
• The “Donut Hole”
– Individuals pay 100% of annual costs between
$2,250 and $5,100
– Private vendors may offer supplemental
coverage for donut hole expenses
Medicare Part D – Prescription Drugs
• Out-of-Pocket Expense Limit – once
individual out-of-pocket expenses reach
$3,600 (adjusted after 2006), 95%
reimbursement of costs
– Out-of-pocket expenses include the
deductible, individual cost-sharing, costs
above the initial coverage limit
– $250 deductible + $500 cost-sharing +
$2,850 in donut hole costs = $3,600
Medicare Part D – Prescription Drugs
$3,000
$2,500
$2,000
$1,500
Enrollee
Part D
$1,000
$500
$0
$0 - $250
$250 $2,250
$2,250 $5,100
$5,100 $7,500
Employer Coordination With Part D
• Two ways for employers to coordinate
coverage:
– Provide primary coverage and receive a
Federal subsidy; or
– Provide secondary coverage (wrap around
PDP coverage)
Employer Coordination With Part D
• Subsidy for primary coverage is 28% of the
“allowable” annual costs between $250 and
$5,000 per retiree
– Up to $1,330 per retiree (cannot average costs
among all retirees)
• Allowable costs are those costs actually paid
on behalf of the retiree
– Net of discounts and charge backs
– Excludes administrative costs (other than
direct dispensing costs)
Employer Coordination With Part D
• Subsidy Requirements
– Benefits under retiree plan must be at least
actuarially equivalent to Part D Qualified
Prescription Drug Coverage
– Employer must file an annual actuarial
certification with Medicare to qualify
– Employer will be subject to audit of records
Employer Coordination With Part D
• Employers may offer supplemental
retiree prescription drug coverage that
is secondary to Medicare Part D
– Supplemental plan will not receive any
subsidy
– Supplemental coverage cannot eliminate
donut hole (TROOP Rule)
Employer Coordination With Part D
• Employers may pay PDP or Medicare
Advantage premiums for Retirees
• Employers may coordinate with PDPs
for a customized plan
CMS Timeline
• February: Final Part D regulations, including
•
•
•
•
eligibility rules for employer subsidy
June: PDP vendor applications to CMS
September: Deadline to apply for Employer Subsidy
for 2006; no indication of when CMS will publish
application forms or accept applications.
October 15: Regional PDP options announced
November 15: Open Enrollment period begins and
runs through May 2006.
Church Plan Issues
• CBA filed Comment Letter with HHS
– Many church plans may not qualify for the
subsidy because proposed regulations require
offset for Retiree contributions in determining
eligibility for subsidy
– No time to align with national PDP for churchwide plan for retirees.
– Low cost of monthly Part D premium may lead
to adverse selection against employer plan