SUMMARY OF MEDICARE ACT OF 2003
Copyright © 2004 Center for Medicare Advocacy, Inc.
On December 8, 2003, President Bush signed into law the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003; Public Law 108-173
(Medicare Act of 2003). This legislation includes sweeping changes to the Medicare
program. It will provide Medicare beneficiaries with some limited assistance paying for
prescription drugs. The legislation also extends some programs, and begins others, which
will be helpful to Medicare beneficiaries. However, the Medicare Act of 2003 also includes
major restructuring of the traditional Medicare program, relying heavily on private
insurance for the delivery of benefits. In addition, it increases beneficiary cost sharing
responsibilities.
I. PRESCRIPTION DRUG PROGRAMS
Prescription Drug Discount
Card:
On
An eligible individual is someone who is entitled to benefits under, or enrolled under Part A, or enrolled under Part B. Individuals who are entitled to drug coverage under
a state Medicaid program or through a §1115 waiver may not purchase a card. Individuals
enrolled in a state Medicaid program or in a waiver program that does not provide drug coverage may purchase a
discount card if they are otherwise eligible for the program. Similarly, “medically needy” individuals
who qualify for Medicaid based on a spend-down or other method of eligibility may purchase
a discount card if, at the time of applying for the discount card program, they otherwise
meet its eligibility requirements. The
regulations further specify that once any individual is found
eligible for the program he will remain eligible unless he chooses to disenroll.
The Medicare Act and interim final regulations provide for continuous
open enrollment for the duration of the program, which expires on
The Act provides additional assistance for a “transitional
assistance eligible individual” and for a “special transitional assistance
eligible individual.” The former group
includes individuals whose income is not more than 135% of poverty and who do not have
coverage under a group health plan or health insurance coverage; insurance related to
uniformed services; or federal employees’ health benefits program. A “special transitional assistance eligible
individual” is a discount card eligible individual whose income is not more than 100%
of poverty. Individuals who apply for this
assistance self-certify their income, family size, and other prescription drug coverage
available. CMS then verifies the information. Individuals who qualify for Medicare Savings
Programs (QMB, SLMB, QI-1) may be deemed to meet the
eligibility requirements for transitional or special transitional assistance.
Individuals in both of these categories will have payment made for
their annual enrollment fees. A transitional
assistance eligible individual will have payment available for 90% of costs incurred for covered discount card drugs obtained through the
program. Payment is available for up to $600
of costs in 2004. Any leftover money carries
over to 2005, when the individual becomes eligible for an additional $600. If the enrollee qualifies as a special transitional
assistance eligible individual, he is entitled to payment of 95% of costs incurred, and
payment is available for up to $600 in costs.
States have the option of paying the enrollment fee for individuals
who do not qualify for transitional or special transitional assistance. States may also ask CMS for permission to pay, with
state-only funds, co-insurance amounts for transitional and special transitional
individuals. Pharmacies may also waive the
co-insurance amount for these individuals.
Prescription Drug Benefit:
The Medicare Act creates a new Medicare Part D under which individuals
eligible for either Part A or Part B may obtain qualified prescription drug coverage
either through a stand alone prescription drug plan (PDP) or
through a Medicare Advantage plan (MA-PD). Such plans would be offered
in regions developed by CMS that correspond to regions for managed care plans. Coverage
under the voluntary benefit begins on
Unlike Part B, enrollment is in a drug plan, not in the Part D
benefit. The initial enrollment period will be
Failure to enroll when originally eligible to choose a Part D plan
will result in the imposition of a penalty that has the potential of being substantial. The penalty will be the greater of an amount that
is actuarially sound for each uncovered month or one percent of the national average
monthly beneficiary base premium for each uncovered month. It is unclear whether, in
determining an amount that is “actuarially sound,” the health status of each
individual late enrollee may be taken into consideration. This
would have the effect of medical underwriting of the policy.
Someone who loses coverage in the middle of the year but who does not qualify for a
special election period would incur a penalty while waiting until the annual coordinated
enrollment period to enroll in another plan.
The benefit design may vary from plan to plan and from geographic
location to geographic location. The $35 monthly premium is not statutory and is only an
estimate of the projected average premium; actual premiums may be higher. The Medicare Act specifies that the standard
benefit package for 2006 include a $250 deductible, 25% cost sharing on formulary drugs
for costs from $251 - $2250 full beneficiary payment (doughnut hole) from $2251 - $5100,
and catastrophic coverage from $5100 with a 5% co-payment (beneficiary incurs $3600 in
out-of-pocket expenses.) Under the Act all figures are indexed for future years. However, plans may vary
the benefit design as long as the package is “actuarially equivalent” and they
do not raise the deductible or change the out-of-pocket threshold. Thus, a plan may charge varying co-payments
depending on therapeutic class of drugs, charging higher co-payments for some more
expensive classes of drugs or drugs used by people with chronic conditions. Only
out-of-pocket expenses for formulary prescriptions count in determining the $3,600
threshold for catastrophic coverage. Expenses
for an off-formulary drug are not included in the calculation.
Both a PDP and an MA-PD may offer supplemental coverage to the basic
benefit. It is more likely that an MA-PD,
rather than a PDP, will offer such coverage because of the overpayments to managed care
plans included in the Act. In addition,
because an MA-PD covers the full range of Medicare benefits, it has more flexibility in
its benefit design than a PDP does and can take greater steps to prevent supplemental drug
coverage from attracting enrollees with more chronic conditions. For example, an MA-PD plan can impose higher cost-sharing for such services as home health care and hospital care
to discourage enrollment of individuals with chronic conditions who are more likely to use
supplemental drug coverage.
Each plan may develop its own formulary and definition of therapeutic
class in which drugs are to be included. There
are no federal standards or requirements. Plans
may only change therapeutic class definitions once a year, but it appears they may be able
to change the drugs covered within a therapeutic class or change preferred or tiered
co-payment status of a drug more frequently. Notice
of changes must be made available, not provided, to enrollees,
physicians, and others. The statute requires
plans to have a “mechanism” for providing timely information to enrollees upon
request, including the use of a toll-free telephone number or provision of information in
writing. The plans must also make information about formulary changes available on a
timely basis on their web site.
Plans cannot require beneficiaries to use mail-order services, but
they may charge lower co-payments or allow larger supplies of drugs for those who do so. Plans may also impose higher co-payments for
prescriptions filled at out-of-network pharmacies.
The Medicare Act “guarantees” beneficiaries access to two
plans which could be two PDPs or one PDP and one MA-PD. The two plans must
be offered by different entities. A government-approved “fallback” plan
may be available if no plans come into the region or if there is only one PDP or only one
MA-PD. While a sponsor can offer a national MA-PD, no sponsor can offer a national
fallback plan. There is some concern that the choice of plans may be more limited than the
guarantee indicates, however, since a fallback plan is allowed to be offered in a limited “area”
within a “PDP region.”
Plans, other than fallback plans, may send marketing materials to
people eligible for Part D. Since CMS will
provide “identifying information” to the private plans, these plans could limit
their marketing to certain parts of a region or to certain individuals in a region. CMS is supposed to send information to
beneficiaries about plans available to them at least 30 days before the enrollment period. The information will include benefits provided
under the plan, the monthly premium, quality and performance
and consumer satisfaction surveys where available, and beneficiary cost-sharing. The statute does not require CMS to send
information about the drugs covered under each plan’s formulary and the cost of each
drug.
The statute requires a PDP or MA-PD to have an appeals process that is
the same as the process for managed care plans. In doing so, the statute seems to
distinguish between coverage determinations and redeterminations that
would go through the internal plan process and appeals that would go through the
external (currently with the Center for Health Dispute Resolution) and administrative law
judge levels of review. Other potential problems include issues of notice of denials and
appeal rights, timeliness, including expedited review, and jurisdictional amounts. In
addition, the statute says “.... only the Part D eligible
individual shall be entitled to bring such an appeal...” calling into question the
ability of a guardian or other agent to act on an individual’s behalf. The provision also directly precludes a physician
from acting on the individual’s behalf as occurs in many state
Medicaid programs.
A beneficiary enrolled in a plan with tiered co-payments can go
through the internal review process to request that a non-preferred drug be covered in the same way as a preferred drug. The prescribing physician must determine that the plan’s preferred drug for the treatment of the same condition is
not as effective for the beneficiary or would have adverse effects for the beneficiary. An
adverse determination could be appealed further through
external and ALJ review. However, the statute
seems to indicate that a beneficiary would have to start at the external review and ALJ
appeals process, rather than the more expeditious internal process, to get coverage for a
non-formulary drug.
In addition, the prescribing physician must determine that all covered
drugs on any tier of the plan’s formulary for treatment of the same condition would
not be as effective for the individual or would
Controlling the Cost of
Prescription Drugs:
The Medicare Act precludes the Secretary of Health and Human Services
(HHS) from negotiating drug prices on behalf of the almost 41 million Medicare
beneficiaries. Each PDP and MA-PD will negotiate on its own behalf. The Act also places
restrictions on the ability to reimport pharmaceuticals from
Prescription Drug Coverage for
Low-income Individuals:
The Medicare Act distinguishes between people who are dually eligible
for Medicare and full Medicaid and other low-income individuals and provides assistance
for both groups.
Dual eligibles enrolled in a Part D plan who
are institutionalized pay no premium, no deductible, no co-insurance and have no gap in
coverage. The Secretary of HHS has authority
to develop standards concerning access to pharmacy services for people in nursing
facilities.
Dual eligibles enrolled in a Part D plan with incomes up to 100% of
poverty who are not institutionalized pay no premium, no
deductible, have no gap in coverage and pay co-payments of $1 for generic/preferred drugs
and $3 for other drugs in 2006. All other dual
eligibles enrolled in a Part D plan have no premium, no deductible, no
gap in coverage. They pay co-payments of $2
for generic/preferred drugs and $5 for other drugs in 2006.
Co-payments for all dual eligibles are indexed to the
increase in the price of covered drugs in future years and end when the individuals have
spent $3600 out-of-pocket. Individuals
enrolled under a Section 1115 waiver program appear not
to be included in the definition of dual eligibles, thus making them eligible under the
non-Medicaid categories, instead.
Unlike with other Medicaid benefits, Medicaid is prohibited from
providing “wrap-around” coverage for Part-D covered drugs that are not included
in a PDP’s formulary or for the co-payments dual eligibles
must pay. States may, but are not required to, pay for drugs that are covered in their Medicaid plan but that are not Part D covered
drugs. Thus, there is no Medicaid drug
coverage for an individual eligible for a
Medicare drug plan, regardless of whether the individual is enrolled
in such a plan. In other words, although Part D is voluntary for most
Medicare beneficiaries, it does not appear to be voluntary for those with full Medicaid
coverage who want continued prescription drug coverage. The Secretary is authorized
to enroll in Part D plans dual eligibles who have not so
enrolled, but it is not yet clear how this will be accomplished, raising concerns that
some individuals may lose drug coverage. The
prohibition against wrap-around services appears not to apply to those enrolled in
Medicaid under a Section 1115 waiver.
Individuals without full Medicaid benefits who are enrolled in a Part
D plan, who have incomes up to 135% of poverty, and whose countable assets are less than
$6,000/individual or $9,000/couple pay
Eligibility is determined either by the state Medicaid agency or by
the Social Security Administration (SSA). Eligibility
for a low-income subsidy begins in the month in which the individual applies. Appeals and redeterminations made by Medicaid are governed by Medicaid rules; those for determinations made by SSA
are governed by SSA’s rules. The
Secretary of HHS may deem Medicare Savings
Program recipients (QMBs, SLMBs, QI-1s) who are not eligible for full Medicaid benefits as
eligible for the subsidy for individuals up to 135% of poverty and must so deem them if the state’s rules for MSP
eligibility are substantially the same as the federal rules for that subsidy. States must, while determining eligibility for
low-income subsidies, screen for eligibility for their Medicare Savings Programs and
enroll individuals found eligible.
A state may not use its more
generous Medicaid rules for counting income and resources in determining eligibility for
non-Medicaid low-income subsidies unless HHS determines that their use will not result in
significantly more people becoming eligible for the subsidy.
Income and resources are determined with reference to the Supplemental Security
Income program.
Coordination with State
Pharmacy Assistance Programs:
Over 30 states currently provide prescription drug coverage to either
older people, people with disabilities, or both populations.
In many instances existing state pharmacy assistance programs are more generous and
serve more people than the Medicare drug benefit. Payments
made under state pharmacy assistance programs count toward the out-of-pocket expenses
limit. But PDPs and
MA-PDs can prohibit wrap-around benefits by such programs if the benefits would undermine
cost-management tools such as tiered co-payments and limited formularies. In addition, state pharmacy assistance programs may
have their own requirements that may raise questions about the ability of individuals to
enroll in both programs. For example, a state
may limit eligibility for its program to those for whom no other plan of insurance or
assistance is available.
Medigap Prescription Drug
Coverage:
On the day that Medicare Part D goes into effect, Medicare
Supplemental Insurance (Medigap) plans that cover prescription drugs (Plans H, I, and J)
cannot be sold, issued or renewed to any Medicare beneficiary who is enrolled in or
eligible for Medicare Part D - with one exception. The exception is that a Medigap policy
with prescription benefits issued before
Under the new law, beneficiaries who currently have Medigap
prescription drug plans will be guaranteed issuance of Medigap
plans A, B, C, or F. These individuals will have no waiting period for
coverage of pre-existing conditions and no medical underwriting if they enroll in a Part D
plan
If a beneficiary decides to keep his Medigap prescription drug plan,
upon enrollment in Medicare Part D the Medigap plan’s coverage will
be modified to eliminate prescription drug coverage for expenses of prescription
drugs incurred after the effective date of coverage under Part D. Premiums will also be
adjusted to reflect the elimination of this coverage. Someone who delays enrollment in a
Part D plan because he had a Medigap prescription drug plan (plan H, I,
or J) will be subject to a late enrollment penalty.
A Medigap prescription drug plan does not qualify as a PDP or qualify as providing
an equivalent benefit to the basic Part D drug benefit.
Two new Medigap policies will also be offered.
The first benefit package will cover 50% of cost-sharing
applicable under Medicare Parts A and B, except for the Part B deductible. It will cover
100% cost-sharing for preventive benefits, all inpatient
hospital co-insurance, and 365 extra lifetime days of coverage of inpatient hospital
services. There will also be a limitation on annual out-of-pocket expenses under Parts A
and B of $4000 in 2006, which will be adjusted for inflation in
subsequent years. The second benefit package will be the same as the first except that it
will cover 75% of cost-sharing applicable under Parts A and B
and the limit on annual out-of-pocket expenses will be $2000 in 2006.
Neither the existing nor the new
Medigap policies will cover any of the cost sharing associated with the prescription drug
benefit provided under Part D.
II. BENEFIT AND STRUCTURAL CHANGES
Restoration of the Moratorium
on Therapy Caps:
Effective
Extension of QI-1 Program:
The Medicare Act extends, through
Potential for Increased Managed
Care Options in 2004:
The first payment increase for Medicare managed care plans included in
the Medicare Act takes effect March 2004. As a result, HMOs in some parts of the country
may improve the benefits they offer or reduce their premiums or cost-sharing.
At least one HMO in the
New Preventive Benefits and
Services:
The Act provides for Medicare Part B coverage of intravenous immune
globulin for the treatment in the home of primary immune deficiency diseases where
medically necessary. Coverage begins
The Act added coverage for the following preventive benefits for
Medicare beneficiaries, starting in January 2005:
An initial physical exam (it does not cover lab tests)
performed within 6 months of a beneficiary enrolling in Part B. If a beneficiary never
enrolls in Part B she never gets this exam. Also,
this provision is not applied retroactively so only Medicare Part B enrollees after the
effective date will get the exam.
Cardiovascular screening blood test such as a
cholesterol (lipids and triglycerides) test once every two years at most. It does provide
for the addition of other tests with the Secretary's approval but may be limited to only
certain individuals and only with the recommendation of the U.S. Preventive Services Task
Force.
Diabetes screening via a fasting plasma glucose test (other tests
as the Secretary deems appropriate). This will
be limited to individuals at high risk for diabetes. High risk is defined as having any of
the following risk factors: age 65 or older, hypertension, dyslipidemia, obesity (Body
Mass Index [BMI] >30), previous identified impaired glucose tolerance, OR at least two
of the following: overweight (BMI 25 - 30), family history of diabetes, history of
gestational diabetes, or delivery of baby > 9 lbs.
Frequency covered is no more than twice
Potential for Reduced Access to
Durable Medical Equipment (DME):
Changes to the way Medicare pays for durable medical equipment may
make it more difficult for some beneficiaries to obtain Medicare coverage for these items.
The Medicare Act freezes payments for most DME through 2008, and calls for the phasing in
of a competitive bidding system for many items starting in 2007. In addition, the Act reduces payment for some of
the most common items, including oxygen equipment, wheelchairs, nebulizers, diabetic
supplies, hospital beds and air mattresses, starting in 2005, to bring the rates more in
line with payments under the Federal Employees Health Benefits Program. Payment rates for therapeutic shoes and inserts will also be reduced in 2005.
Indexing Part B Deductible:
The Part B deductible, which has been set at $100 since 1991, will
increase to $110 in 2005. The deductible will
then increase yearly by the same increase as the Part B premium, i.e., by the annual
percentage increase in the monthly actuarial value of benefits payable under Part B.
Income-Related Part B Premium:
Starting in 2007, individuals with incomes over $80,000 per year and
couples with incomes over $160,000 per year will have to pay a greater share of the Part B
premium. Rather than paying 25% of the Part B
rate, those with incomes of $80,000-$100,000 ($160,000 - $200,000 for couples) will pay 35
% of the Part B rate. People with incomes of between $100,000 - $150,000 ($200,000 - $300,000 for couples) will
pay 50% of the rate, and those with incomes above $200,000 ($400,000 for couples) will pay
80% of the rate. The income amounts will be increased yearly by the Consumer Price Index.
The Internal Revenue Service will provide information to the Social
Security Administration (SSA) to help identify individuals subject to the income-related
increase in their Part B premium.
The Medicare Advantage Program:
The Medicare Act re-titles Medicare+Choice, the current Medicare Part
C, to Medicare Advantage (MA), phasing the name change in through 2004 and 2005. In addition to the payment increases for 2004
discussed above, the Act provides for restructuring of the payment rates so that MA plans will be paid increasingly more on average per enrollee than Medicare
would pay had the individual remained in the traditional program. Congress intended the increased payments to
encourage establishment of more MA plans, particularly in rural areas, and to increase
enrollment. Private insurance companies may continue to offer HMOs and private
fee-for-service plans under the MA program. The Medicare Act reauthorizes Medicare Savings
Accounts (MSAs) as a plan option under Part C, though no company has ever offered a
Medicare MSA. Starting in 2006, only local PPOs in the current PPO demonstration areas
will continue to be authorized.
Instead, private insurance companies will be able to offer regional plans,
primarily PPOs, in one of the 10 to 50 regions to be
Although an MA plan must still offer the same benefit package as
offered under Medicare Parts A and B, or its actuarial equivalent, there are additional
requirements for some MA plans. A plan may
impose higher co-payments for services received from non-network providers. A regional MA
plan must offer a single deductible for both Part A and Part B benefits, which can be applied differently for in- and out-of-network services. The plan may waive the deductible for preventive
services. Finally, a regional MA plan must
offer catastrophic coverage, with different limits applying for out-of-pocket expenses for
in- and out-of-network Part A and Part B benefits.
Someone enrolled in an MA plan that offers prescription drug coverage
must obtain drug coverage through the plan; they may not enroll in a PDP. MSA enrollees and enrollees in MA private
fee-for-service plans that do not provide qualified prescription drug coverage may enroll
in a PDP. An MA plan may provide supplemental
prescription drug coverage which does not count towards the
out-of-pocket threshold. In addition, an MA
plan may offer only supplemental coverage without offering a basic drug plan if it does
not require an enrollee to pay a premium for that coverage.
Starting in 2010, the Secretary will designate six different areas of
the country to participate in a six-year “comparative cost adjustment”
demonstration project. Congress intends the demonstration, more commonly referred to as
“premium support,” to test the effect of competition between private plans and
the traditional Medicare program. CMS will establish a competitive “benchmark”
based on bids of private plans and the fee-for-service amount in each area chosen.
Beneficiaries enrolling in an option with bids lower than the benchmark will receive 75%
of the difference; those enrolling in an option with bids above the benchmark will have to
pay the difference. Because MA plans will be paid substantially
more than the cost of providing fee-for-service benefits to the average beneficiary, and
because managed care plans tend to enroll healthier individuals, it is likely that the
bids submitted by the MA plans will be lower than the fee-for-service amount. Projections indicate that Part B premiums may
increase as much as 88% in some areas under premium support for beneficiaries who remain
in traditional Medicare.
Cost Containment Resulting in
New Definition of Medicare Insolvency:
In the guise of cost containment for the Medicare program, the
Medicare Act creates a new definition of Medicare insolvency that may threaten
Medicare’s existing benefit structure. The
law requires the annual issuance of federal reports that identify if
and when more than 45% of Medicare’s total costs are projected to come from
general revenue. If reports two years in a row
predict that this arbitrary insolvency point will be reached
within six years, then the President must send recommendations to Congress for legislation
to address the under-funding. The provision
has the potential for creating unnecessary concerns about the security of Medicare that
could lead to even more radical restructuring proposals.
It is important to note that, in creating both Medicare Part B and the
new Part D drug benefit, Congress intended
that they be financed primarily by general revenues, and, in
fact, the Medicare statute does not limit financing from general revenues to 45% of total
Medicare spending. Further, no other programs
funded by general revenues are subjected to such an arbitrary
cap on financing.
The 45% figure calls in to question the ability of Congress to use
future income tax reforms that increase revenues to cover increased Medicare costs. As a result, Congress would only be able to address
the crisis by cutting benefits or increasing cost sharing, reducing provider payments, or
increasing the payroll tax contributions - a solution that falls more heavily upon
lower-income individuals.
III. OTHER CHANGES
Changes to the Appeals Process:
The Medicare Act provides for the transfer of administrative law
judges (ALJs) from the Social Security Administration to the Department of Health and
Human Services (HHS) between July and
The Medicare Act makes changes to appeal reforms that were made by BIPA 2000 but never implemented. The BIPA time frame for
issuing redeterminations and reconsiderations is extended from 30 to 60 days. The Medicare Act modifies some of the requirements
for Qualified Independent Contractors (QICs), which are entities established under BIPA to
provide an independent level of review after a review by the fiscal intermediary but
before the ALJ. Again, CMS has yet to contract
with entities to serve as QICs or otherwise to establish the QIC level of review.
Starting in 2005, the jurisdictional amount for requesting an ALJ
hearing or for requesting judicial review will be increased by
the percentage increase in the medical care component of the consumer price index for
urban consumers. The jurisdiction amount for
requesting an ALJ hearing of a Part B claim was reduced by BIPA
from $500 to $100 to bring it in line for the amount for non-hospital Part A claims. The Medicare Act now increases the amount again.
The Act also establishes two new appeals procedures. The first creates a process, effective for appeals
filed on or after
The Secretary is also supposed to establish, by June 2005, a limited
prior determination process for physician services designated by the Secretary as eligible
for review. Under the process a participating
physician who has the consent of a beneficiary, or a beneficiary who has received an
Medicare Secondary Payer
Provisions:
The Medicare statute, 42 U.S.C. § 1395y(b)(2), previously precluded
Medicare from paying for services to the extent that payment was made or could reasonably
be expected to be made promptly (defined in regulations) under a worker’s
compensation law or plan, or under an automobile or liability insurance policy or plan,
including a self-insured plan, or under no fault insurance.
The Medicare Act modifies this section (1) to preclude Medicare
payment if payment has been made or can reasonably be expected to be made promptly, (2) to
give Medicare discretion to pay if a primary plan has not or cannot reasonably be expected
to pay promptly (as defined by regulation), and (3) to condition payment on reimbursement
to Medicare.
Further, the Act expands the definition of “primary plan”
which has the obligation to pay first beyond a group health plan, large group health plan,
workers’ compensation plan, automobile or liability insurance policy or plan
(including a self-insured plan) or no fault insurance.
Now, an entity that engages in a business, trade, or profession is
deemed to have a self-insured plan if it carries its own risk, whether by failure
to get insurance or otherwise, in whole or in part.
The Act expands those who have an obligation to reimburse Medicare for
conditional payments to include a primary plan and
an entity that receives payment from a primary plan, such as the attorney who receives
payment from the primary plan. Responsibility
of a primary plan to make payment may be demonstrated by a
judgment, a waiver, or release of payment included in a claim against the primary plan or
the primary plan’s “insuree”. Reimbursement
must be made before the expiration of the 60-day period
beginning on the date notice of, or information
related to, a primary plan’s responsibility for payment is received, or else
Medicare can impose interest. The Act also
expands the parties against whom Medicare may recover payment to include any or all
entities that are or were required or responsible to make payment under a primary plan.
These provisions are made effective as if
included when the amended Medicare Secondary Payer provisions were enacted in the 1980's.
Health Savings Accounts:
The Medicare Act creates new Health Savings Accounts (HSAs) that allow
certain individuals to put
In order to be eligible to establish an HSA, the individual must be covered under a high deductible health plan and not be covered
under any other kind of health plan, with the exception of accident, disability, dental
care, vision care, or long-term care. A
long-term care insurance policy does not qualify
as a high deductible plan. Neither do plans covering only accidents, disability, dental, or vision.
An eligible individual can contribute the lesser of the annual
deductible under his high deductible health plan, or $2,250 for
an individual with self-only coverage or $4,500 for an individual with family coverage. The amounts are increased
annually for inflation.
Demonstration Projects and
Reports:
The Medicare Act creates a variety of demonstration projects and
reports that may benefit certain beneficiaries who are able to participate in the
programs. These include projects involving the
deeming of certain beneficiaries to be “homebound” for purposes of eligibility
for home health benefits, projects covering medical services in adult day care as part of
the home health benefits, and
projects concerning quality standards for coordinated care for beneficiaries with certain
chronic conditions.
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— BUT SHOULD —
When the Medicare prescription drug coverage was
proposed beneficiaries were told that they should expect a program that was as generous as
the plan available to Congress. The program
offered by the new law does not meet this standard. Unlike the new Medicare drug program,
most members of Congress have a drug benefit that does not include a deductible in
addition to the one in their health plan. Also
unlike the Medicare plan, their insurance does not include the large “doughnut
hole” gap in coverage for drugs, nor do members of Congress pay an additional premium
for their drug coverage as Medicare beneficiaries will.
Did You Know That The Medicare Act of 2003:
1. Does not include the prescription drug benefit
within the Medicare program itself. Instead, the Act requires people who choose the
voluntary prescription drug benefit to select and enroll in a private plan to obtain
prescription drug coverage.
2. Imposes a late penalty on people who don’t
enroll in a drug plan when they are first eligible, unless they have “creditable
coverage.” Creditable coverage includes
coverage that is comparable to the new Medicare Part D prescription drug benefit such as
coverage provided under Medicaid or an
3. Does not establish a standard Part D premium
amount. The $35 amount used in
discussions is just an estimate of what the “average” premium might be. The
actual premium will vary by plan and by geographic area.
4. Allows drug plans to vary the basic drug benefit (for example, the
$250 deductible, 25% co-payment up to $2250) as long as the benefit package offered is the
“actuarial equivalent” (meaning it is estimated to be the same value) as the
basic benefit.
5. Allows each drug plan to decide independently
which drugs to cover under its formulary.
6. Requires people to remain in the drug plan they choose for a year, but
allows drug plans to change the drugs they cover during the year.
7. Requires prescription drug plans to make available information about
changes in the formulary but does not require the plan to actually
provide the information directly to enrollees.
8. Requires beneficiaries to pay the full cost of prescriptions in what is known as “the doughnut hole” until the $3600
out-of-pocket spending cap is reached. The
“doughnut hole” is the complete gap in coverage between $2,250 and $5,100. The
$3600 out-of-pocket requirement includes the deductible and co-payments, but only when
paid for drugs on the plan’s formulary.
9. Does not include the price of non-formulary
prescriptions when calculating the $3600 out-of-pocket spending cap. Co-payments, deductibles, and other costs paid for
by a retiree health plan also are not counted. This means that most people will spend more than
$3600 out-of-pocket before reaching the catastrophic coverage.
10. Prohibits, as of
11. Does not allow Medigap policies to pay for the prescription drug
deductible and co-insurance or for
drug coverage in the "doughnut hole."
12. Does not allow the Secretary of the Department of
Health and Human Services (HHS) to negotiate lower prescription drug prices on behalf of
the nearly 41 million Medicare beneficiaries.
13. Forces people with Medicare and full Medicaid coverage (the dually
eligible) into a Medicare drug benefit by precluding Medicaid from paying for
prescriptions for people who are eligible for the drug benefit. Medicaid may not pay for drugs that are covered under Medicare Part D but that are not on a plan’s
formulary.
14. Increases the Part B deductible for the first time
since 1991. Currently $100, it will
increase annually beginning in 2005.
15. Increases the Part B premium based on income, for the first time ever. (Effective 2007.)
16. Provides coverage for an initial physical exam (
but not related lab work.), only for
people who first enroll in Part B after
17. Increases, rather than decreases, the time for
processing a Medicare appeal by giving Medicare contractors twice as much time to review
appeals at the contractor level.
18. Makes it harder to obtain a hearing for Medicare denials by increasing
the dollar amounts which must be at issue in order to obtain an
Administrative Law Judge hearing and to appeal to federal court.
19. Changes the name of Medicare Part C, which governs Medicare managed
care plans, from Medicare+Choice (M+C) to Medicare Advantage (MA).
20. Changes the name of the entities that process
claims from fiscal intermediaries (for Part A claims) and carriers (for Part B claims) to
Medicare Administrative Contractors.
__________________________________________
TIME-LINE FOR IMPLEMENTATION
THE MEDICARE REFORM ACT OF
2003
QI 1 program, which provides assistance with
Medicare Part B premium to low-income individuals, extended until
Moratorium on caps on the amount Medicare will pay for outpatient
therapy services re-instated and continued through
Effective date of Medicare Part B coverage of
intravenous immune globulin for the treatment in the home of primary immune deficiency
diseases where medically necessary.
March 2004
Increased payments under Medicare Part C to Medicare managed care
plans may result in some HMOs revising benefits and co-payments.
May 2004
Marketing for and enrollment in prescription drug discount cards
begins.
June 2004
Prescription drug discount cards become
effective. Discount card program terminates on
A new expedited appeals process for certain
claims filed on or after this date is supposed to be in place. The relevant claims are those for which the
Departmental Appeals Board lacks authority to decide a question of law or regulation
relevant to the issue and in which there is no material issue of fact in dispute.
Part B deductible increases from $100 to $110. The deductible will increase yearly by the annual
percentage increase in the monthly actuarial value of benefits payable under Part B.
Coverage begins for an initial physical exam, but not lab tests,
performed within 6 months of a beneficiary enrolling in Part B. This is not a new benefit
for those already enrolled.
Coverage begins for cardiovascular screening blood tests such as a
cholesterol test, once every two years at most.
Coverage begins for diabetes screening via a fasting plasma glucose
test for individuals at high risk for diabetes.
Increase begins in the jurisdiction amount for requesting an
administrative law judge hearing or for requesting judicial review of a denied claim. The amount will be increased
by the percentage increase in the medical care component of the consumer price index for
urban consumers.
The date by which the Department of Health and Human Services (DHHS)
is supposed to establish a limited prior determination process for physician services
designated by the Secretary of DHHS as eligible for review.
The latest date by which the Social Security Administration (SSA) and
DHHS are supposed to effectuate the transfer of administrative
law judges from SSA to DHHS. The transfer may occur as early as
Name change effective for entities that review Medicare claims. Fiscal intermediaries and carriers become known as Medicare Administrative Contractors (MACs).
Start of initial enrollment period in Medicare prescription drug plans
under the new Part D. The initial enrollment
period lasts for 6 months and ends on
Effective date of Medicare prescription drug
coverage under Medicare Part D.
No new Medigap plans H, I, and J, which
provide prescription drug coverage, may be sold.
Two new Medigap polices are expected to be available in 2006. These policies will provide less coverage for
Medicare co-payments and deductibles but will include limitations on out-of-pocket
expenses.
Completion of name change phase-in for Medicare Part C from Medicare+Choice to
Medicare Advantage.
Effective date for new regional PPOs, should private insurance
companies choose to offer them, under the Medicare Advantage program.
January 2007
Individuals with incomes over $80,000 per year and couples with
incomes over $160,000 per year will have to pay a greater share of the Part B premium.
2010
Start of the premium support “comparative cost adjustment”
demonstration project, in which traditional Medicare will have to compete with managed
care plans in 6 different parts of the country.
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