Medicare Part D is on the Horizon

Beginning January 1, 2006, new Medicare prescription drug plans known as Medicare “Part D” will be available to all Medicare beneficiaries. Part D is a result of the Medicare Prescription Drug, Improvement and Modernization Act (MMA), designed to provide availability of health plans and drug benefits to those age 65 or older or disabled in all geographic areas — regardless of health status or income.

The new prescription drug plan helps seniors pay for medically necessary prescription drugs (including vaccines, insulin, and certain biological products) and replaces the current Medicare approved drug discount card program that expires on December 31, 2005.

Who can enroll in Part D?

Beneficiaries enrolled in Original Medicare can enroll in a stand-alone Prescription Drug Plan (PDP) or a Medicare Advantage health plan (MA) for drug coverage. If current beneficiaries are enrolled in an MA health plan that offers pharmacy benefits, such as an HMO or PPO, they will automatically receive their Part D benefits as part of their MA coverage.

Dual-eligibles (those who receive their health benefit from Medicare and drug benefit coverage from Medicaid) will no longer receive a drug benefit from Medicaid as of January 1, 2006, and will get drug coverage from Part D. If dual-eligibles do not enroll on their own, they will automatically be enrolled in a Part D plan by the Centers for Medicare and Medicaid Services (CMS).

The new law prohibits Medicare Supplement (or Medigap) programs from offering prescription drug coverage to new enrollees as of January 1, 2006. Beneficiaries who wish to keep Medicare Supplement policies and have prescription drug coverage must enroll in a stand-alone PDP. Or, the beneficiary could drop the Medicare Supplement policy and enroll in a Medicare Advantage plan that includes drug coverage, where available. Those covered by Original Medicare Parts A and B, who wish to have prescription coverage, must enroll in an approved PDP offered by a private entity, such as Humana.

What drugs are covered under Part D?

Generally, most categories of drugs covered by Medicaid are covered under this plan. Some of the drugs that are not covered include drugs for symptomatic relief of cough and colds, barbiturates and benzodiazepines. Drugs that are covered by Medicare Parts A and B are excluded from the plan, but will continue to be covered by Medicare A and B. PDPs and Medicare Advantage plans can use formularies — specific lists of drugs approved for coverage — for their Part D coverage, provided they meet certain standards and are approved by CMS.

CMS requires all Part D plans, whether they are stand-alones or included in Medicare Advantage plans, to have policies to transition beneficiaries on drug regimens under the new program. CMS requires Part D formularies to offer at least two drugs in each therapeutic class and has issued rules and regulations for drug coverage through all disease conditions.

As additional protection to participants, any changes throughout the year that Humana may make in its formulary offerings under Part D that moves a drug to a higher tier will be preceded by a 60-day notice to affected members and CMS to allow time to transition affected Part D enrollees to the new medication.

Humana’s formulary design is based on therapeutic categories and classes and includes generic (Tier 1), preferred brands (Tier 2), nonpreferred brands (Tier 3) and specialty drugs (Tier 4). A list of covered drugs, tiered costs for formulary drugs and processes for gaining approval of nonformulary drugs will be made available to Humana physicians.

How much does the Part D drug benefit cost?

If a beneficiary is enrolled in Original Medicare, he or she will pay a monthly premium of about $37 for Part D drug coverage in 2006, in addition to the premium that currently applies to the Part B benefits, which is $78.20 for 2005. The standard Part D benefit structure is as follows:
• A $250 annual deductible
• Coverage of 75 percent of drug costs between $250 up to $2,250 of total drug cost (beneficiary pays 25 percent coinsurance of covered drug costs)
• No coverage for drug costs between $2,250 and $5,100; this is the coverage gap
• After reaching $5,100 threshold, beneficiaries reach a next level of coverage known as “catastrophic” coverage. Once this level is reached, beneficiaries will only be responsible for paying a 5 percent coinsurance amount for any drugs or a $2 copayment for a generic drug prescription and a $5 copayment for a name-brand drug prescription. If a beneficiary is below 100 percent of the federal poverty level, he or she would only have copayments of $1 and $3 respectively.

PDPs may differ from the basic benefit plan required by Medicare as long as the benefits are at least equivalent to the standard Part D Medicare benefit plan. Richer benefit plans may carry a higher monthly premium.

When does enrollment occur for Part D?

• Annual enrollment for the PDP is November 15, 2005, to May 15, 2006; the earliest effective date will be January 1, 2006. (If a beneficiary joins later than May 15, 2006, the monthly premiums may be higher due to an additional fee for late enrollment.)
• Beneficiaries will have limited exceptions that will give them the right to switch plans during the year, such as moving out of their current service area, turning 65 or if a plan discontinues coverage.
• The 2007 annual election period will be November 15, 2006 – December 31, 2006.

Humana intends to offer the new PDP to Medicare beneficiaries:

• Through stand-alone prescription drug plans, which Humana will establish in 31 of the 34 regions established by CMS;
• As a component of new Humana Medicare Advantage Regional PPO plans in 14 of the 26 CMS regions; and
• As a component of existing Humana Medicare Advantage HMO, Local PPO and Private Fee for Service plans, many of which already provide pharmacy benefits.

Back to top