Medicare Drug Plans and Medicare Advantage Plans Presentation to P1 and P2 Classes Spring 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 to 35% 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 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 of a hospital stay each benefit period. –$476 per day for days 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 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