1 UNDERSTANDING THE ROLE OF THE MEDICARE PRESCRIPTION DRUG BENEFITS BY KYLA GROFF KELIM 1 Understanding the Role of the Medicare Prescription Drug Program: 1. Who is Eligible for Benefits? Medicare at a glance. Medicare is national health insurance program that provides coverage for: People 65 or older People under 65 who have been disabled for more than 24 months (except for the two following conditions) People of any age with end stage renal disease (ESRD)(permanent kidney failure requiring dialysis or a kidney transplant) People with amyotrophic lateral sclerosis (ALS), or Lou Gehrig disease. 2 1 Kyla Groff Kelim is an elder law attorney and principal of the firm Aging in Alabama located in Fairhope, Alabama and has been practicing in Florida and Alabama for nearly 20 years. A prolific national speaker and advocate of senior issues, her firm provides consultation and representation to seniors, their families, caretakers and professionals to protect their life’s work from the devastating costs of long term care. 2 Source: http://www.medicare.gov/navigation/medicare-basics/medicare-benefits/medicare-benefits-overview.aspx, accessed December 2, 2012. Introductory note: Practicing in the area of elder law or health care law, requires an advanced knowledge of a number of different regulatory schemes and programs, such as Medicare, Medicaid and Social Security, as well as a thorough understanding of estate and tax implications. The key is to provide options for your client that will offer him or her a clear roadmap of the obstables that these regulatory schemes present, and how their particular situation may be affected. Often, I compare this area to learning several difficult foreign languages at once, such as Mandarin Chinese and Sanskrit. The practitioner should be aware that planning in this area often comes with a price tag in copays and deductibles that run into thousands of dollars per year. Clients often want increased benefits for no cost, or are willing to sacrifice necessary benefits due to decreased income upon retirement. That being said, if you do not fully understand the Medicare Prescription Drug Program, you could be in the unenviable position of explaining to the client that you did not intend to DISENROLL them from their supplemental insurance just in time for their major heart surgery or stroke because you were not permitted to have both…
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Introductory note: UNDERSTANDING THE ROLE OF THE … · (ESRD)(permanent kidney failure requiring dialysis or a kidney transplant) People with amyotrophic lateral sclerosis (ALS),
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1
UNDERSTANDING THE ROLE OF THE MEDICARE
PRESCRIPTION DRUG BENEFITS
BY
KYLA GROFF KELIM1
Understanding the Role of the Medicare Prescription Drug
Program:
1. Who is Eligible for Benefits?
Medicare at a glance.
Medicare is national health insurance program that provides
coverage for:
People 65 or older
People under 65 who have been disabled for more
than 24 months (except for the two following conditions)
People of any age with end stage renal disease
(ESRD)(permanent kidney failure requiring dialysis or a kidney
transplant)
People with amyotrophic lateral sclerosis (ALS), or Lou
Gehrig disease. 2
1 Kyla Groff Kelim is an elder law attorney and principal of the firm Aging in Alabama located in Fairhope,
Alabama and has been practicing in Florida and Alabama for nearly 20 years. A prolific national speaker and advocate of senior issues, her firm provides consultation and representation to seniors, their families, caretakers and professionals to protect their life’s work from the devastating costs of long term care. 2 Source: http://www.medicare.gov/navigation/medicare-basics/medicare-benefits/medicare-benefits-overview.aspx,
Medicare has 4 parts or components, parts A through
D.
a. Medicare Part A is usually considered the
“hospital” portion of Medicare, and most do not pay a
monthly premium but some may not qualify for part A
without a very large premium, notably if the beneficiary
or spouse had less than the requisite 40 quarters of
work (see sidebar for 2013 premium information). To
offset hardship, a number of states will also permit a
“buy-in” during the year for low income individuals
suffering a catastrophic illness.3 As shown in the
sidebar, Medicare part A provides very basic coverage
with large copays and deductibles for many services.
Given the large out of pocket expense, it is desirable for
any beneficiary to maintain a “Medigap” policy that will
provide coverage for the “gaps” in Medicare A and B
coverage. See more below. Medicare part A also
covers skilled nursing home care, and hospice care, as
well as other types of care that would be typically
associated with an inpatient or institutional setting.
3 Those states not offering a “buy-in” for Medicare part A during times of the year not usually subject to open enrollment
are: Alabama, Arizona, California, Colorado, Illinois, Kansas, Kentucky, Missouri, Nebraska, New Jersey, New Mexico, South Carolina, Utah and Virginia. Center for Medicare Advocacy. “Medicare General Enrollment begins January 2
nd: An
Opportunity for Some Individuals and States to Expand QMB Coverage,” http://www.medicareadvocacy.org/2011/12/medicare-general-enrollment-begins-january-1st-liminted-opportunity-for-some-states-to-expang-cmb-coverage/, accessed January 9, 2012.
privately owned health insurance. As with Part A, Part B, is subject to an annual
deductible and then some significant coinsurance and flat copays will apply to various
services. Part B will cover medically necessary physician services, outpatient services
such as physical therapy and diagnostic tests, home
health care, and durable medical equipment, as well as
some preventative therapies. While the coverage is
thought to be a general 20% of the covered service, this is
not precisely correct. The coinsurance is tied to a
complex formula that, in some cases, may leave the
beneficiary with a much larger than 20% liability. The beneficiary should have some kind
of “Medigap” coverage in order to pay for some or all of these costs.4
Penalties. For those beneficiaries who wish to avoid the payment of premiums and “wing
it” by not signing up for Medicare, a significant penalty of 10% per year will apply for each
12 month period the beneficiary has been eligible – but not enrolled – in a Medicare
4 See below.
QUICK FACTS:
Nearly 50 Million beneficiaries in 2012 (statehealthfacts.org)
25% are in Medicare Advantage (part C) plans (medicare.gov).
In effect since 1965
For major medical, physician and prescription drug coverage
Appointments with dentists, chiropractors, opticians not covered
Generally, only covers beneficiary while in the United States
DID YOU KNOW? Medicare is available
to all, otherwise qualified beneficiaries
(so long as they pay for the premiums)
and no one can turned down for
preexisting conditions or refused for
any health care related reason. The
same is NOT true of Medigap plans.
4
program. Thus, if the beneficiary were first
eligible in May of 2006, and enrolls right now,
the monthly premium for the majority of
Medicare beneficiaries for 2013 of $104.90
will not apply; instead, he will pay more than $
178.00 per month, each month until his
death.5
c. Medicare Part C is really a misnomer.
Part C is the name for a number of “Medicare
Advantage programs” operated by private insurance companies that completely replace
Part A and Part B, and in most cases, Part D as well.6 Those beneficiaries who choose a
Medicare Advantage plan are no longer Medicare recipients. Part C plans include Health
Maintenance Organizations (HMOs) as well as Preferred Provider Organizations (PPOs)
and Private Fee for Service (PFFS) organizations. Special Needs Plans (SNPs) are also
included, but are subject not only to the specific coverage area available, but also have to
be prequalified by being either 1) chronically ill with one or more conditions such as
diabetes, congestive heart failure or
other debilitating chronic illness or
2) be dual eligible or 3) be in a
nursing home. It is extremely
important to understand the
limitations as well as the benefits of
5 Those beneficiaries who are eligible for a savings program or another Medicaid program that will impact the premiums will
benefit by losing the penalty. 6 It is rare that a client recognizes that he is no longer in the Medicare system and when he does, he is very upset. This will
be important for appeal purposes where the client is not giving his provider the correct card. Just keep reminding him that he did not have to pay nearly $4,000.00 for a supplement last year, his memory may return.
Client interviewing tips:
1. The client can opt to have Medicare premiums
deducted from client’s Social Security check or can
be billed quarterly for premiums.
2. Most clients will tell you how much Social Security is
deposited in the bank when you ask how much the
client receives in Social Security funds. Since most
beneficiaries have the premium for Part B and/or
other parts taken out, this can lead the practitioner to
believe the income is much lower than it is.
3. For purposes of screening clients to determine if they
may qualify for a Medicare Savings Program or other
government discount program, add back into the
monthly Social Security check the amounts deducted
for health insurance premiums.
TIP: For those clients who are retiring at 65, and
in very good health, having a zero premium HMO
may be a very good idea. Also, some HMOs in
large, urban areas with a multitude of providers
may certainly offer an attractive alternative to a
high cost Medigap policy (see below), as the
health care premiums eat away at a retiree’s
limited fixed income.
5
enrollment in one of the Part C plans, as it can wreak havoc on the access to the
beneficiary’s health care if the wrong plan is selected. For example, there are some plans
available that not only provide no prescription drug coverage under Part D, the beneficiary
cannot get a stand alone plan either! In this case, if the beneficiary takes a number of
high cost medications, it could be a mistake in the tens of thousands of dollars. In cases
where the beneficiary has a number of chronic illnesses and long term care nursing home
admission is a subject of planning, whether imminent or near future, or the beneficiary is
on hospice care or of very advanced age, and the Medicare C program does not offer
skilled nursing benefits consistent with original Medicare or the nursing home is out of
network, then at least a month will not be paid. That can lead to a $ 5,000.00 or more
error that the client will not appreciate.7 Special needs plans can provide great coverage
for those persons who qualify for help, but not for QMB as it can provide great
supplemental coverage without premium.
d. Medicare Part D, our subject today, is the prescription drug coverage plan, and is
generally divided between those plans that are part of a Part C plan, or those plans that
are “stand-alone” plans (PDP). The part D plan does not provide coverage for every
event, it contains a basic benefit, which might or might not be subject to a premium. If so,
then the premium is paid each month or deducted from the beneficiary’s monthly income.
The plans vary and contain variable amounts of deductibles. The coverage continues on
its terms until the company has provided the initial coverage limit of $ 2,970. Then, the
client is in the “gap” or “donut hole” until the client’s out of pocket costs exceed $
4,750.00. When the total drug cost reaches $ 6,733.75, then the client is on “catastrophic
coverage” or paying $ 2.650 to $ 6.60 for prescription drugs. These amounts will change
7 Be sure to confirm that the client is actually switched to Original Medicare or another plan that will cover the facility
before the end of the month, or else this is a $ 5,000.00 per month mistake that keeps on going.
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every year. See more detail in Part V, Medicare Part D Prescription Drug Program
Updates.
New provisions to Medicare D are added this year though the implementation of parts of
the Affordable Care Act. See below for more, the meat of our talk.
Penalties. As of May 2006, Medicare beneficiaries must select a plan and pay a monthly
premium for a part D plan, unless their existing health insurance provides certification that
the prescription drug portion is equivalent or better than the Part D program or the
beneficiary will be subject to a penalty of 1% per month in additional premiums when she
does finally enroll. Thus, if a beneficiary chooses a plan right now that is at the average
cost of $ 30.00 per month, with the penalty it would cost a beneficiary over $ 50.00 per
month for life.8
e. Medigap coverage. Medigap coverage is the private health insurance plan that is
also referred to as a Medicare supplement plan. These plans are also referred to by
letter, Plans A through N. Each Plan type has a set of specific coverage parameters, and
were updated in 2010. A chart summarizing the types of Medigap plans is attached
below.
f. Special help is available to help low income beneficiaries pay for their insurance
and lower the overall out of pocket cost. LIS or Low-Income Subsidy can provide extra
help for paying for Medicare part D premiums and copays, as well as traditional Medicaid
provisions, and Medicare Savings Programs, below.
8 Right now is misleading, as the open enrollment period is over and the late enrollee must still wait until October to sign up
for a plan that will not start until January, generating a larger penalty still. As with Medicare part B, if the beneficiary is eligible for a savings program or LIS, then the penalty can be forgiven. But see Chart, Medicare Enrollment Dates (Secondary).
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g. Medicare Savings Plans (MSP): For beneficiaries with low income, there are a
number of “Medicare Savings Programs” (not to be confused with Medicare Advantage
Programs), that will pay for up to 100% of the shortfall or “gaps” in Medicare, depending
upon income. Those qualifying for one of these programs or for full Medicaid benefits are
often referred to as “Dual Eligibles.” Medicare Savings Plans are administerered
through Social Security and the local Medicaid agency and generally offer 3 programs,
although other state specific programs may be available as well. They are:
An alarming number of clients get upset that we cannot predict the future with more
precision. ---Kyla Kelim, Aging in Alabama (not related to famous seer)
Guitar music is on the way out. ---Decca Recording Co. in rejecting the Beatles, 1962 (Source: Matthew Perpetua, “Paul McCartney Signs to Label
That Rejected the Beatles”, Rolling Stone Magazine, August 23, 2011, accessed online at
no premiums, copays, coinsurance, deductibles and prescriptions will be $ 2.50 to $ 6.50.
To qualify, the beneficiary must have income of less than $ 951.00 if single and $
9 Not included in this discussion is the QDWI or Qualified Disabled Working Individual program that pays for premiums if the
disabled beneficiary loses benefits due to one or more periods of SGA or Substantial Gainful Activity.
PRACTICE TIP:
It is always a good idea to have your clients come
in for a consultation after the death of a spouse.
One of the primary advantages is to see if the
spouse now qualifies for benefits such as the
Medicare Savings Program. Many middle income
workers will have no idea they are eligible for any
benefits, particularly if they have significant
assets and have no familiarity with government
benefit programs in general. You can save your
client tens of thousands of dollars per year by
simply screening and advising. Some states will
limit the savings programs to those who have
limited assets as well. This is one of the areas
of great confusion because of the low income
subsidy on Part D (LIS). The rules for the LIS
only permit a small amount of assets, other than
the home and vehicle. See Part D, infra, Section
V. for more detail and comparison. It is
important that the attorney either become very
familiar with the Medicare program and its
various savings plans and the LIS, or refer the
client to the local Area Agency on Aging or SHIP
counselor for the most up to date Medicare
advice.
9
1,281.00 if married10, and some states also limit the assets of the recipient.11 Those limits
are $ 6,940.00 if single, $ 10,410.00 if married. When calculating income for these
programs, be sure to disregard the first twenty dollars of income for everyone and the first
$ 65.00 and half of all remaining earned income.12
2. SLMB: Special Medicare Low Income Beneficiary program. Qualification for
those who make a bit to much to qualify for QMB but still make less than 120% of the
FPL. The main benefits of this program are the payment of the Medicare premium and
the free drug card13, both the same terms as described above for QMB. What SLMB
does not provide is additional help with health care costs. Those users need either a
Medigap policy or a Medicare Advantage plan under Part C to assist with the costs of
healthcare. For 2013, the monthly income limits are $ 1,137.00 for an individual and $
1,533.00 for a married couple. As with QMB, the resource limits may apply, as well as
the income disregards. (See above).
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Several states have raised or otherwise altered the income limits. Connecticut has aligned its income threshold to correspond with its State Pharmaceutical Assistance Program to nearly 200% of FPL for QMB. The District of Columbia has raised their limit to 300% of FPL, eliminating QI-1 completely and SLMB except for the first month and the three retroactive months of application. Maine adds a $75 income disregard in addition to the others, and effectively has raised the limits to 150% for QMB, 170% for SLMB and 185% for QI-1. See analysis: Kaiser Family State Health Facts, based on data submitted to CMS February 18, 2010, and other private analysis, located online at http://www.statehealthfacts.org/comparereport.jsp?rep=61&cat=6&gsa=2, , accessed on January 7, 2012. 11
37 states do not have the precise asset limit in place. 9 states, Alabama, Arizona, Connecticut, Delaware, District of Columbia, Maine, Mississippi, New York and Vermont have eliminated the asset test. Minnesota raised the asset limit to $ 10,000 and $ 18,000. See analysis, Kaiser Family State Health Facts, as set out in n.10. 12
Federal Poverty Limit or FPL is actually $ 20.00 more for an individual as the first $ 20.00 is disregarded for the entitlement calculations. These numbers are also different for Alaska and Hawaii. 13
Program will at least cover Medicare part B premiums. Other benefits for SLMB and QI-1 may vary with state Medicaid coverage. See your state for specifics.
periodically extended by Congress, the latest extension expires on Feburary 29, 2012.
Income limits for 2013 are $ 1,277.00 for an individual and $ 1723.00 for a married
couple. Those who will qualify, particularly if the COLA for 2013 will jeopardize QMB or
SLMB, should apply RIGHT NOW.
See also, a list of resources at the end of the material.
It is important to educate your
clients that their insurance will
not pay for long term nursing
home care as most believe that
they will never have to apply for
Medicare.
FIND HELP! The SHIP program provides free Medicare counseling to all beneficiaries through the Center for Medicare and Medicaid Services (CMS). That person can knowledgeably determine coverage and let the lawyer know what options are available for all types of Medicare coverage. To get more information, go to the SHIP website and make an appointment with your counselor https://www.shiptalk.org/About/CounselLocSearchForm.aspx?mf=Display
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Blue Cross C+, the most
popular / recognizable
Medicare supplement,
is not a C plan, it is a B
plan, and thus does not
cover the skilled nursing
coinsurance
To get more information, go to
http://www.ssa.gov
Medigap
In contrast to the various plans under Medicare plan C,
the Medigap plan fits on top of Medicare A and B and
covers some of the costs that Medicare assigns as a
deductible, copay or coinsurance. The Medigap plans
have been standardized since 1990, with the latest revision in
2010. As a result, there are now 10 standards plans, identified by letter, which is
very confusing since the Parts are identified by letter as well. Keep in mind that Medigap
plan A for example, does not correlate with Medicare part A, anymore than the new
Medicare plan N corresponds to the Medicare part N (there is no such thing).
One of the many pieces of legislation that implicates Medicare seeks to abolish
Medicare coverage for the 9 million disabled recipients of SSDI currently receiving it
after 24 months of disability.
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2. Best Practices in Seeking Prescription Drug Assistance
There are thousands of stand-alone drug plans under Medicare being offered in
2013, along with a projected 2600 Medicare part C or Medicare Advantage plans,
the vast majority of which carry drug coverage. Without becoming an expert, the
practitioner can and should do 2 things:
A. Become familiar with the drug plan finder. The drug plan finder at
http://www.medicare.gov is an excellent tool. Go to the site and launch the plan
finder tool, and either search generally (NOT RECOMMENDED) by zip code, or
enter your client’s data, including prescription drugs (dosage and quantity) in the
tool, which has a saving feature, to be given a ranked list of plans that will reveal
the exact cost of each plan. Remember that a client that is newly eligible for “extra
help” through the LIS program, or through the Medicare Savings programs, may
pay even less than what is listed.
B. Become familiar with your SHIP counselor. The State Health Insurance Program is
sponsored by the Department of Health and Human Services and provides free
counseling to Medicare beneficiaries. These trained counselors and volunteers will
know more than you do about new developments, so I would make friends with
your local counselor and keep abreast of late breaking news by cultivating that
relationship. Your counselor has government grant money available to hold free
outreach and enrollment events and you can direct your client to that resource.
When I counseled my brother last year on enrolling for Medicare for the first time, I
spent 14 HOURS reviewing plans by hand and presenting them to him in a short