Medicare Part D Lawsuit Settlement Helps Shorten Delays in Getting Medication for Low-Income Beneficiaries

Tens of thousands of low-income Americans who become eligible for Medicare each month will no longer have to wait weeks for subsidized prescription drug coverage under a new settlement with the Bush administration. District Court Judge Thelton Henderson granted preliminary approval of this settlement agreement in early July and set a fairness hearing for October 6, 2008 to determine whether to grant final approval. This Medicare Part D class action lawsuit Situ v. Leavitt was filed in June 2008 on behalf of the nation’s 6.2 million dually eligible beneficiaries (close to 1 million of who are in California) by the National Senior Citizens Law Center (NSCLC), the Center for Medicare Advocacy (CMA), with pro bono assistance from the law firm of Wison Sonsini Goodrich & Rosati.

Since the beginning of Part D, Medicare beneficiaries who are also on Medicaid (Medi-Cal in California) have experienced long delays in receiving their entitled help with prescription drug costs when they first become eligible for Medicare and their drug coverage switches from Medicaid to Medicare Part D. What is supposed to be a ‘seamless’ transition of being automatically assigned to a Part D plan and getting the low-income subsidy (LIS) can take 5-6 weeks. During this time, beneficiaries often cannot afford to pay the $50 or greater copayments plans are charging for their needed drugs and get reimbursed later. Many have been left to the mercy of their pharmacists to either provide some temporary supplies or use the Point of Service (POS) system, which bills a default Part D plan for beneficiaries not yet shown to be enrolled in a plan. A growing number of pharmacists refuse to use this POS system, due to concerns about reimbursement. Many of these beneficiaries in this situation are cutting pills or skipping necessary medication just to get by.

The proposed settlement addresses this serious coverage gap by:

  • Shortening the amount of time it takes to auto-enroll dually eligible beneficiaries and verify their LIS eligibility; and
  • Significantly strengthening the safety net for beneficiaries who do still experience some delay in either being enrolled in a Part D plan and/or shown eligible for the LIS.

Shortening delays in coverage gaps

According to the settlement agreement, as of September 1, 2008, states will be able to send the Center for Medicare and Medicaid Services (CMS) files identifying the people on Medicaid who are newly eligible for Medicare as frequently as they choose. California’s Department of Health Care Services is planning on sending these files once a week with a projected start date of September 20th. Currently, states are only sending this information once a month and CMS does not act on the information provided until it has received the files from all 50 states and the District of Columbia. As a result, plans usually do not receive information about beneficiaries to be enrolled in their plans until the 2nd week of the month following the month the state sent the information.

Under the proposed settlement, CMS will be required to process the information from the State within 1 day of receipt so that beneficiaries are promptly enrolled in a Part D plan and get their low-income subsidy.

Strengthening the safety nets: Point of Service (POS) and Best Available Evidence (BAE)

Point of Service (POS):

While CMS revised its contract with the POS contractor (WellPoint) in June 2007 to relieve pharmacists of financial liability for claims that are initially accepted by the POS system, but are later retroactively rejected, many pharmacists are either unaware of this revision or still reluctant to use this system based on past bad experience. As part of the proposed settlement, CMS will conduct renewed outreach to pharmacists in using the POS system, educating them on changes significantly reducing or eliminating their financial risk. Under the changes to the POS contract, if the pharmacist submits a claim to the POS that is accepted, payment to the pharmacist is guaranteed, even if the POS contractor later determines that the beneficiary was not POS eligible.

Best Available Evidence (BAE):

The Best Available Evidence (BAE) policy is a CMS policy which instructs Part D plans how to respond when their system’s Part D subsidy information differs from an enrollee’s claim to be eligible for the LIS. As a result of the settlement, new clear, strong guidance on what constitutes BAE (presented by beneficiaries and/or their representatives) and what plans are required to do both when presented with BAE and when a beneficiary is unable to present any evidence of LIS eligibility will be issued by CMS to the plans. The guidance, which CMS expects to send to plans this month, will lay out the following plan requirements.

  1. Plans must update a beneficiary’s LIS status in their system when the beneficiary, his/her pharmacist, advocate, representative, family member or other individual acting on behalf of the beneficiary provides the plan with any of the following:
    • A copy of the beneficiary’s Medicaid card that includes the beneficiary’s name and an eligibility date during a month after June of the previous calendar year;
    • A copy of a state document confirming one’s active Medicaid status during a month after June of the previous calendar year;
    • A print out from the State electronic enrollment file showing Medicaid status during a month after June of the previous calendar year; or
    • Other documentation provided by the State showing Medicaid status during a month after June of the previous calendar year.

CMS’ memorandum will also state what plans must accept as evidence that a beneficiary is institutionalized and therefore qualifies for zero cost-sharing.

While plans will have 72 hours to update their systems, they must provide the beneficiary with drugs at the LIS full-subsidy cost-sharing levels ($1.05 for generic drugs and $3.10 for brand name) or zero cost-sharing for those who are institutionalized as soon as they are presented with a single piece of BAE.

  1. Plans must assist beneficiaries who claim to be eligible for the LIS but can’t provide the plan with any of the documents listed above.
    • Plans must contact the appropriate CMS Consortium within 1 business day of a being notified that a beneficiary claims to be subsidy eligible but is unable to provide a form of BAE. A plan must also ask the beneficiary when s/he will run out of medication if s/he doesn’t receive the subsidy, and forward this information to CMS.
    • The plan must notify the beneficiary (or at least attempt to notify 4 times, after which they must communicate with the beneficiary in writing) of CMS’ response within 1 business day of receiving that response. If a request is made by an advocate or authorized representative, the plan can contact the advocate or representative. If the request is made on behalf of the beneficiary by a pharmacist, however, the plan will contact the beneficiary directly.
    • If CMS confirms the beneficiary’s LIS status, the plan must provide the beneficiary with drugs at the LIS cost-sharing amount as soon as it receives this confirmation.
  1. Plans must have a link on their website to the section on CMS’ website that provides information regarding the BAE policy and make information about the BAE policy readily available to people who contact the plan’s call center.

The settlement also outlines specific internal procedures and timelines that CMS must implement and follow when responding to plans’ inquiries on beneficiaries’ LIS status and communicating with State Medicaid agencies to confirm this information. See the full Settlement Agreement for more information.

Under the settlement, CMS is required to issue partner tip sheets instructing beneficiaries, pharmacists and advocates about beneficiary rights and plan requirements related to the BAE policy. This information is required to be in the 2009 edition of the Medicare & You Handbook and posted on the CMS website as well. In addition, CMS must track complaints relating to the BAE policy and report these regularly to both NSCLC and CMA who are monitoring the implementation of this settlement for 2 years.

Monitoring the Settlement Agreement

NSCLC and CMA will have quarterly telephone meetings with CMS to monitor all aspects of this settlement agreement for 2 years. Before each meeting, CMS is required to provide comprehensive monitoring data, including:

  • The number of files submitted by each state in each month, the date the files were received and the date the files were processed;
  • The number of claims each month that were processed through the POS;
  • The number of claims each month that were rejected from the POS because of other Part D plan enrollment; and
  • The number of requests each month submitted by plans on behalf of beneficiaries to the appropriate CMS Consortium or CMS Contractor for assistance with obtaining BAE.

This settlement will help hundreds of thousands of beneficiaries more easily receive their needed medications in a much timelier manner. In addition, it shifts the burden of proving LIS eligibility away from beneficiaries and toward Part D plans and CMS. The Court will retain jurisdiction over this agreement for 3 years.

Questions about the settlement can be directed to Kevin Prindiville, NSCLC Staff Attorney, at or Vicki Gottlich, CMA Staff Attorney, at View the full Settlement Agreement.

Karen Joy Fletcher

Our blogger Karen Joy Fletcher is CHA’s Communications Director. With a Masters in Public Health from UC Berkeley, she is the online “public face” of the organization, provides technical expertise, writing and research on Medicare and other health care issues. She is responsible for digital content creation, management of CHA’s editorial calendar, and managing all aspects of CHA’s social media presence. She loves being a “communicator” and enjoys networking and collaborating with the passionate people and agencies in the health advocacy field. See her current articles.