There are significant changes to Medicare this year, most of which are a result of health care reform.
Among the changes that take effect in 2011:
- Part D participants receive a 50% discount on brand-name drugs and a 7% discount on generics when they are in the Part D coverage gap, also known as the “donut hole.”
- All beneficiaries with Medicare Part B are entitled to a free wellness exam once a year, which is not subject to the Part B deductible ($162 in 2011). This is in addition to the free “Welcome to Medicare” physical exam beneficiaries can receive during their first 12 months of Medicare coverage.
- Beneficiaries with Medicare Part B have no cost-sharing for a wide range of preventive services.
- All Medicare Advantage plans have a new mandatory maximum out-of-pocket limit for their plan enrollees.
- The former MA Open Enrollment Period (OEP) is replaced by the new Medicare Advantage Disenrollment Period (MADP), which is from Jan 1 to Feb 14 each year.
- Medicare Part D enrollees with higher-incomes pay a higher premium for their Part D prescription drug benefits.
- The income limits over which people pay a higher Part B, and this year Part D, premium are no longer indexed for inflation. Instead, they are frozen at 2010 levels from 2011 through 2019. As incomes rise over time, more people will have to pay the higher premiums.
Part D Discount When in the Donut Hole
This year, beneficiaries in the coverage gap will receive a 50% discount on all Part D covered brand name drugs and a 7% discount on generic drugs. This discount will gradually increase over the next several years until beneficiaries pay just 25% of their drug costs in 2020.
How Will the Donut Hole Discount Work?
Part D plan members who reach the donut hole (after incurring $2,840 in drug costs in 2011) will receive their discount immediately when paying for their drugs at the pharmacy. There will be no delays or forms to fill out. The 50% brand-name drug discount applies to all “applicable” Part D covered drugs on the plan’s formulary and/or a drug granted by an exception. Beneficiaries will pay 50% of the brand name drug’s cost, plus a small dispensing fee (usually $2 – $5) charged by the pharmacy, which will not be discounted.
“Applicable drugs” refer to brand name drugs provided by manufacturers who have signed an agreement with the Centers for Medicare and Medicaid Services (CMS) to participate in the discount program. CMS has stated that “in 2011, manufacturers that produce over 99% of the brand-name drugs used by people with Medicare are participating in this program.” Drugs sold by manufacturers who do not sign an agreement will not be covered under Part D. Neither the 50% brand name, nor 7% generic discounts will apply to those drugs, and such drugs cannot be requested by exception.
What Costs Count Toward TrOOP — True Out-Of-Pocket Costs?
For brand name drugs, the total cost of the drug will be counted toward one’s TrOOP, not just the 50% the beneficiary pays. For generics, however, only the amount the beneficiary pays, which includes the dispensing fee, will count toward their TrOOP. This is because the 7% discount is provided through a subsidy from Medicare, rather than through a discount from the drug manufacturers.
Example: Anne just entered the donut hole and her brand-name prescription drug costs $70, plus a $2 dispensing fee. She’ll pay $37 ($35 for 50% of the drug’s cost + $2 dispensing fee), and $72 will be counted toward her TrOOP.
Anne also takes a generic drug which costs $10 plus a $2 dispensing fee. The 7% subsidy applies to both her drug cost and the dispensing fee, so she’ll pay a total of $11.16, which is the amount that will count toward her TrOOP.
Note: The brand name and generic drug donut hole discounts do not apply to people with the low-income subsidy (LIS) and/or people in a retiree drug subsidy program. In addition, the discount is only available if Medicare Part D is the primary payer. If there is secondary prescription drug insurance, like AIDS Drug Assistance Program (ADAP) or Indian Health Services, it will pay after the Part D discount has been applied. For more information on the Part D drug discount and other 2011 Part D changes, see our article, 50% Discount on Part D Brand Name Drugs Starts January 1st.
Expanded Preventive Services 2011
Health care reform establishes an Annual Wellness Visit. This visit happens every 12 months after the first year of Medicare coverage during which beneficiaries are entitled to the “Welcome to Medicare Exam.” The Annual Wellness Visit:
- Has no cost-sharing.
- Covers a range of personal risk assessment and prevention plan services, such as:
- Examination for height, weight, body mass index, blood pressure and other routine measurements;
- Detection of cognitive impairment;
- Updates to medical and family history, including a beneficiary’s list of providers and medications; and
- Personalized health advice and referral to preventive and educational programs.
Health reform legislation also eliminates out-of-pocket cost-sharing for most other Medicare-covered preventive and screening services. It applies to services that are both appropriate for an individual and are recommended by the United States Preventive Services Task Force (USPSTF) for any indication or population. The services with no cost-sharing (copays, coinsurance and/or deductibles) for beneficiaries include:
- Mammograms every 12 months for eligible beneficiaries age 40 and older;
- Colorectal cancer screening, including flexible sigmoidoscopy or colonoscopy but not barium enema;
- Cervical cancer screening, including a Pap smear test and pelvic exam;
- Cholesterol and other cardiovascular screenings;
- Diabetes screening;
- Medical nutrition therapy to help people manage diabetes or kidney disease;
- Prostate cancer screening;
- Annual flu shot, pneumonia vaccine, and the hepatitis B vaccine;
- Bone mass measurement;
- Abdominal aortic aneurysm screening to check for a bulging blood vessel;
- Smoking cessation counseling services;
- HIV screening for people who are at increased risk or who ask for the test; and
- New annual wellness visit and personal prevention plan, as mentioned above.
Cost-sharing will continue for the following services, as the USPSTF does not recommend these services with a grade of A or B for any indication or population:
- Digital rectal exam (part of prostate cancer screening);
- Glaucoma screening;
- Diabetes self-management training services; and
- Barium enema (part of colorectal cancer screening).
Note: Regardless of the change in cost-sharing requirements, current coverage policies continue to apply to all services. For example, Medicare only covers bone mass measurements once every 24 months for beneficiaries with certain medical conditions. Beneficiaries who meet the eligibility criteria within that time frame will not have to pay a deductible or copayment. Beneficiaries who do not meet the eligibility criteria, however, will not have these measurements covered, even with the change in cost-sharing requirements.
Part C Medicare Advantage (2011)
All local MA plans must establish a mandatory maximum out-of-pocket (MOOP) amount for all Medicare Parts A and B services. After meeting the MOOP, a beneficiary’s MA plan will cover in full his/her remaining Medicare-covered costs for the rest of the calendar year. In 2011, the mandatory MOOP is $6,700, but plans can voluntarily set a lower MOOP at $3,400 and have more flexibility in setting their cost-sharing amounts.
Note: For local PPOs, the mandatory MOOP amount only applies to in-network services; a higher maximum amount of $10,000 applies to both in- and out-of-network costs. Regional PPOs are free to set their own maximum.
In addition, MA plans cannot charge more for certain services than what it would cost a beneficiary in Original Medicare. This protects beneficiaries from high or unexpected cost-sharing liabilities. The Patient Protection and Affordability Care Act of 2010 (PPACA) specifically limits the cost-sharing for chemotherapy, kidney dialysis, and skilled nursing facility (SNF) stays to be no more than that in Original Medicare. Yet, PPACA also makes an exception that allows MA plans to charge cost-sharing for a service even though there is no cost-sharing in Original Medicare if it is actuarially equivalent. For instance, MA plans can charge copayments for the first 20 days of a SNF stay, even though traditional Medicare has no cost-sharing during this time. This is acceptable as long as the overall cost-sharing does not exceed traditional Medicare levels for a 100-day SNF stay.
PPACA gives the Secretary of Health and Human Services the authority to extend this cost-sharing protection to other services. It also gives CMS the authority to set: 1) annual Part A and B service cost-sharing limits (above which would be considered discriminatory) for all MA plans, including special needs plans (SNPs); and 2) annual Part D cost-sharing limits for prescription drug plans.
Elimination of the MA Open Enrollment Period (OEP) – And Implementation of the New Medicare Advantage Disenrollment Period (MADP)
The Open Enrollment Period (OEP), which has been January 1 to March 31 since 2006, has been eliminated. In its place is the new Medicare Advantage Disenrollment Period (MADP), which runs from January 1 to February 14. It allows beneficiaries to disenroll from a Medicare Advantage plan and return to Original Medicare. However, the MADP does not allow people in an MA plan to switch to another MA plan; nor does it allow people in Original Medicare to join an MA plan.
Beneficiaries who want to disenroll from their MA plan and return to Original Medicare during the MADP also have a special election period (SEP) to join a stand-alone Part D plan. To do so, beneficiaries in an:
- MA-PD can either 1) submit a disenrollment request to their MA-PD plan and then enroll in a Part D plan, or 2) enroll in a Part D plan first, which then automatically disenrolls them from their MA-PD.
- MA only plan must first request disenrollment from their MA plan to trigger their SEP to join a Part D plan.
Beneficiaries can only enroll into one Part D plan during their SEP, and their SEP is only available during this Medicare Advantage Disenrollment Period, January 1 – February 14. Their enrollment into their new Part D plan is effective the first of the following month.
Higher Part B and D Premiums for Higher Income Individuals – 2011
Since 2007, Medicare beneficiaries with higher incomes have paid higher monthly premiums for Part B, known as the Income Related Monthly Adjustment Amount (IRMAA). Currently, an individual beneficiary with an income of >$85,000 pays more. The threshold of $85,000 will be frozen between 2011 and 2019 and will not be adjusted for inflation. This means that over time, more people will reach the threshold and pay a higher amount for their Part B premium.
As of 2011, people with higher incomes ($85,000/individual and $170,000/couple) also have to pay a higher premium for their Part D coverage. People’s income levels are based on their income reported to the IRS. The IRMAA-related premium is either deducted from a person’s Social Security check or is billed separately from the premium paid to the Part D plan.
Below is a chart of the Part B premiums and the additional Part D premium amounts charged for higher income individuals and couples in 2011.
|Individual income bracket||Couples income bracket||Part B premium||Additional Part D premium|
|>$85,000 but ≤$107,000||>$170,000 but ≤$214,000||$161.50||$12.00|
|>$107,000 but ≤$160,000||>$214,000 but ≤$320,000||$230.70||$31.10|
|>$160,000 but ≤$214,000||>$320,000 but ≤$428,000||$299.90||$50.10|
*Beneficiaries who enroll in Part B in 2011 pay this premium amount ($115.40). People who enrolled in Part B in 2010 or 2009 and earlier, pay $110.50 or $96.40 per month respectively.