After being a topic of discussion and debate for over a decade, health care reform became law this March through 2 bills: Patient Protection and Affordability Care Act of 2010 (PPACA) (Public Law 111-148); and Health Care and Education Reconciliation Act of 2010 (HCERA) (Pub. L. 111-152). While the coming months will require volumes of regulations, rules and guidance to be written and executed, the Administration also has the massive task of dismantling any ‘myths’ about what health care reform is and isn’t and educating the public on how this legislation will affect them.
In sum, for Medicare beneficiaries, health care reform means no cuts to Medicare’s guaranteed benefits; some benefit improvements; and an extension of Medicare Part A’s Trust Fund to 2029. Below is a more detailed overview of some of the major changes affecting Medicare and its beneficiaries.
Part D Coverage Gap Rebate (2010)
In 2010 only, beneficiaries who reach the Part D coverage gap, or donut hole, will receive a $250 rebate check from Medicare. The first batch of about 80,000 checks were sent out mid June and subsequent batches will be mailed out monthly. Beneficiaries who reach the donut hole can expect to receive their check within 45 days of reaching the donut hole. The Centers for Medicare and Medicaid Services (CMS) estimates that about 4 million people will receive the rebate this year. Beneficiaries do not need to apply for or give out any personal information to receive this rebate. Some beneficiaries have reported callers asking for their Medicare numbers in order to make sure they receive their rebate checks. These are scams; Medicare is making no such calls.
People who receive the low-income subsidy (LIS) are not eligible for this rebate.
Part D Coverage Gap Will Gradually Close (2011-2019)
The $250 rebate check applies to 2010 only. Starting next year in 2011, the coverage gap (where beneficiaries currently pay 100% of their drug costs) will decrease until 2020, when enrollees will pay only 25% of their drug costs after meeting their deductible and before reaching catastrophic coverage.
Brand Name Drugs
In 2011, enrollees who reach the coverage gap will receive a 50% discount on the cost of their brand name drugs. Note: the dollar amount of savings beneficiaries will receive for the discount will vary depending on what plan they’re enrolled in. The discount depends on the negotiated price of the drug(s), and different plans will have different negotiated prices. Also, a drug dispensing fee will be added to each beneficiary’s cost. (See article #3 for more discussion on the challenges this ‘50% discount’ poses for plans, CMS, beneficiaries and advocates.)
In addition to the 50% discount, Medicare will phase in a subsidy starting in 2013. By 2020, enrollees will pay only 25% of their brand name drug costs as they’ll receive a 50% discount on brand name drugs, plus a 25% subsidy from Medicare.
In 2011, Medicare will begin its gradual phase-in of a subsidy for generic drugs, starting with a 7% subsidy of the generic drug costs. By 2020, enrollees will pay only 25% of their generic drug costs and the subsidy will cover the other 75%.
(See the Kaiser Family Foundation’s graph of the subsidy phase-in amounts for both brand name and generic drugs on page 3 of their publication: Explaining Health Care Reform: Key Changes to the Medicare Part D Drug Benefit Coverage Gap (PDF).)
Other Changes Under Part D
Starting in 2011, drug payments made by the AIDS Drug Assistance Program (ADAP) and Indian Health Services (IHS) will count towards one’s true out-of-pocket (TrOOP) expenses. This means that whatever amount of assistance a beneficiary receives towards drug costs from either of these programs will be applied towards their total out-of-pockets costs. Once a beneficiary reaches the catastrophic limit ($4,550 in 2010), they pay 5% of their drug costs and their plan covers the remaining costs for the rest of that calendar year.
A uniform Part D exceptions and appeals process will also be put into place by 2012. Right now each plan has its own forms and slightly varying procedures. Starting in 2012, beneficiaries will be able to initiate the appeals process by phone or the internet, and all plans will use the same appeals forms.
In addition to the above Part D changes, both Medicare and Medicaid will cover benzodiazepines and barbiturates in 2014.
Medicare Advantage (2011)
For 2011 and beyond, CMS has set maximum allowable cost-sharing amounts for specified Medicare Part A and B services which will protect beneficiaries from high cost-sharing liabilities under some MA plans. For example, some MA enrollees receiving chemotherapy have been charged a high percentage coinsurance for each chemo injection that costs thousands of dollars. These costs are greater than they would have been under Original Medicare. 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, and gives the Secretary of Health and Human Services the authority to extend this protection to other services.
PPACA also increases the Secretary’s authority to hold MA plans accountable by requiring plan sponsors to justify any proposed changes, such as changes in the premium or benefits. The Secretary can also prevent MA plans from offering discriminatory benefit packages.
Election Periods – Changes in Fall 2011 (Effective 2012 Plan Year)
Each fall beneficiaries can disenroll from, switch, or enroll into an MA plan or Part D plan during the Annual Election Period (AEP). Since 2005, the AEP has been November 15 to December 31. Beginning Fall 2011 (for the 2012 plan year), the AEP will be October 15 to December 7. The earlier start and additional week will allow beneficiaries, their families and advocates to relax during the holidays and avoid the end-of-the-year crunch to change plans.
The Open Enrollment Period (OEP), which has been January 1 to March 31 since 2006, has been eliminated. In its place, starting 2011, the Medicare Advantage Disenrollment Period (MADP), which will be from January 1 to February 14, will allow beneficiaries to disenroll from a Medicare Advantage plan and return to Original Medicare. The MADP does not allow people in an MA plan to switch to another MA plan or people in Original Medicare to join an MA plan. Those beneficiaries who want to disenroll from an MA-PD plan and return to Original Medicare during the MADP starting 2011 will have a special enrollment period (SEP) to join a Part D plan.
Higher Part B and D Premiums for Higher Income Individuals – 2011
Since 2007, Medicare beneficiaries with higher incomes pay higher 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 more people will reach the threshold and pay a higher amount for their Part B premium. Also, effective January 1, 2011, people with higher incomes ($85,000/individual and $170,000/couple) will also have to pay a higher portion of their Part D premium under the same formula.
Expanded Preventive Services 2011
The health reform legislation eliminates out-of-pocket cost-sharing for most Medicare-covered preventive and screening services. It also establishes an Annual Wellness Visit. This visit will:
- Be covered every 12 months, starting 12 months after the Welcome to Medicare Exam
- Have no cost-sharing (and no cost-sharing for the Welcome Exam)
- Cover 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
- List of risk factors, recommended interventions and treatment options, including associated risks
- Personalized health advice and referral to preventive and educational programs
Low-Income Subsidy (LIS) for 2011 and 2012
Some LIS beneficiaries are reassigned to a new Part D plan at the beginning of the year. This is because their former plan’s premium would be higher than the benchmark amount for the new year, and the LIS covers the full Part D premium for plans who charge amounts less than or equal to the benchmark amount. (The term ‘benchmark amount’ refers to a weighted average premium in a region for a given year. In California, the benchmark amount is $28.99 for 2010. Part D plans with premiums below the benchmark amount are called benchmark plans..
This fall, LIS beneficiaries are less likely to be reassigned to Part D plans for 2011 because:
- The method to calculate the Part D benchmark amount changed; and
- Part D sponsors with premiums slightly above the benchmark can now adopt a voluntary de minimis policy, meaning full LIS enrollees may not have to pay the additional premium amount.
In addition, LIS enrollees who are reassigned to new benchmark plans in the fall of 2011 for the 2012 plan year will for the first time receive a personalized notice from CMS comparing the cost of their 2011 plan to their cost in the plan to which they will be reassigned.
Also, all LIS beneficiaries who chose their own Part D plan (instead of going with their auto-assigned plan) and whose plan will have a premium higher than the benchmark for 2011, will receive a notice alerting them that they may have to pay a higher premium if they stay in their current plan.
Health care reform legislation includes 2 LIS eligibility extensions as well. One is for widow(er)s. Starting in 2011, if the death of a spouse would affect a beneficiary’s LIS eligibility, the beneficiary’s eligibility will be extended for 1 year beyond the date it would have otherwise ended.
The other extension is for full dual eligibles receiving certain home-based care. Starting in 2012, these duals, including those receiving home and community based services (HCBS) will be exempt from Part D cost-sharing. This is similar to the current situation for LIS beneficiaries in institutional settings.
These 2 pieces of health reform legislation are vast and include much more than the above summary. For example, it also establishes the first federal voluntary long-term insurance program (known as the Community Living Assistance Services and Supports (CLASS) Act), provides increased funding for fighting Medicare fraud and abuse, promotes better care after hospital discharges, improves quality of care in nursing homes, and strengthens Medicare’s financial health. Below are some additional resources for more information.
www.healthreform.gov. Scroll halfway down the page and you’ll see a heading that says “The Affordable Care Act: How it Helps You.” The links below provide short tip sheets for various population groups including seniors and people with disabilities. Tip sheets are also available in Spanish.
The following organizations have quality information on health care reform:
- Commonwealth Fund: http://www.commonwealthfund.org/
- Kaiser Family Foundation: http://www.kff.org/
- National Council on Aging: http://mymedicarecommunity.org
- National Committee to Preserve Social Security and Medicare: http://ncpssm.org
- Center for Medicare Advocacy: http://medicareadvocacy.org