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Medicare Issues Rules for New Medicare Bill
Medicare Provides the Details on How New Drug
Program Will Work
July 27, 2004 – Medicare
issued proposed regulations for implementing the new Medicare
Modernization Act – including the prescription drug program – which
gives a more detailed look at how the plan will work. The rules released
yesterday are now available for public comment.
HHS Secretary Tommy G.
Thompson announced the proposed regulations, saying the bill will
“deliver on a new law that provides better benefits -- including
prescription drug savings of more than 50 percent for the average senior
without coverage -- and improved access to health care services through
Medicare.”
The proposed regulations
implement the essence of the Medicare Modernization Act that creates a
new voluntary prescription drug benefit under Medicare, as well as new
health plan choices, improved health care for rural America and improved
preventive care benefits.
The new prescription
drug benefit will allow all Medicare beneficiaries to enroll in drug
coverage through a prescription drug plan or Medicare health plan with
Medicare paying for 75 percent of the premium. Additional benefits for
Medicare beneficiaries who have limited means will cover, on average, 95
percent of their drug costs. The new benefits also will provide new
protections for retirees who currently receive drug coverage through
their employers or unions. All the new Medicare benefits are voluntary
as seniors can choose to keep their existing traditional coverage.
“We’re delivering on our
promise to America’s seniors to provide better benefits and real savings
on their prescription drugs,” Secretary Thompson said. “For the first
time, all Medicare beneficiaries will have access to prescription drug
coverage. Seniors currently without coverage could see their drug costs
cut by more than half, with lower-income seniors getting even greater
savings.”
The Medicare
prescription drug benefit is a key element of the Medicare Modernization
Act signed into law on Dec. 8, 2003. The Centers for Medicare & Medicaid
Services (CMS) today also proposed rules to implement another key
element of the law: strengthening and improving the Medicare Advantage
program, including making regional preferred provider organizations
(PPOs) available to all Medicare beneficiaries. These provisions will
give beneficiaries broad and more secure access to coordinated–care
health plans that provide additional benefits and significantly lower
out-of-pocket costs. Though over 60 million Americans in all 50 states
including rural areas get their health insurance coverage through PPOs
today, they have generally not been available to Medicare beneficiaries.
The proposed rules would also implement new, less costly options for
Medigap coverage.
“As we move closer to
providing affordable drug coverage, access to popular health plans, and
more secure retirement coverage, we need input from the public,” said
CMS Administrator Mark B. McClellan, M.D., Ph.D. “We are taking special
steps to encourage comments and dialogue on these proposed rules, and
implement them together, to assure that the key elements of the new law
work together to give seniors and people with disabilities the best
Medicare possible.”
Medicare beneficiaries
will also have access to supplemental coverage from states, employers,
unions and charitable organizations, and they can use these and other
sources of their existing coverage to add to the Medicare coverage for
more comprehensive assistance.
The rule will go on
display today be published in the Federal Register on Aug. 3, 2004. The
comment period on the proposed regulations lasts 60 days, closing on
Oct. 4, 2004. Final rules are expected to be issued early in 2005.
Enrollment for the new Prescription drug plans will begin in the fall of
2005 for benefits starting in on Jan. 1, 2006.
Just over 4 million
seniors already are saving on their prescription medicines through
Medicare-approved prescription drug discount card. This transitional
benefit, which includes $1,200 in subsidies over the next 18 months for
low-income seniors, is the first step toward the permanent drug benefit
that the new rules are proposing to implement.
Secretary Thompson said
the new regulations are important because of the improved care and
financial savings they provide seniors. Washington lawmakers have been
promising prescription drug coverage for a decade, but it took President
Bush working with Republican Congressional leaders and bipartisan
members of Congress to actually deliver real savings and better benefits
for seniors. The Secretary said the aggressive timeline for implementing
these new benefits shows the administration is moving forward in
providing this much-needed help as promised and on schedule.
“We’re focused on the
hard work of delivering meaningful savings on prescription drugs for
seniors, while some in this town continue to come up with excuses,”
Secretary Thompson said. “The bottom line is we’re saving seniors money
and we’re strengthening Medicare with better benefits and more choices.”
The Medicare
Prescription Drug Benefit
As described in the
proposed regulation, the new prescription drug benefit will help
Medicare beneficiaries lower the prices they are currently paying for
their prescription drugs, make those costs much more predictable, and
provide more choices and greater access to high quality care. When the
regulations are implemented, Medicare beneficiaries who wish to receive
the prescription drug benefit can choose to enroll either in a Medicare
health plan or prescription drug plan with a monthly premium of around
$35. The drug coverage will be available to enrollees who choose the
traditional, fee-for-service Medicare plan as well as any Medicare
Advantage program.
All beneficiaries,
regardless of their income, will receive significant help with their
drug bills and protection from high drug costs under the new Medicare
prescription drug plans. After a $250 deductible, the standard drug
benefit paid by the federal government in 2006 will be 75 percent of the
drug costs up to an
initial coverage limit of $2,250 and 95 percent of the beneficiary’s
drug costs once the beneficiary spends $3,600 out-of-pocket. There is no
annual plan maximum and that coverage will never run out. On average,
the new benefit will cover about half of beneficiaries’ prescription
drug costs for those currently without coverage.
Comprehensive Help
for Beneficiaries with Limited Means
Under the proposed rule,
it is estimated that nearly 11 million beneficiaries with limited means
will receive substantial additional help from Medicare.
About 6.4 million
“dual-eligible” low-income beneficiaries will have no premium or
deductible and nominal co-pays of as little as $1 or $3 per
prescription. For these beneficiaries, the Medicare benefit will pay, on
average, 97 percent of their drug costs.
About 3 million Medicare
beneficiaries who are not full benefit dual eligibles, but whose incomes
are less than 135 percent of the federal poverty level ($12,568 for an
individual and $16,861 for a couple in 2004) with limited assets will
also pay only a few dollars per prescription. Medicare will cover 95
percent of their drug costs on average.
About 1.5 million
beneficiaries with incomes less than 150 percent of the federal poverty
level and assets up to $10,000 (or $20,000 if married) in 2006, the
Medicare benefit will provide 15 percent co-pays with a sliding-scale
premium, covering on average 85 percent of their drug costs.
The proposed rules make
clear that the asset test will only count liquid assets and real estate
holdings other than a beneficiary’s home or residential farm --
non-liquid assets like wedding rings, family heirlooms, and burial plots
will not be counted. In addition, the rule outlines new methods for
collaboration with the Social Security Administration, states and
non-governmental organizations that work with Medicare beneficiaries
with limited means to enroll as many eligible beneficiaries as possible.
Altogether, about a third of all Medicare beneficiaries and about half
of minority beneficiaries will qualify for these very comprehensive
benefits, which involve no gaps in coverage.
“The proposed rules
underscore one of the greatest strengths of this new law -- it provides
the greatest help to those most in need,” Secretary Thompson said. “It
is a tremendous benefit for seniors and those with disabilities who have
limited incomes, so they can cut their medicine bills in half, not their
pills. The proposed rules also outline a straightforward, common-sense
assessment of assets for those seeking these benefits.”
Negotiating Power to
Make Drugs More Affordable
The prescription drug
plans and Medicare Advantage program will use their experience in
negotiating discounted prices and managing prescription drugs costs to
ensure that beneficiaries pay the lowest prices available for the drugs
they need. These plans have demonstrated their ability to pass on lower
costs to their health plan members and many enrollees in public health
insurance plans for many years. The proposed rule outlines a similar
approach for encouraging beneficiaries to get the best discounts on
their drugs -- discounts as good or better than could be achieved
through direct government negotiation, resulting in prices that will be
substantially better than Medicare’s prior experience with price
regulation for drugs covered in Part B -- by using approaches similar to
those used by the federal employees’ plans and by many other large
health care payers.
The proposed rule also
describes beneficiary protections intended to make sure that all
beneficiaries have coverage for medically necessary drugs through nearby
pharmacies. Drug plans would be subject to many of the existing
beneficiary protections that are available in Medicare, as well as some
new ones, including requirements to meet strict pharmacy access
standards to give beneficiaries access to retail pharmacies and needed
drugs. The proposed rule outlines the process for the coverage of drugs
that are not on the formulary when a physician determines that it would
be in the best interest of the patient to have that drug. Under this
process, urgently needed drugs would be covered while a prompt exception
process is concluded.
Plans offering the new
Medicare drug benefit will also be required to offer a program to make
sure beneficiaries receive the appropriate drugs to improve their health
outcomes and reduce adverse drug interactions. The rule describes how
the drug benefit will build on the transparent pricing and coverage
features of the Medicare drug discount card to help make sure that
beneficiaries can get the important, individualized information they
need about a plan’s features.
More Help to Secure
Coverage for Retirees
The proposed rule
includes tens of billions of dollars in new federal spending to protect
retirees who get prescription drug coverage through their former
employers and unions. Employers have been dropping this coverage at an
alarming rate over the past 10 or 15 years. The new Medicare rule is the
first real effort by the Federal Government to reverse this trend and to
preserve employer-sponsored retiree drug coverage.
The new rule gives
employers a menu of options that will enable them to continue
subsidizing drug coverage for their retirees. One option would provide
sponsors of retiree drug coverage with federal subsidies of 28 percent
of incurred allowable drug costs between $250 and $5,000 in 2006 per
qualifying covered retiree to help the companies maintain prescription
drug coverage for their retirees. But the rule offers employers other
ways to stay in the game. It provides other approaches for employers to
supplement the Medicare drug benefit, to provide more comprehensive
coverage at a lower cost than employers face today. The additional
options are important to help assure that retirees are better off,
because many employers do not currently contribute enough to the cost of
retiree drug coverage to avoid a “windfall” (that is, a payment to an
employer that exceeds their contribution to the retiree coverage, which
will not be allowed) and because many employers may prefer to provide
“wraparound” coverage, similar to the wraparound coverage they provide
for Part A and Part B Medicare benefits. Each of these options would
result in providing retirees with more comprehensive coverage at less
cost than employers face today.
“We intend to give
employers and unions a set of subsidized options to help them continue
to provide high-quality drug coverage,” said Dr. McClellan. “The result
will be a significant increase in the total support for retiree
benefits, and we’re seeking input from retirees, employers, and unions
on the best ways to maximize this increase in retiree coverage.”
More Help for
Beneficiaries Receiving State Benefits
The proposed drug
benefit will save states $500 million in 2006 and $8 billion over five
years. In addition to providing significant net savings to states
through comprehensive Medicare coverage for dual-eligible beneficiaries
and new Medicare subsidies for state retiree coverage, the new law and
the proposed rules also allow states the flexibility to “wrap around”
the comprehensive coverage for certain low-income beneficiaries and
count as true out-of-pocket expenses. As a result, State Pharmacy
Assistance Programs (SPAPs) plans will be able to provide the same or
better coverage for the beneficiaries who receive coverage through state
programs now, at a lower cost per beneficiary for the states because of
the availability of the Medicare drug benefit.
States will be able to
restructure existing “Pharmacy Plus” programs to wrap around the
Medicare prescription drug benefit. States will also be able to receive
new assistance with the costs of drug coverage for their retirees, just
like any other employer offering qualified retiree drug coverage.
Medicare will use the comment process to work closely with all states,
the new “SPAP Commission,” and many other forums, to ensure that the
drug benefit delivers better coverage and lower costs for beneficiaries
based on the individual circumstances of each state.
More Opportunities
for Beneficiaries to Get More Benefits and Save Money in Medicare
Advantage Programs
Beneficiaries who choose
to enroll in a Medicare Advantage program can get their drug benefits as
part of their plan, allowing the plans to better coordinate
beneficiaries’ medical care and drug coverage.
The new rules also
create a new competitive bidding system for paying Medicare Advantage
programs, and for the first time provide support for regional Medicare
Advantage preferred provider organizations as an option for Medicare
beneficiaries beginning on Jan. 1, 2006. These changes are important
options for Medicare beneficiaries without good, inexpensive
supplemental coverage (for examples, from Medicaid or an employer) to
get extra benefits and much lower out-of-pocket costs compared to the
traditional fee-for-service Medicare plan. Recent studies indicate that
beneficiaries in Medicare Advantage program pay about $700 less on
average in out-of-pocket medical costs per year, and beneficiaries in
fair or poor health may pay about $1,900 less. When the new rules and
payments are implemented, PPOs and other lower cost and more
comprehensive coverage options will be much more widely available to
Medicare beneficiaries.
PPOs are the most
popular health insurance choice for non-Medicare beneficiaries,
including millions of Americans in rural areas, in part because they
offer both low co-payment rates for “network” services as well as
coverage for non-“network” care from any provider. Unlike the current
Medicare Advantage program, which features local plans that serve
individual counties and groups of counties, the new regional PPOs will
bid to serve an entire region. Following extensive public input, a
market survey and analysis that takes into account public comments, the
Secretary will establish 10 to 50 Medicare Advantage regions to maximize
plan participation.
Under the proposed
rules, all of these plans are required to offer the same benefits as
traditional fee-for-service Medicare with simplified cost-sharing and
new protection against catastrophic costs. They are also expected to
offer additional benefits not available in fee-for-service Medicare,
such as
dental or vision
services; lower co-payments or other reduced cost sharing; payment of a
beneficiary’s premium for these supplemental benefits; or lower Medicare
Part B premiums and drug benefit premiums. The new plans may offer a
wider range of doctors and other health care providers than the Medicare
coordinated care plans that are currently available.
The rule also supports
the creation of plans to offer health care services to people with
special needs, such as those who are Medicaid eligible, have severe or
disabling chronic conditions, or live in nursing homes or other long
term care institutions.
Public Comment Period
Begins Now
CMS and many
organizations involved in health care and Medicare will be hosting
meetings all across the country to gather information and comments
beginning July 26 until the comment period closes on Oct. 4, 2004. CMS
will also host a series of national phone calls for additional comment,
input and information. Comments can also be sent electronically to
www.cms.hhs.gov/regulations/ecomments.
Secretary Thompson urged
seniors and other interested parties to submit constructive
recommendations during the comment period so HHS and CMS can make sure
the benefits are provided in the most effective and efficient way
possible.
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