Author: Prairie State Legal Services
Last updated: September 2012
What It Is: Medicare will help pay for certain prescription drugs under a new section of Medicare called Part D. Eligible persons can choose to join a prescription drug plan run by an insurance company or other private company approved by Medicare. Most persons will have to pay premiums, a deductible and co-payments, but there is Extra Help from the government to pay these costs for certain low-income persons. Not all drugs will be covered. The plans vary in cost and drugs covered, and persons can choose from a selection of different plans.
Where to Apply: You apply for Medicare Part D benefits directly to the prescription drug plan of your choice, but it must be to one of the plans that cover the area where you live, and it must be during defined enrollment periods. If you decide not to enroll in a drug plan when you are first eligible, you may have to pay a penalty if you choose to join later.
Who May Be Eligible: Anyone eligible for Medicare Part A and/or enrolled in Medicare Part B may also enroll in the new Medicare Part D program. Those participating in a Medicare Advantage Plan (like an HMO or PPO) may get all of their Part A and Part B coverage and prescription drug coverage (Part D) through that Plan. Anyone whose Medicare Advantage Plan does not include prescription drug coverage can independently enroll in Part D.
Since January 1, 2006, Medicare Part D has been available to everyone with Medicare. It will pay for about half your drug costs. Almost 1 in 3 people will qualify for Extra Help paying for their drug costs. It protects you against ever having very high drug expenses. It pays for brand-name and generic drugs.
If you are eligible for Medicare and you are also receiving Medicaid, SSI or benefits from a Medicare Savings Program such as the Qualified Medicare Beneficiary Program (QMB), you will receive drug coverage from a Medicare Prescription Drug Plan. Medicare Part D is optional for all other persons, meaning they can choose whether or not to elect drug coverage from Medicare Part D. If you choose not to elect such coverage, you will still be able to participate in Medicare Parts A and B.
You can join a Medicare Drug Plan at these times:
See the sub-section below titled Choosing An Appropriate Drug Plan. Once you choose a Medicare Drug Plan, you can join by completing a paper application, calling the plan, or enrolling on the Plan’s website or on www.medicare.gov. You can also enroll by calling 1-800-633-4227 (TTY users, 1-877-486-2048).
In most cases, you must stay enrolled for the calendar year starting the date your coverage begins. However, you can join, switch or drop plans at other times, if: a) you move out of the plan’s service area; b) you lose other creditable prescription drug coverage; or c) you live in an institution like a nursing home. If you want to join or switch plans, do so as soon as possible so you will have your membership card when your coverage beings and you can get your prescriptions filled without delay.
You can switch plans simply by joining another drug plan during one of the times listed above. You don’t need to cancel your old Medicare drug plan or send them anything. You will be dis-enrolled automatically from your old Plan when your coverage with the new Plan begins on the first day of the month after the month you changed Plans.
Note: If you have both Medicare and Medicaid coverage ("dual-eligibility"), you can switch Plans once per month. If one Plan is not working out for you, then you can switch very readily.
The Medicare Part D Program is a complex new benefit program. To ensure that Medicare-eligible persons are fully informed regarding the choices they must make and the way the system works, we suggest that readers take a careful approach to the following content. We also recommend that they consult the websites and helplines listed at the end of this Section.
If you choose not to enroll in Part D when you are first eligible, you will have to pay a penalty in the form of a higher premium if you decide to join later on.
This penalty will not be charged if you had drug coverage from another source (such as an employer), as long as the coverage is “at least as good as” a standard Medicare prescription drug plan. This is called “creditable prescription drug coverage.” If you dropped or lost that coverage, you can avoid the penalty as long as you have not been without this comparable drug coverage for more than 63 days. Likewise, you will not be charged a penalty if you get “Extra Help.”
If the penalty applies, it is calculated by multiplying 1% of the national average monthly premium ($32.34 in 2011) times the number of full uncovered months that you were eligible but didn’t join a Medicare drug plan and went without other creditable prescription drug coverage. Since the national average premium may increase each year, the penalty amount may also increase every year.
It is important to keep this penalty in mind in making a decision whether to enroll in a Plan. Even if you have low prescription drug costs now, if you wait too long, you will pay an increasingly larger penalty when you need more help with prescription drug costs.
Persons receiving both Medicare and Medicaid (called “dual-eligibles”) need to apply to enroll in a Prescription Drug Plan if they are not already enrolled in a Prescription Drug Plan. Otherwise, they will be randomly assigned to a Plan that has a monthly premium set at or below the average premium for Plans available in the State.
If you do not receive Medicaid, but you do receive SSI or help from the State paying your Medicare expenses through the Qualified Medicare Beneficiary Program (QMB) or one of the other Medicare savings programs, you can apply to enroll in a Prescription Drug Plan when your SSI or QMB becomes effective. Otherwise, when your SSI or QMB becomes effective, you will be assigned randomly to a Plan that has a monthly premium set at or below the average premium for Plans available in the State. Your coverage will begin on the first day of the month after the month you join.
If persons receiving Medicaid, SSI or benefits from a Medicare savings program wait to be assigned to a Plan, they may find that the Plan to which they are assigned may not be one that best meets their needs. For example, it might exclude pharmacies or drugs that they usually use.
If you already have prescription drug coverage through an employer or union, check with your plan administrator to learn how your plan coordinates with Part D. You need to learn whether your drug coverage is at least as good as Medicare’s standard drug coverage (“creditable coverage”). If you continue to have employee or retiree prescription drug coverage, you have 3 choices:
If you have creditable coverage, do not sign up for Medicare Part D unless you have received one-on-one, trustworthy counseling from SHIP, your Area Agency on Aging or another reliable source. Enrolling in Medicare Part D may terminate your current prescription drug coverage, and you may risk losing your retiree or supplemental general health coverage as well.
The prescription drug plans available in Illinois are announced prior to the annual enrollment period between October 15 and December 31. The overall value of the drug coverage offered by each Plan must be the same or greater than the Standard Plan outlined in the Medicare law and described later in this Section. However, plans can vary in what drugs they cover, the co-payments you must pay and a variety of other limitations they may impose, including what pharmacies they will let you use.
There are two ways you can get your Medicare drug coverage:
Insurance companies that offer MA-PD policies in Illinois as of 2011 include Humana, Health Alliance, United Healthcare, Essence and Wellcare. If you wish to enroll in a MA-PD, you must:
Private companies offer different Plans from which you can choose. They provide different benefits for different costs. It is important that you shop for the right Plan using the factors explained below. There are many sources for help in this process, including the Senior Health Insurance Program (SHIP), 1-800-548-9034 or call 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048.
In order to choose a Plan that works best for you personally, you will need to look carefully at the costs and other requirements for each plan, and compare the drugs covered in each plan to your own medication needs. Some of the factors to consider when choosing a prescription drug plan include:
Some important considerations are the following: All plans offer coverage until you hit a limit of $2,840 in total drug costs, and all plans offer coverage when your out-of-pocket costs exceed $4,550. But only some plans offer coverage during the "gap" between $2,840 in total costs and $4,550 in out-of-pocket costs.
Part D will cover only FDA-approved prescription drugs, prescribed biologicals, and medical supplies associated with injection of insulin. However, a PDP or a MA-PD may not cover all drugs. Certain drugs are excluded from all Plans, including drugs for:
Note: In Illinois, Medicaid will “wrap around” the Medicare drug benefit to help pay for the following drugs that are excluded from Medicare coverage by law as long as they are on the Medicaid formulary:
See the section of the Senior Citizens Handbook on the Illinois Pharmaceutical Assistance Program for more information on how the state program “wraps around” Medicare.
Each PDP will establish a list of drugs it covers (called a "formulary"). The Medicare law includes certain requirements about types of drugs that must be included in a formulary. However, the Plans will retain very broad discretion about which specific drugs they will cover. A formulary must generally include at least 2 drugs in each therapeutic category and class of covered Part D drugs, but the Plan can choose the drugs. A "therapeutic category and class" contains drugs that are similar based on the disease or condition they treat or on the way they affect the body. Plan formularies are required to cover almost all drugs in six classes that include: anti-psychotics, antidepressants, immuno-suppressants, cancer medications and HIV/Aids medications.
The federal government will make sure that formularies do not discourage enrollment among certain groups of people, such as persons with HIV or other diseases, by not covering certain drugs needed by that group. They will also make sure that the Plans include a broad distribution of drug categories and classes.
Plans may also create pricing tiers. The tier with the lowest prices may be the generic drugs, and then there may be higher priced tiers for different brand name drugs. The federal government will review the Plans to make sure that they have not discouraged enrollment of certain people by placing certain drugs in the most expensive tiers.
Your Plan might also require that you get prior approval from the Plan for certain drugs, or require that you try an alternate drug first before you try a drug that your doctor would otherwise prescribe. The federal government will review these types of policies to make sure they are fair. They might also cover only a limited number of pills per month.
PDPs may change the drugs on their formularies. But if they do, they must post any changes on their websites. Moreover, if you have been taking a drug that your Plan intends to drop, they must give you 60 days written notice of the change in order to allow you time to make adjustments in your drugs or in your Plan. If you don’t get this advance notice, your Plan must give you a 60 day supply of the drug at the time of refill. However, you cannot leave the Plan because of a change in the formulary until the next annual election period (October 15 - December 31 each year).
You need to find out from each Plan what they charge for coverage. Different companies are allowed to charge different premiums, have different co-payments, and cover different drugs, so long as the entire plan is of equal value to the standard plan. Some plans may offer a more comprehensive selection of covered drugs but charge higher monthly premiums. They may have preferred pharmacies, so you pay less if you purchase your prescriptions through their preferred network of pharmacies. They may offer a discount if you use their mail order pharmacy.
The basic Part D coverage may or may not include a monthly premium. You pay this in addition to the Part B premium. If you belong to a Medicare Advantage Plan (like an HMO or a PPO) that includes Medicare prescription drug coverage, the monthly premium you pay to your plan may include an amount for prescription drug coverage.
Note: Contact your drug plan (not Social Security) if you want your premium deducted from your monthly Social Security check.
Actual premiums vary depending on your plan, and in 2011, range from $0 to 115.20. If you get Extra Help from Medicare, you will pay a reduced premium or no premium at all. See Extra-Help, below.
Note: Your Part D monthly premium could be higher if your income is above a certain amount.
Premium increases in future years will depend on the amount of the previous year’s Part D spending on prescription drugs.
Depending on the plans available in Illinois, your deductible could range from a low of $0 to a maximum deductible of $310. For example, if your plan’s deductible is at the high end, you must pay the first $310 of the costs of drugs covered by the Plan before the plan begins to pay. If your plan sets the deductible amount at zero, you do not have to pay anything before the plan begins to pay. Regardless of your plan, if you get Extra Help from Medicare, you will pay a reduced deductible or no deductible at all. See Extra Help below.
During the initial coverage phase, you pay a copayment or coinsurance, and your Part D drug plan pays its share for each covered drug until your combined amount (including your deductible) reaches $2840.
After you pay your deductible and until you and the plan together pay a total of $2,840 in cost of covered drugs (including the amounts you paid for the deductible), you must pay 25% of the cost, and Medicare will pay 75%.
Example: If you incur $2,530 of drug costs after your $310 deductible, you will have paid $632 in addition to your deductible of $310. Medicare will pay $1,898.
Most Medicare drug plans have a coverage gap (also called the “donut hole”). Once you and your Part D drug plan have spent $2,840 for covered drugs, you will be in the donut hole. The Explanation of Benefits notice, which your drug plan mails to you each month when you fill a prescription, will tell you how much you’ve spent on covered drugs and whether you’ve entered the coverage gap.
While you are in the donut hole, you have to pay certain costs out-of-pocket for your prescriptions up to a yearly limit (the out-of-pocket limit is $4,550 in 2011). Not everyone will reach the coverage gap. Your yearly deductible, your co-insurance or co-payments, and what you pay during the coverage gap all count toward this out-of-pocket limit. The limit does NOT include the drug plan premium you pay or what you pay for drugs that are not covered.
Previously, you had to pay the full cost of your prescription drugs while in the donut hole. However, starting in 2011, you get a 50% discount on covered brand-name prescription medications and a 7% discount on generic drugs. Those figures will rise over the years, eventually reaching a total 75% discount that effectively will eliminate the gap by 2020.
The donut hole continues until your total out-of-pocket cost reaches $4,550.
Example: If you incurred a deductible of $310, and paid $632 for the initial coverage, and paid an additional $3,608 in drug costs during the donut hole, then you will have reached your out-of-pocket limit of $4,550. Medicare will have paid $1,898.
There are several plans that will cover your drugs during the "gap." Some will only pay for generic drugs and others will pay for both generic and brand drugs. If you qualify for Extra Help, there will be no coverage gap at all, and your plan will continue to cover your drugs during the gap period.
When you spend more than $4,550 out-of-pocket, the coverage gap ends and your drug plan pays most of the costs of your covered drugs for the remainder of the year. You will then be responsible for a small copayment. This is known as catastrophic coverage.
Once you reach catastrophic coverage, the amount you pay depends on whether or not you receive Extra Help. If you don’t have Extra Help, you will pay 5 percent of the cost of the covered drug, or a co-pay of $2.50 for generics and $6.30 for brand-name drugs (whichever is greater). If you have full Extra Help, you will pay nothing for drugs on your plan’s formulary for the rest of the calendar year. If you have partial Extra Help and have been paying 15% of the cost of your drugs or your plan’s standard co-pay or coinsurance (whichever is cheaper), you will pay $2.50 for generic drugs and $6.30 for brand-name drugs for the rest of the calendar year.
To sum up your out-of-pocket expenses, you will pay, in a standard plan:
If you've paid the maximum for initial coverage and donut hole, this adds up to approximately $4,550. After you have paid that amount, you have reached catastrophic coverage.
The Plans must keep track of your out-of-pocket expenses. They also must send you monthly statements, so you can track your coverage and see how close you are to catastrophic coverage. However, the Plans and Medicare will count only true out of pocket costs (TrOOP) in determining whether you have reached the catastrophic coverage level. Medicare will consider payments to be TrOOP if those payments come from:
On the other hand, Medicare will not consider payments to be TrOOP if those payments come from:
Moreover, Medicare will not consider payments to be TrOOP if they are for:
You may qualify for “Extra Help” from either the federal or state government to pay for all or part of your Medicare Part D premiums and other costs. Certain persons are deemed to be automatically eligible for this extra help and do not need to apply for it. They still need to affirmatively enroll in a Prescription Drug Plan. Others may qualify for Extra Help if their income and resources are below a certain level, but will need to apply for it.
The Extra Help is estimated to be worth an average of $4,000 per year. Many people qualify for these big savings and don't even know it. In 2010-2011, to qualify for Extra Help:
These amounts may change in 2012.
You will be deemed to be automatically eligible for the extra help if you receive Medicare, and:
If you are deemed to be automatically eligible, you will get the full benefit of Extra Help. This means that you will have no monthly premium, no annual deductible, and no coverage gap in the “donut hole.” Co-payments for “dual-eligibles” will be limited to $1.10 for generic drugs and $3.30 for brand-name drugs. Co-payments for others who are automatically eligible for Extra Help will be limited to $2.50 for generic drugs and $6.30 for brand-name drugs. If your annual true out-of-pocket expenses reach $4,550, Medicare pays all further covered drug costs for the year.
Dual-eligibles will not pay any cost sharing in their Medicare PDP if they live in a Long Term Care (LTC) Facility. This means that in addition to not having to pay a premium or a deductible, they will not have to pay any co-payments, either. Medicare pays for it all. For purposes of Medicare drug coverage, LTC facilities include skilled or unskilled nursing facilities, inpatient psychiatric hospitals or intermediate care facilities that are residential facilities for developmentally disabled adults (ICF/MR).
If you are not deemed automatically eligible, you must apply for the Extra Help. You may apply through the Social Security Administration or through the Illinois Department of Human Services (DHS).
There is an advantage to applying to DHS for Extra Help. You can ask DHS to review your eligibility for Medicaid or other programs that help you pay other Medicare costs under Parts A and B. Be sure to explain to DHS that you want them to review your eligibility for all Medicaid programs.
On the other hand, applying through the Social Security Administration may be easier. For example, SSA will not require you to bring in papers proving your income, unless it detects some inconsistency with other information they might have received from the IRS or other sources about your income. Many persons have received applications in the mail from the Social Security Administration. Those who did not can complete an application for Extra Help at the local Social Security Office use their online tool to apply for Extra Help. Local senior centers have "Extra Help" paper applications and can help with the application process.
There are different levels of Extra Help available, depending on your income and assets. People with a lower income and fewer assets get more help with their Medicare drug plan costs. As to the information below “FPL” refers to federal poverty level. These numbers apply as of 2011, but may change in subsequent years.
For individuals/couples with income less than or equal to 135% of FPL with resources of $8,180 or less for individuals and $13,020 or less for couples;
For individuals/couples with income less than or equal to 135% of FPL but with resources between $8,181-12,640 for individuals and between $13,021-25,260 for couples;
For individuals/couples with income between 136% and 149% of FPL and resources are $12,640 or less for individuals, or $25,260 or less for couples (considered “partial” Extra Help.)
Nobody receiving Extra Help has to face the dreaded donut hole. Income and asset limits increase every year. The Social Security Administration announces the new amounts in February or March, and they become effective immediately. Extra Help co-payments (and the amount of the deductible for people who receive the partial benefit) increase at the beginning of each calendar year and remain the same for that whole year.
By law, SSA is required to review a beneficiary's eligibility for Extra Help periodically, beginning with the first year of low income subsidy.
Beneficiaries will receive a letter from SSA providing notice of their termination of Extra Help for the next calendar year, beginning in September. Beneficiaries can request a redetermination of their eligibility at any time. If the beneficiary makes the request within 30 days of receiving the notice of termination, their Extra Help will continue past January 1st of the next calendar year, if a redetermination decision has not yet been made. Use form SSA-1026 to request this redetermination.
Beneficiaries have the right to appeal the termination of their Extra Help with SSA and must do so within 60 days of the date of the termination notice. Use form SSA-1021 to make this appeal. SSA will set up a telephone hearing with the beneficiary in order to review their case. If the SSA upholds the beneficiaries' Extra Help determination, that beneficiary has the right to appeal the decision in federal district court. It is important to note, that this right to appeal was enacted in 2008, but is retroactive to terminations from 2003.
In some situations, your doctor may want to prescribe a drug for you that is not on the Plan’s formulary. In other situations, you are already using a drug which the Plan proposes to remove from the formulary. If the doctor believes the drugs presently on the formulary are not medically appropriate for you, either you or your doctor can request an “exception” from the Plan so that it will cover the drug the doctor wants to prescribe or the drug you are using.
Likewise, your doctor may prescribe a drug that costs more because it is under a more expensive cost-sharing tier than other drugs. If the doctor believes that the drugs covered under the less expensive cost sharing tier are not medically appropriate for you, either you or the doctor can request an “exception” from the Plan so that it will enable you to get the drug at the lower cost.
Your doctor will need to tell the Plan why you need the drug prescribed. Your Plan must respond to your request within 72 hours, but you can request a response within 24 hours if your life, health or ability to regain maximum function is at risk. If your Plan denies your request for an exception, you may appeal.
The process starts with a review by the Plan sponsor, but their decision can be reconsidered by an independent review entity, and there can be further reviews by an Administrative Law Judge, a Medicare Appeals Council, and ultimately, by filing suit in federal court.
The Plan must respond within 7 days; however, they must respond within 72 hours if your doctor certifies that the review should be expedited.
You may request reconsideration within 60 days of the redetermination by your Plan. This entity must consult your doctor about why the exception is needed. The review must be completed within 7 days of your request, but within 72 hours if your doctor certifies that the review should be expedited.
If the Independent Review Entity denies your request, and your request involves at least $130 in costs projected out over a year, you may request a hearing before an ALJ, who should make a decision within 90 days.
You may ask the Medicare Appeals Council to review an ALJ decision within 60 days of the decision. This review council will accept review under limited circumstances.
If the Appeals Council decision is unfavorable, you may seek judicial review in federal court, within 60 days of the Medicare Appeals Council’s decision, if your claim involves at least the minimum level Medicare will set every year. In 2008, that level is $1,300.
The relevant statute and regulations are as follows:
The federal government offers assistance through its Medicare website and through its Medicare Help hotline at 1-800-633-4227.
You may also get help through the Illinois Senior Health Insurance Program (SHIP). You also can call SHIP at 1-800-548-9034.
You may also call the Help Line at the Illinois Department on Aging at 1-800-252-8966 or consult their website.
The Center for Medicare Advocacy, Inc. maintains another useful website on the new Medicare Part D.
The following also are useful websites:
If you want to find out if you qualify for Extra Help with your Medicare prescription drug costs, go to the Social Security Prescription website. At this website, you can also apply online for the Extra Help. You can also print a form to appeal the decision Social Security makes about your eligibility for the Extra Help.
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