May 18, 2006
As is being widely reported in the press, the initial sign-up period for the new Medicare drug benefit expired on May 15. Starting May 16, Medicare beneficiaries that did not signed up for drug coverage will have to wait until the fall to enroll and their coverage will not be effective until January 1, 2007. More importantly, Medicare beneficiaries that did not sign up – and later apply for coverage -- will be forced to pay a financial penalty if they later decide to sign up for coverage (see details on the late enrollment penalty below).
Yesterday, the Centers for Medicare and Medicaid Services (CMS) released data showing that 90% of the 42 million Medicare beneficiaries now have prescription drug coverage. The surge in enrollment in the final days leading up to the May 15 deadline was overwhelming, with more than 143,000 signing up on the last day.
Of greatest concern to NAMI are estimates that 2/3 of the 4.5 million people who did not sign up for coverage are low-income Medicare beneficiaries who are eligible for a deep subsidy that makes the new benefit affordable. The good news is that both the May 15 enrollment deadline, and the late enrollment penalty, do NOT apply to them. These Medicare beneficiaries generally qualify for “extra help” (also known as the Low-Income Subsidy, LIS) that offers them deep discounts on monthly premiums, no deductible, and no gap in coverage. These low-income beneficiaries must first apply with Social Security for this “extra help” subsidy.
On May 16, just hours after the open enrollment period ended, a bipartisan group led by Senate Finance Committee Chairman Charles Grassley (R-IA) and Ranking Member Max Baucus (D-MT), introduced legislation (S 2810) to waive the Medicare Part D late enrollment penalty for those that did not sign up for coverage. The proposal would specifically waive the penalty for any beneficiary that missed the May 15 sign-up deadline and seeks to enroll starting in November.
Senator Grassley made clear his intention to move S 2810 through the Senate as quickly as possible, perhaps later this week. It is estimated that the legislation would cost $1.7 billion over five years – largely through late enrollment penalties that the government would not collect. Officials from the Bush Administration and House leaders expressed limited interest in waiving late enrollment penalties, but first want to hold hearings on overall progress in Part D implementation.
Medicare beneficiaries with incomes above about $15,000 (150% of the federal poverty level) that do not enroll by May 15 will face a financial penalty. This penalty is one percent per month for every month after May 15 that an individual has not signed up. That one percent however, is not based on the premium of the plan an individual chooses. Rather, it is based on the national average premium offered by insurers in the year that coverage starts.
Thus, an individual cannot keep the penalty low by choosing a cheaper policy. Again, since enrollment will not open again until November 15, 2006, the initial minimum penalty will be at least seven percent, on top of increased premium rates for the 2007 plan year. Moreover, the late enrollment penalty stays with a late enrollee for the rest of their life. CMS estimates that in the first year, the penalty would average about $2.50 per month in 2007.
Even after the May 15 deadline, help is still available through 1-800-MEDICARE. In addition, the following online links are recommended:
Official U.S. Government Medicare Web site
One of the most challenging problems with the roll-out of the Medicare drug benefit has been disruption to existing programs sponsored by drug manufacturers that offer free or deeply discounted drugs to low-income people. Earlier this year, many of these programs either cut off enrollment, or ended assistance for Medicare beneficiaries. The idea was to encourage Medicare beneficiaries to enroll in Part D coverage and not rely on drug manufacturer PAPs as a substitute for coverage – and thereby expose low-income beneficiaries (especially those between 150% of poverty and 300% of poverty) to the late enrollment penalty.
In addition, an opinion letter from the HHS Office of Inspector General raised a series of complicated issues involving violations of federal laws governing antitrust and anti-kickback protections with respect to manufacturer-sponsored PAPs. However, in the absence of these PAPs many low-income Medicare beneficiaries have been left worse off under Medicare Part D than they were when they received deeply discounted or free medications. This is especially the case for beneficiaries at or below 150 percent of the federal poverty level that have assets that made them ineligible for the “extra help” subsidy.
In recent weeks, there has been a flurry of activity as several drug manufacturers have either reopened their old programs, or established new programs. More drug companies are expected to follow suit in the coming days. What is clear however is that standards issued by the HHS Inspector General require that these manufacturer-sponsored PAPs operate completely independent from Part D coverage. In other words, the PAPs are not allowed to coordinate with, or fill in gaps for, Medicare drug coverage. Several of the newly revised and reopened PAPs require an enrollee to demonstrate that they are NOT enrolled in Medicare Part D or have applied for “extra help” and been denied.
Some of these manufacturer-sponsored assistance programs will eventually require a certification on the part of the Medicare beneficiary that: 1) they will not submit a claim to their Medicare drug plan, and 2) they understand that medications provided by the drug company are outside of Part D and cannot count toward meeting the $3,600 catastrophic threshold. Each program is slightly different, so qualified low-income beneficiaries should carefully review eligibility requirements and program rules before applying. Among the companies that have reopened or reestablished their PAPs are Astra-Zeneca, Eli Lilly, Glaxo-Smith-Kline, Janssen, Merck, Pfizer, and Schering Plough.
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