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Medicare Drug Benefit Update 

CMS Announces Plans to Reimburse States for Costs of Coverage Gap for Dual Eligibles

January 25, 2006

The federal Centers for Medicare and Medicaid Services (CMS) announced plans to provide reimbursement to states that have elected to cover costs associated with gaps in coverage during the transition to the new Medicare drug benefit.  Since the new Medicare Part D drug benefit went into effect on January 1, more than 23 states have provided reimbursement for a range of gaps in coverage, particularly for low-income individuals dually eligible for both Medicare and Medicaid.  This has included state coverage for medications excluded from Medicare drug plan formularies and payment for cost sharing above the limited $1/$3 co-payments that dual eligibles should be charged under the benefit.  This has resulted in states paying for prescription costs that should have been paid for by private sector Part D drug plans.  CMS is undertaking the following steps to help states recover these costs:

  • Working directly with Part D plans to reimburse states for the amount the plans would otherwise have paid;
  • Developing a demonstration project under which the federal government will reimburse states for the remainder of their costs, including the administrative costs for paying the state claims; and
  • Establishing a policy that ensures states will only serve as a payer of last resort – CMS will assist states to support pharmacist efforts to primarily bill the Medicare Part D plans, and thereby promote the use of the Medicare point-of-sale billing before relying on state payment.

This initiative to help states to recover the costs of covering medications will run through February 15.  By then, CMS hopes that drug plans will be covering medications for dual eligibles as required.  HHS Secretary Leavitt has made clear that this date will be extended if problems persist.  CMS will be asking states to agree to turn off their state reimbursement system and return to the Medicare Part D system by February 15. 

Click here to view a copy of the CMS announcement.

Medicare Drug Plans Issue Inaccurate Premium Notices to Dual Eligibles

In the past week, there have been increasing reports of Medicare drug plans sending notices of payment due for monthly premiums to dual eligible beneficiaries.  Such premium notices contradict CMS policy, since low-income beneficiaries who are dually eligible for Medicare and Medicaid should NOT be charged premiums for enrollment in the new drug benefit.  Unfortunately, because of administrative problems, some dual eligibles were enrolled in drug plans without their status as dual eligibles being confirmed.  As a result they have been incorrectly charged deductibles and subjected to higher cost sharing. 

CMS has been working aggressively to fix these problems.  While in many instances these problems have been resolved, the mailing of monthly premium bills provides another challenge for dual eligibles in this initial transition period. 

It is critically important that dual eligibles receiving premium notices do NOT make any payments to their drug plan. Instead they should contact the plan directly to verify their dual eligible status as well as reminding the drug plan of their obligation to offer drug coverage with no deductible and cost sharing limited to $3 for a brand name drug and $1 for a generic drug.  During the transition period, these drug plans are also required to provide for an initial 30-day refill of any medication previously prescribed to a dual eligible. 


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