Medicare Part D - Enrollment Issues After the Deadline

The Medicare Part D Deadline Has Come And Gone:
What’s Next If You Enrolled…
And What If You Didn’t?

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The initial enrollment period for Medicare Part D’s prescription drug program ended Monday, May 15. This Alert discusses what beneficiaries who enrolled should think about next, as well as consequences and possible courses of action for beneficiaries who did not.

The press is abuzz with reports of Members of Congress on both sides of the aisle introducing legislation to extend the enrollment period, waive the late enrollment penalty (LEP), or both. Meanwhile, the current situation is that those beneficiaries who were not auto-enrolled or exempt from the deadline, and who did not enroll by May 15, cannot enroll again until the end of 2006, with enrollment effective January 1, 2007.

If You Did Enroll In a Plan:

You are now locked into that plan until January 1, 2007. Enrollment for next year runs from November 15 through December 31, 2006. Although you can voluntarily leave your plan before next year, you cannot choose another one to replace the one you left. If you disenroll during the year and then decide to enroll in a new plan during the open enrollment period described above, you will incur a penalty on your premium for the months in which you were not enrolled in a plan but were eligible.
If your drug costs are high enough, you might enter the “doughnut hole” or coverage gap, during which you pay 100% of your drug costs. The doughnut hole begins when you and Medicare have spent $2250 for your drugs. This is not just $2250 of your own out-of-pocket costs, but includes Medicare’s spending for you. Some people will reach this coverage limit very quickly. Catastrophic coverage - during which Medicare pays about 95% of your costs - begins when your total out-of-pocket costs, excluding premiums, reach $3600. This amount includes only what you have paid, not Medicare’s payments.
The $3600 out-of-pocket spending is calculated only on costs you incur within your plan; if the plan does not cover a drug or won’t pay for it because you went to an out-of-network pharmacy, the cost of that drug does not count toward your catastrophic threshold.
Plans can change their formularies between now and the end of the year, and could remove a drug that you are taking. Although the Centers for Medicare & Medicaid Services (CMS) has told plans that formulary changes should not affect plan enrollees who are taking the drug that is removed, this guidance is voluntary for plans; it is not clear what the consequences to a plan would be of removing a drug and having that action apply to everyone. If your plan does remove your drug, you should file an exception with your plan. You should also contact your regional CMS office and report that your drug has been removed and that the plan is applying that decision to you.
You should learn about your plan’s exceptions process (by calling the plan or looking on its website) for drugs that you need that are not on the plan’s formulary (list of covered drugs) or are removed from the formulary and for drugs in high cost-sharing tiers. If your doctor says the drugs on the formulary are less effective or harmful to you, the plan should cover the drug (or reduce its cost-sharing) even if it is not covering it for other plan enrollees. If the drug is covered in this way, what you pay for it will count toward your catastrophic threshold. If you do not seek an exception, or the exception is denied and you don’t succeed in a further appeal, what you pay for it will not count toward your threshold.

If You Did Not Enroll In a Plan and Do Not Have Creditable Coverage Through Another Source:

You may still be able to enroll, and to do so without a penalty, if you qualify for a Low Income Subsidy (LIS). If your income is about $1225/month (some types of income don’t count, so if you are a little over, you should still apply) and your assets - mostly bank accounts, stocks and non-home real estate - are about $11,500 ($23,000 for a couple), you should apply for the subsidy, also called "Extra Help". If you are eligible, you will also have an opportunity to enroll in a Part D plan before the end of the year, without penalty.
If you enter a nursing home or other institution before the end of the year, you will have a Special Enrollment Period to choose a plan, but may have a penalty for the months in which you did not previously enroll.
Check with your state to see if it has a State Pharmacy Assistance Program (SPAP) in which you can enroll. Twenty-five (25) states have operational programs in 2006 (see www.ncsl.org/programs/health/drugaid.htm). While some such programs require you to be in Part D to get additional assistance from the state, not all do. Additional states have discount cards that at least allow you discounts on drug prices.
Check your eligibility for a pharmacy assistance program run by a drug company. These would be for specific drugs offered by that company and would not necessarily pay for all your drugs, but can be helpful nonetheless. Although most drug companies declared they would end their assistance programs because of government rules that suggested they would be committing fraud to continue them, a recent clarification by the Office of Inspector General has led the companies to reconsider and many are continuing their programs. See http://www.rxassist.org/docs/medicare-and-paps.cfm for an up-to-date list of participating programs.
If you had creditable coverage before May 15, but involuntarily lose it before the end of the year (e.g., your COBRA coverage ends August 15), or if you were given incorrect written information by a government employee about when you had to enroll, or if you returned home from living abroad (where you were ineligible for Part D), you will have a Special Enrollment Period (SEP) of 63 days from your change in circumstances during which you can choose a plan without having to pay a late enrollment penalty. Victims of Hurricane Katrina will also have a Special Enrollment Period if they reside in certain zip codes identified by the Federal Emergency Management Agency. See http://www.cms.gov/PrescriptionDrugCovContra/downloads/KatrinaSEP_03.08.06.pdf. You can find out if your zip code qualifies you for an SEP by going to http://www.fema.gov/news/disasters.fema?year=2005 and selecting the document under “Designated Counties” for your state. Qualifying parishes are listed under “Individual Assistance.”
Finally, even if you have to wait until November to enroll for next year, your penalty will be small – only 7% of the national average premium. If this year’s national average premium ($32.20) is used, the penalty would be approximately $2.25/month added to the premium of the plan you choose. If future national averages are used, then the amount could change. For example, if the national average is $30, the penalty for 7 months would be $2.10/month. If the national average is $40, then the penalty for 7 months would be $2.80/month.