This Weekly Alert summarizes two final regulations issued by the Centers for Medicare & Medicaid Services (CMS) regarding the Medicare Part D prescription drug benefit.  The two regulations address a number of issues raised by beneficiaries, providers and health plans in the administration of the drug program.  Unfortunately, some of the changes made by the new regulations are not beneficiary-friendly; they do not go far enough to correct problems identified by beneficiaries, or they limit access to drugs or drug coverage.

Calculating the Low-Income Benchmark

On April 3, 2008, CMS published in the Federal Register a final rule concerning the methodology to be used to calculate the low-income subsidy (LIS) benchmark amount for prescription drug plans.[1] Only plans offering basic Part D benefits with a premium that is at or below the benchmark for a given plan year qualify as LIS or benchmark plans.  LIS-eligible beneficiaries may be automatically enrolled in benchmark plans, and those who are eligible for the full low-income subsidy pay $0 premium for these plans.

Problems arise when a plan that qualifies as a benchmark plan in one year fails to qualify for a subsequent year. For the past two years, if a benchmark plan to which an LIS-eligible beneficiary had been assigned did not qualify as a benchmark plan in the following year, CMS re-assigned LIS-eligible enrollees in that plan to a different plan that would so qualify. Those who were in a benchmark plan of their choosing, rather than in a plan to which they had been assigned, were given notice that their plan would no longer qualify for LIS, and so they had to choose a different $0 premium plan on their own. The need to change plans in order to avoid paying a Part D premium created hardship for many beneficiaries, particularly when the formulary of the new plan did not cover their existing drugs. Some beneficiaries chose to remain in their old plan and pay a small premium because the formulary covered more of their medicines.

To reduce the number of beneficiaries who needed to be reassigned, CMS instituted a "de minimis" demonstration for 2007 and 2008.  LIS-eligible beneficiaries could remain in their drug plan if the plan's premium did not exceed the benchmark by more than a "de minimis" amount.  Even with this policy, however, 2.1 million LIS-eligible individuals were reassigned to a different benchmark plan for 2008; 400,000 more were notified that they would need to change plans themselves to avoid having to pay a premium for their drug coverage.

The final rule, which becomes effective on May 31, 2008, changes the method for calculating the benchmark premium in an attempt to mitigate the disruption in coverage caused by reassignment.  The benchmark will still be calculated by averaging prescription drug plan premium bids.  Instead of weighting plan premiums by total plan enrollment, however, CMS will weight the premium bids by LIS enrollment. In other words, premium bids for plans with high LIS enrollment will be given more weight in the averaging process than will the premium bids for plans with little or no LIS enrollment.  CMS also will end its de minimis demonstration; enrollees in plans whose bids exceed the new benchmark by a very small amount will still be reassigned.

Although CMS states that the new methodology will result in the need to reassign fewer beneficiaries to a new plan, even CMS acknowledges that some beneficiaries will always need to be reassigned.  It is also questionable whether the aggregate number of reassignments will actually be reduced. The new methodology will result in fewer reassignments than the old methodology, but only if the de minimis demonstration is not taken into consideration.  Furthermore, there is some concern that the new methodology will result in more reassignments than if CMS had made its de minimis policy permanent.

In addition to requesting that the de minimis demonstration be made permanent, beneficiary advocates had asked CMS to change how Medicare Advantage (MA) plan drug premiums are averaged in the benchmark calculation. Many MA plans use the overpayments they receive (called rebates) to reduce their prescription drug premium to $0.  When the MA $0 premiums are averaged in with the premiums of stand-alone prescription drug plans, the MA $0 premiums artificially reduce the benchmark amount.  Advocates suggested that CMS include in the benchmark calculation the actual MA prescription drug premium amount without taking the rebate into account. Such a calculation would more accurately reflect the market cost of offering drug coverage, and would result in greater plan stability.  CMS rejected the beneficiary alternative calculation and chose instead the method suggested by the health plans.

Other Changes to Part D

On April 15, 2008 CMS published in the Federal Register a final regulation to make policy and technical changes to its Part D rules.  The regulation becomes effective on June 9, 2008.[2]  Some of the policy changes CMS plans to make are discussed only in the preamble.  Others are included as changes to the text of the regulations themselves. Among the provisions addressed in the final rule:

·         Eligibility and Enrollment:  Under the new final regulations, Part D plans may use individual providers, provider groups, and pharmacies to distribute printed comparative plan information, as long as these entities display printed comparative information about all of the different Part D plans with which they contract.  They are not obligated to display comparative information about plans with which they do not contract.

·         Definition of Covered Drugs:  The final regulation discusses and modifies the definition of a Part D covered drug.

1. Erectile dysfunction drugs: CMS confirms that no regulatory change is required to implement the statutory change that excludes erectile dysfunction drugs from coverage under Part D.  These drugs may be covered if they are used to treat a condition other than sexual or erectile dysfunction for which the drug has received FDA approval.

2. Weight loss or weight gain agents: CMS clarifies that agents when used for anorexia, weight loss, or weight gain are specifically excluded from coverage, even when not used for cosmetic purposes. CMS describes as "an error" its statement in the preamble of the January 2005 final regulation that weight loss drugs could potentially be covered. Plans may cover weight loss agents used to treat morbid obesity under enhanced alternative coverage but not under their standard coverage. However, CMS reasserts its previous statement that prescriptions used to treat AIDS wasting and cachexia are not considered agents used for weight gain or for cosmetic purposes.

3. Insulin inhalation drugs and supplies:  CMS has broadened its definition of a covered drug in the regulation to include all products directly associated with delivery of insulin, including the insulin inhalation chamber and future potential delivery mechanisms.

4. Vaccine administration fee: The definition of a Part D drug is also amended to include reference to vaccine administration on or after January 1, 2008, to be consistent with statutory changes.

·         Long-Term Care Facilities:  CMS makes a number of clarifications:

1. The definition of long-term care facility includes an institution for mental disease (IMD) to the extent that it is a nursing facility and serves full benefit dual eligible individuals for whom Medicaid payment is made.

2. Part D covers drug costs for inpatients in hospitals that meet the definition of a medical institution if they have exhausted their Part A inpatient days and for whom payment for drug costs is no longer available under Part A or Part B.

3. Part D plans are not compliant with CMS long-term care pharmacy access standards if they do not provide access to Part D covered drugs via a network pharmacy for enrollees who reside in long-term care facilities. CMS states in the preamble that drug plans should contract with the pharmacies serving the facilities in which enrollees reside, and plans may need to enter into a retroactive contract.  CMS also "encourages" plans to coordinate with in-house and state-run pharmacies used by many ICF/MRs, IMDs, and long-term care hospitals.  Further, CMS expects that situations in which a beneficiary is hospitalized and exhausts Part A coverage will rarely occur, so that the plans would only have to contract with hospital pharmacies to provide coverage to these individuals on an as-needed basis.

·         Waiver or Reduction of Cost-Sharing by Pharmacies:  CMS clarifies that waivers or reductions of cost-sharing by pharmacies only count as incurred costs towards the out-of-pocket limit (TrOOP) that gets beneficiaries out of the coverage gap if the pharmacy is not providing other wrap-around coverage.  In other words, pharmacies operated by group health plans or under government-funded programs may waive or reduce cost sharing, but the waived or reduced cost-sharing amount will not count towards TrOOP.  Most importantly, cost-sharing waivers or reductions applied by safety-net provider pharmacies, including federally-qualified health centers, will not count because these entities use government funding to help pay for the cost of the drugs.

·         Access to Home Infusion Pharmacies:  The Part D plan pharmacy network must provide adequate access to home infusion pharmacies that (1) are capable of delivering home infused drugs that can be administered appropriately; (2) while not required to directly arrange for supplies, can ensure that the services and supplies necessary for home infusion therapy are in place before the drugs are delivered; and (3) can deliver the drugs within 24 hours of discharge from an acute care setting, or later if so prescribed.  CMS reminds plans that they are ultimately responsible for compliance with these obligations, and that the agency will investigate complaints about access problems.

·         Coordination of Benefits with Other Providers of Prescription Drug Coverage:  Part D plans should use the CMS reconciliation process to coordinate benefits where payment was made to a plan on behalf of a beneficiary who transferred enrollment to another plan.  CMS declined to extend the reconciliation process to address inaccurate cost-sharing amounts withheld from pharmacies, but reiterated that plan sponsors are required to pay for covered Part D drugs provided during the retroactive enrollment periods, even if the pharmacy is not a network pharmacy.

·         Grievance and Appeals Issues:  The regulations make technical corrections to the definition of "appointed representative" to allow the representative to file a grievance on the enrollee's behalf, and to the definition of "projected value," limiting the projected value of a drug for purposes of meeting the jurisdiction amount for a hearing to benefits incurred within a plan year.  Additionally, plans must deliver written notice to an enrollee within 3 calendar days of denying a request to expedite a coverage determination, but providing the notice to both the appointed representative and the enrollee "could be confusing for an enrollee…"

·         Premium Subsidy for Late Enrollment Penalty:  The initial Part D regulations failed to include the calculation of the subsidy of the late enrollment penalty (LEP) for individuals who are not eligible for the full subsidy.  This final regulation provides for a sliding scale subsidy, with higher subsidization available for individuals with incomes below 135% of the federal poverty level.  CMS notes that its demonstration to waive the LEP applies only to low-income subsidy eligible individuals who enroll in a Part D plan in 2006, 2007, and 2008.  CMS indicates that it "may consider" suggesting to Congress that the LEP be waived for low-income subsidy recipients.

Medicare Part D is constantly changing, adding new twists to an already complex program, and unfortunately not all changes are for the better.  In addition to those issues outlined above, CMS has recently issued other proposed and final rules affecting Medicare Part D, as well as Medicare Part C, and the Center will continue to keep readers updated on changes that affect access to care.
 

For further information contact attorney Vicki Gottlich
in the Center for Medicare Advocacy's Washington, D.C. office
at (202) 293-5760 or vgottlich @ medicareadvocacy.org (remove spaces).