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On Dec. 8, to less-than-sweeping acclaim, President George W. Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. While the AARP supported the legislation, others have raised concerns as to just how much prescription drug coverage it actually provides. Like any other complex government benefit, the devil is in the details. The new act makes significant changes to the Medicare program. Most notably, it offers Medicare beneficiaries — mainly, Americans over the age of 65 — some, though far from complete, relief from the high cost of prescription drugs. It creates a Medicare Part D under which individuals eligible for either Part A (hospital/hospice care) or Part B (outpatient services) may obtain qualified prescription drug coverage. This optional coverage does not begin until Jan. 1, 2006. (The law also provides for major restructuring of the traditional Medicare program, relying heavily on private insurance for the delivery of benefits.) When prescription drug coverage was first proposed, Medicare beneficiaries were told that they should expect a program as generous as the plan available to members of Congress themselves. Unfortunately, the program offered by the new law does not meet this standard. Unlike Medicare beneficiaries, most members of Congress have a drug benefit that does not require its own deductible. Unlike the Medicare plan, Congress’ insurance does not have a large “doughnut hole” in coverage. And unlike Medicare beneficiaries, members of Congress do not pay an additional premium for their drug coverage. But enough with the broad statements. Let’s get down to those details. Here are 20 more warnings about the Medicare Act of 2003 for hopeful beneficiaries and those who advise them: 1. The prescription drug benefit, unlike benefits under Part B, is not offered through the Medicare program itself. Instead, the act asks people to select and enroll in a private plan that has a contract with Medicare to obtain prescription drug coverage. These qualified plans may offer coverage either through a stand-alone prescription drug plan or through a so-called Medicare Advantage managed care plan (see No. 20). 2. The act imposes a “late penalty” on Medicare beneficiaries who do not enroll in a drug plan when they are first eligible — unless at the time they have “creditable coverage.” Creditable coverage is coverage that is comparable to the new Part D drug benefit and that is provided under Medicaid or an employer-sponsored health plan. The act says that drug coverage obtained under a private Medigap policy will not be considered comparable coverage; someone with a Medigap drug policy (Policies H, I, or J) who delays enrollment in a Medicare drug plan will have to pay the late penalty. Note that the enrollment rules are not simple, either: The initial enrollment period will be Nov. 15, 2005, through May 15, 2006. Individuals who first become eligible for Part A after that date will have an enrollment period that corresponds with their Part B enrollment period. People who do not enroll during the initial period will have the opportunity again during an annual enrollment period that corresponds to the enrollment period for Medicare Advantage plans. There will also be special enrollment periods for individuals who move out of a service area or who lose comparable coverage under an employer plan, Medicaid, or another qualified plan (but not under Medigap policies H, I, and J). 3. The act does not establish a standard premium amount. The $35 figure used in discussions is just an estimate of what the average premium might be. The actual premium will vary, perhaps widely, by plan and geographic area. 4. The act also permits drug plans to vary the basic benefit package — the $250 annual deductible, the 25 percent co-payment up to $2,250, etc. — as long as the benefit package offered is the “actuarial equivalent” of the basic benefit. 5. Each private drug plan will decide independently which prescription drugs to cover under its formulary. Individuals will have to choose wisely — and then hope for the best (see No. 6). 6. Individuals are generally “locked in” to the plans they choose until the next enrollment period, which will run from Nov. 15 through Dec. 31 annually. But the drug plans are free to change the drugs they cover during the course of the year. 7. Drug plans must make available information about changes in their formulary, but they are not required to provide that information directly to enrollees. In other words, Medicare beneficiaries will probably have to become much more proficient with the use of Web sites, or seek assistance from family, friends, or their state programs. 8. The act creates what has been dubbed the “doughnut hole” in prescription drug coverage. This hole is the complete absence of Part D coverage after the first $2,250 in annual prescription drug expenses is reached and before the person has paid $3,600 in out-of-pocket prescription drug costs. Only when total prescription drug expenses hit $5,100 does catastrophic coverage kick in. (An individual reaches the $3,600 cap by paying the $250 deductible, the 25 percent co-payments on the next $2,000, and the full cost of the next $2,850 in expenses. But see No. 9.) 9. The act does not include the price of nonformulary prescriptions when calculating that $3,600 out-of-pocket spending cap. Deductibles, co-payments, and other costs paid for by a retiree health plan are also not counted. This means that most people will have to spend more than $3,600 a year out of their own pockets for prescription drugs alone before getting the catastrophic coverage. 10. As of Jan. 1, 2006, the act prohibits the sale of Medigap policies H, I, and J, which provide prescription drug benefits, except to people who already have such policies as of that date. 11. Medigap policies also will not pay for the Medicare prescription drug deductible and co-insurance and for drug coverage in the doughnut hole. 12. The legislation’s guarantee of choice may not be met in every location. The Medicare Act “guarantees” beneficiaries access to at least two private drug plans, which could be two stand-alone drug plans, or one stand-alone plan and one Medicare Advantage plan. The two plans must be offered by different entities. A government-approved “fallback” plan may be available if there is only one plan or no plan at all sold in the region. But this promise of choice has its limits: The fallback plan itself may only be offered in a limited area. And while a provider can offer a national Medicare Advantage plan, it cannot offer a national fallback plan. 13. The Department of Health and Human Services does not have the power to negotiate lower prescription drug prices on behalf of the nearly 41 million Medicare beneficiaries. 14. The act forces people with Medicare and full Medicaid coverage (the so-called dually eligible) into a Medicare drug benefit by precluding Medicaid from paying for prescriptions for people who are eligible for the Medicare drug benefit. Nor will Medicaid be allowed to pay for drugs that are covered under Medicare Part D but that are not on a particular plan’s formulary. 15. The Part B deductible will rise to $110 in 2005, and thereafter will increase yearly based on increases in Part B medical costs. It has been set at $100 since 1991. 16. For the first time ever, the Part B premium will be increased based on income. 17. The act covers an initial physical exam only for people who first enroll in Part B after Jan. 1, 2005. Current Medicare beneficiaries and those who become entitled to Part A after that date but never enroll in Part B will not receive this benefit. 18. The duration of a Medicare appeal has been increased, rather than decreased, by giving Medicare contractors (see No. 20) twice as much time to review appeals at the contractor level. 19. The act makes it harder to obtain a hearing for Medicare denials, including those involving prescription drug costs, by increasing the dollar amount that must be at issue to obtain an administrative law judge hearing or to appeal in federal court. 20. The act changes the name of Medicare Part C, which governs managed care plans, from Medicare+Choice to Medicare Advantage. It changes the name of the entities that process claims from “fiscal intermediaries” (for Part A) and “carriers” (for Part B) to “Medicare contractors.” In short, the federal government has moved to make at least some form of a prescription drug benefit available to Medicare recipients. It is complicated and limited in what it provides, but then no one promised this would be simple. Alfred J. Chiplin Jr. is the managing attorney and Vicki Gottlich is a lawyer in the D.C. office of the Center for Medicare Advocacy (www.medicareadvocacy.org). The center is a private, nonprofit organization providing education, advocacy, and legal assistance to help elders and people with disabilities.

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