The Medicare Replacement Drug Demonstration Project Q&A:
How Some Medicare Beneficiaries Can Now Get Certain
Prescription Drugs Through Medicare

Please note that as the Centers for Medicare and Medicaid Services publicizes additional regulations and/or develops further implementation policies, we will revise, as necessary, our explanations of this aspect of the Medicare Modernization Act of 2003.

Introduction

Questions:

1. Which drugs are covered by Medicare in this demonstration project for what diseases?
   Drugs Covered Under the Medicare Replacement Drug Demonstration
2. How will demonstration participants obtain their prescription drugs?
3. How much will a demonstration participant pay for Medicare-covered drugs?
   Summary of Demonstration Project Cost-Sharing 
4. How will demonstration participants know how much they will have to pay for each prescription drug?
5. Is there help for low-income demonstration participants?
6. Who can get the special help for low-income beneficiaries?

7. Are there special rules for low-income nursing home residents?

8. Who is eligible to participate in this demonstration project?
9. How can beneficiaries decide whether or not the demonstration project is the best option for them?
10. Will all applicants for participation in this demonstration project be allowed to participate?
11. How are demonstration participants selected?
12. How can a beneficiary apply to participate in this demonstration project?
13. What do beneficiaries need to know about the demonstration application form?
14. How long will the demonstration project last?

Appendix: Subsidies by Income Level

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Introduction

As a part of the Medicare Modernization Act, Medicare will allow up to 50,000 beneficiaries with designated serious, chronic illnesses to participate in a demonstration project through which Medicare will cover a limited number of prescription drugs for the specified diagnoses.  This demonstration will last from September 2004 through the end of December 2005. 

The drugs included in this demonstration project generally “replace” other drugs prescribed for the identified medical conditions that are currently covered by Medicare only because those medications must be administered in a doctor’s office or in a medical institution, such as a hospital or nursing home.  An important aspect of this demonstration project is that it eliminates the need to have a health care professional dispense the medication, which can be a barrier to treatment, particularly for people in rural areas, people with limited mobility, and people who do not respond to the currently covered drugs.

Beneficiaries do not need to have a Medicare-approved drug discount card in order to participate; if they do, they cannot use it to purchase demonstration-covered drugs. 

The rules established for this demonstration project apply only to this project.  They do not necessarily reflect how the Medicare Part D benefit will be implemented in 2006.  (back to top) 

1. Which drugs are covered by Medicare in this demonstration project for what diseases?

A limited number of prescription drugs will be covered by Medicare but only for specific diagnoses.  Beneficiaries’ physicians must certify on the application to the demonstration project that their patients need the drugs listed below for the corresponding diagnosis. (back to top)

Note: Osteoporosis patients seeking to participate in this project are required to be homebound.

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2. How will demonstration participants obtain their prescription drugs?

Medicare beneficiaries who participate in this demonstration project must get their prescription drugs through Caremark, the pharmacy benefit manager for this demonstration project.  Caremark has a national network of pharmacies as well as a mail order service.  According to Caremark, approximately 98 percent of all local pharmacies participate in the Caremark network.

Once selected for the demonstration project, beneficiaries will receive a complete information packet, including a demonstration project identification card and instructions on how to fill their prescriptions for the demonstration-covered drug.  In addition, beneficiaries will be given a telephone number for Caremark to request more information about pharmacies from which they can obtain their covered drug.

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3. How much will a demonstration participant pay for Medicare-covered drugs?

Medicare beneficiaries who participate in this demonstration project will pay for the covered drugs in a similar way to the way in which Medicare beneficiaries who enroll in Medicare Part D will pay beginning in 2006.  Beneficiaries, however, will not pay a monthly premium to participate in the demonstration.  All participating beneficiaries whose income is 150% or more of the federal poverty level will pay as follows:

• An annual deductible of $85 in 2004 and $250 in 2005 for the drugs that are covered by Medicare through the demonstration project. 
  
  
  • Note:  Beneficiaries’ cost-sharing is pro-rated in 2004.
    
    
• A 25 percent co-insurance amount for each prescription of each covered drug until they have paid co-insurance of $165 in 2004 and $500 in 2005.  
  
  
  • Medicare will pay for 75 percent of the cost of the drugs.  After these co-insurance amounts have been paid, beneficiaries enter the so-called “doughnut hole” in which they are fully responsible for their drug costs.
    
    
• 100 percent of the costs of the demonstration drugs until they have spent “out-of-pocket” an additional $950 in 2004 and $2,850 in 2005.  
  
  
  • This means that a beneficiary’s “out-of-pocket” expenditures will reach $1,200 in 2004 and $3,600 in 2005 before the Medicare catastrophic drug coverage begins.
    
    
  • Only beneficiary out-of-pocket expenditures; contributions from friends, relatives, and certain charitable foundations; and state pharmacy assistance program payments count towards the doughnut hole maximums. 
    
    
• The greater of a 5 percent co-insurance or a fixed co-payment of no more than $5 under the Medicare catastrophic drug benefit that begins after the doughnut hole.  (back to top)
  
  
  • The Medicare catastrophic drug benefit pays the remaining costs of the drugs.

Summary of Demonstration Project Cost-Sharing

Note: Any amount paid by other insurance, with the exception of a state pharmacy assistance program or certain charitable organizations, may not be counted towards the beneficiary's out-of-pocket limit.

4. How will demonstration participants know how much they will have to pay for each prescription drug?

According to Trailblazer, the Medicare contractor for the demonstration, Caremark (the pharmacy benefit manager) will keep track of demonstration participants’ out-of-pocket expenses.  When beneficiaries go to a Caremark pharmacy to fill their prescription, the pharmacy will be able to tell them how much they have spent to date for their prescription drugs and when they enter each level of cost-sharing.  This is to hold true even if beneficiaries do not always fill their prescription at the same Caremark pharmacy. (back to top)

5. Is there help for low-income demonstration participants?

Yes.  Certain low-income Medicare beneficiaries are eligible for subsidies that lower their out-of-pocket expenditures.  There is a resource (or asset) test as well as an income limit to obtain these subsidies. (back to top)

6. Who can get the special help for low-income beneficiaries?

Beneficiaries are eligible for Medicare subsidies if their countable income is below 150% of the federal poverty level and their countable resources are at or below $10,000 for a single individual or $20,000 for a couple.  Supplemental Security Income (SSI) rules will be used to determine financial eligibility for the low-income subsidies. There are several levels of subsidies that are scaled to beneficiaries’ income and asset levels.  (See the Appendix: Subsidies by Income Level.) (back to top)

7. Are there special rules for low-income nursing home residents?

Yes. 

Nursing home residents who are full duals, or beneficiaries with both Medicare and Medicaid, do not have any out-of-pocket expenditures.  They do not pay any annual deductible or any co-insurance for their demonstration-covered drugs. (back to top)

8. Who is eligible to participate in this demonstration project?

In order to be eligible for selection to participate in this demonstration, beneficiaries must

• Have Medicare Part A and Medicare Part B,
  
  
  • If a beneficiary has other insurance in addition to Medicare, Medicare must be the primary payer.
    
    
• Live in one of the 50 states or the District of Columbia, and
  
  
• Not have comprehensive prescription drug coverage.
  
  
  • Examples of comprehensive drug coverage are TriCare, most retiree health insurance, and many state Medicaid plans.  While CMS has not defined “comprehensive,” CMS has stated that beneficiaries may be eligible to participate in the demonstration project if their other health insurance does not cover the demonstration drug.
    
    
  • Beneficiaries with VA drug coverage are allowed to participate, as long as they agree not to obtain demonstration-covered drugs through the VA. (back to top)
    

9.  How can beneficiaries decide whether or not the demonstration project is the best option for them?

Before applying to the demonstration project, beneficiaries should be advised to carefully consider all of the options available to them that provide some help with their prescription drug costs.  For example:

·        Beneficiaries who have other health insurance (such as retiree coverage) that supplements Medicare should find out if their supplemental insurance covers the demonstration-covered prescription drug.  If so, beneficiaries should compare their out-of-pocket costs for that particular drug under their supplemental insurance versus their out-of-pocket costs under the demonstration project.

·        Beneficiaries who are receiving a demonstration-covered drug through the Veterans Administration (VA) should carefully review the out-of-pocket costs that they currently incur for the drug, compared to what their out-of-pocket costs would be under the demonstration project.

·        Beneficiaries who are receiving the demonstration-covered prescription drug through a state pharmacy assistance program (SPAP) or through a drug manufacturer's program should also compare their current out-of-pocket costs for that particular drug to those under the demonstration.

It is also important to consider the types of prescription drugs that are available through this demonstration.  The demonstration-covered drugs may not be the best prescription drug for a beneficiary's condition.

10. Will all applicants for participation in this demonstration project be allowed to participate?

Maybe not.  The Medicare Modernization Act limits the number of participants to a maximum of 50,000 and limits total spending on the medications to $500 million.  Moreover, at least 40 percent of the funding must go towards the designated oral chemotherapy agents for the specified cancer diagnoses. (back to top)

11. How are demonstration participants selected?

Up to 50,000 qualified applicants can be selected for the demonstration project.  CMS has said that the selection process will be “needs-blind,” meaning that there will be no preference for selection based upon the financial status of beneficiaries. 

According to CMS, as of October 1, 2004, applications are being accepted on a rolling basis as long as space is available.  All qualified beneficiaries who submit completed and signed applications will be eligible for participation in the demonstration project until the maximum limit of participants is reached. There is no waiting period once beneficiaries are enrolled in the project.

To date, enrollment in the project has not reached its maximum capacity.  But, remember that the sooner a beneficiary is enrolled in the project, the sooner he/she will begin receiving benefits. (back to top)

12. How can a beneficiary apply to participate in this demonstration project?

Beneficiaries must complete and sign an application form and have the physician who prescribes the demonstration drug complete and sign a certificate that is included with the application.  Beneficiaries may get help completing the application from anyone who they choose (such as family members, friends, or SHIP counselors).

The application form can be downloaded from the government’s Medicare Web site, www.medicare.gov, or from http://www.cms.hhs.gov/forms/cms10113.pdf.  Requests for applications, as well as questions, can also be directed to Trailblazer, the Medicare contractor for the demonstration, at 1-866-563-5386 (TTY 1-866-563-5387). (back to top)

13. What do beneficiaries need to know about the demonstration application form?

The application has three parts. 

• The first part must be completed by the beneficiaries who want to participate in this demonstration project. 
  
  
• The second part is a physician’s certificate.  It must be completed and signed by the prescribing physician. 
  
  
• The third part is a detailed questionnaire about applicants’ income and resources, and this section must be completed only by beneficiaries who want the low-income help to participate in the demonstration project. 

Completed application forms, signed by the beneficiary (or the person who helped the beneficiary complete the form) and the prescribing physician, should be mailed to Trailblazer.  The mailing address is:

Medicare Replacement Drug Demonstration
Trailblazer Health Enterprises, LLC
Post Office Box 5136
Timonium, MD 21094

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14. How long will the demonstration project last?

The demonstration project will start operations on September 1, 2004.  It will end on December 31, 2005.  In order to maintain seamless Medicare coverage for demonstration project drugs, participants will need to enroll in a Medicare Part D drug plan in November of 2005 to assure they will retain Medicare coverage for the demonstration drugs after January 1, 2006. (back to top)

Appendix: Subsidies by Income Level

Note that Supplemental Security Income (SSI) rules will be used to determine the financial eligibility for the low-income subsidies. Under the different low-income benefit levels, subsidies by Medicare as well as out-of-pocket payments by the beneficiary count towards the out-of-pocket catastrophic limit.

Income at or Below 100% of the Federal Poverty Level (FPL)

• If your monthly countable income is at or below 100% of the FPL ($776 for a single person or $1,041 for a couple in 2004) regardless of your countable resources (assets), then:
  
  • you do not pay any annual deductible, and
    
  • you have a co-payment of $1 or $3 per prescription drug until the total charges for demonstration-covered drugs reach $1,695 in 2004 and $5,100 in 2005 at which point you have reached the catastrophic limit and your prescription drugs are free.

Income Greater than 100% of the Federal Poverty Level but Less than 135% of the Federal Poverty Level (FPL)

• If your monthly countable income is more than 100% of the FPL but below 135% of the FPL (more than $776 but less than $1,048 for a single person or more than $1,041 but less than $1,406 for a couple in 2004) and your countable resources (assets) are less than $6,000 for an individual or $9,000 for a couple, then:
  
  • you do not pay any annual deductible, and 
    
  • you pay only a co-payment of $2 or $5 for each prescription drug until the total charges for demonstration-covered drugs reach $1,695 in 2004 and $5,100 in 2005 at which point you have reached the catastrophic limit and your prescription drugs are free. (back to top)
    
    
• If your monthly countable income is more than 100% of the FPL but below 135% of the FPL (more than $776 but less than $1,048 for a single person or more than $1,041 but less than $1,406 for a couple in 2004) and your countable resources (assets) are between $6,000 and $10,000 for an individual or between $9,000 and $20,000 for a couple, then:
  
  • you pay a $20 annual deductible in 2004 and a $50 annual deductible in 2005, and
    
  • you pay a 15% co-insurance amount for each prescription drug until the total charges for demonstration-covered drugs reach $1,695 in 2004 and $5,100 in 2005 at which point you have reached the catastrophic limit and you pay $2 or $5 for each prescription drug.
    
    
• If your monthly countable income is more than 100% of the FPL but below 135% of the FPL (more than $776 but less than $1,048 for a single person or more than $1,041 but less than $1,406 for a couple in 2004) but your countable resources (assets) are greater than $10,000 for an individual or $20,000 for a couple, then you follow the standard cost-sharing requirements.  (See the table Summary of Demonstration Project Cost-Sharing.)

Income of 135% or More of the Federal Poverty Level but Below 150% of Federal Poverty Level (FPL)

• If your monthly countable income is 135% or more of the FPL but less than 150% of the FPL ($1,048 or more but less than $1,164 for a single person or $1,406 or more but less than $1,561 for a couple in 2004) and your countable resources (assets) are no more than $10,000 for an individual or no more than $20,000 for a couple, then:
  
  • you pay a $20 annual deductible in 2004 and a $50 annual deductible in 2005, and
    
  • you pay a 15% co-insurance amount for each prescription drug until the total charges for demonstration-covered drugs reach $1,695 in 2004 and $5,100 in 2005 at which point you have reached the catastrophic limit and you pay $2 or $5 for each prescription drug.
    
    
• If your monthly countable income is 135% or more of the FPL but less than 150% of the FPL ($1,048 or more but less than $1,164 for a single person or $1,406 or more but less than $1,561 for a couple in 2004), but your countable resources (assets) are greater than $10,000 for an individual or $20,000 for a couple, then you follow the standard cost-sharing requirements.  (See the table Summary of Demonstration Project Cost-Sharing.) (back to top)