Who will offer Medicare discount cards?

A variety of companies and organizations are expected to offer Medicare-approved discount cards, including pharmacy benefit management companies, retail pharmacies, HMOs, and other health insurance companies.

When can you get a Medicare prescription discount card? What is the transitional card?

People on Medicare may begin to sign up for Medicare-approved prescription drug discount cards beginning May 3, 2004. However the discounts will not be effective until June 1, 2004. These cards are considered transitional because the program terminates at the end of 2005 when the Medicare drug benefit begins.

Individuals with incomes less than $12,569/individual, $16,862/couple in 2004 and without drug coverage from other sources will be eligible for temporary transitional assistance in which the federal government pays the enrollment fee for the card as well as 90-95 percent of drug costs up to $600 a year in 2004 and 2005.

Will the prescription drug benefit cover all drugs?

This is an excellent question and the answer is not entirely clear. Plans must provide drugs in each therapeutic class and category, but have flexibility to establish formularies or preferred drug lists. The law does not specify a minimum number of drugs in each therapeutic class and category. What will happen to existing pharmaceutical coverage plans? Again, this is not entirely clear, but will be important to monitor over time.

Employers are now the leading source of drug coverage for people on Medicare and tend to provide the most comprehensive benefits. The Medicare legislation included substantial subsidies to encourage employers to maintain health benefits for retirees, and employers are currently in the process of deciding their likely response. There is some evidence that employers have been pulling back on their retiree health commitments in recent years. Whether or not the Medicare drug benefit will hasten the erosion of retiree health benefits is not yet known.

Medicaid provides drug coverage to many of Medicare's poorest beneficiaries. Beginning in 2006, Medicaid will no longer provide prescription drug coverage to low-income Medicare beneficiaries; instead, they will have to enroll in private plans that contract with Medicare to provide drug benefits.

Medigap plans provide drug coverage for a small share of the Medicare population and will likely play less of a role over time. In 2006, Medigap insurers will no longer be allowed to issue new policies that include drug benefits. Beneficiaries who already have Medigap policies that include drug coverage may keep those policies, but could face a premium penalty should they choose to enroll in the Medicare drug benefit at a later date because Medigap drug coverage is not considered "qualified" drug coverage.

Medicare Advantage (formerly known as Medicare+Choice) provides Medicare-covered benefits as well as some additional benefits like drug coverage to about 11 percent of the Medicare population and will likely continue to play a role in the years to come. However, government officials differ in the extent of the role these plans will play over time. For example, the Administration expects 32 percent of Medicare beneficiaries will be enrolled in Medicare Advantage plans whereas the Congressional Budget Office expects only 9 percent enrollment between 2006 and 2013.

What are the benefit levels in the prescription drug plan?

Beneficiaries who sign up for the new drug benefit will pay a monthly premium, estimated to $35 per month in 2006. Beneficiaries will be responsible for the first $250 in drug expenses, and then will pay, on average, a 25 percent coinsurance until they reach the benefit limit ($2,250 in 2006). Once they reach the benefit limit, they will face a gap in coverage (called the "hole in the doughnut") in which they will pay 100 percent of their drug costs up to $5,100 in total drug spending (equal to $3,600 in out-of-pocket spending). The beneficiary will then pay the greater of $2 for generic drugs, $5 for brand name drugs, or 5% coinsurance for all drugs above the out-of-pocket limit. These benefit levels are indexed to rise annually with the growth in per capita drug spending for the Medicare population. As a result, the benefit gap is expected to increase from $2,850 in 2006 to $5,066 in 2013.

Plans have flexibility both in establishing cost-sharing requirements and in creating formularies and preferred drug lists.

What is Medicare Advantage?

Medicare Advantage (formerly known as Medicare+Choice) refers to private health plans such as health maintenance organizations (HMOs), preferred provider organizations (PPOs), provider-sponsored organizations (PSOs), private fee-for-service plans (PFFS) that contract with Medicare to provide all Medicare-covered benefits to enrollees. The Medicare drug law created regional PPOs as a new option. Beginning in 2006, beneficiaries who sign up for the Medicare drug benefit, will be able to enroll in a Medicare Advantage plan for their Medicare-covered benefits, including drug coverage; if they prefer to stay in traditional Medicare, they can enroll in private prescription drug plans (PDPs) for their drug benefits.

What is Medigap insurance? Can you get it for the benefit gap in the new drug plan?

Medigap is supplemental insurance coverage that people on Medicare may purchase to help fill in gaps in Medicare's benefit package and help pay some of Medicare's financial requirements. Medigap insurers will not be allowed to supplement the new Medicare drug benefit by filling in the benefit gap, known as the "hole in the doughnut," but will continue to help with cost-sharing for other Medicare benefits.

Are there deadlines that Medicare recipients need to be aware of?

People on Medicare should keep the following key dates in mind:

April 29, 2004: Centers for Medicare and Medicaid Services (CMS) launches a price compare Web site on Medicare.gov (information also available by calling 1-800 MEDICARE) for beneficiaries to compare drug price information across discount card sponsors and participating pharmacies.
May 3, 2004: Medicare-Approved discount card sponsors begin marketing materials and enrolling beneficiaries
June 1, 2004: Medicare discount cards begin offering drug discounts to enrollees
November 15, 2005: Initial open enrollment period for Medicare drug coverage begins
December 31, 2005: Medicare drug discount cards are discontinued
January 1, 2006: New Medicare drug coverage begins
May 15, 2006: Initial open enrollment period for Medicare drug coverage ends

Where can you go for help and detailed information?

The Centers for Medicare and Medicaid Services offers a toll-free "helpline" to answer beneficiary questions about Medicare and the new drug law (1-800-MEDICARE). For those beneficiaries who have access to the internet, CMS operates a consumer Web site with the same information at www.medicare.gov. In addition, state health insurance assistance programs (SHIPs) are available in all 50 states and DC to provide information and help beneficiaries understand the new law.