The
Medicare Act of 2003
Part
1: Pre-2006 Changes Including the
Drug Discount Card
Written By:
Attorney
Jeffrey A. Marshall
, CELA*
The
Elder Care Law Alert is providing readers with an ongoing analysis of
the major provisions of the new Medicare Act (The
Medicare Prescription Drug, Improvement, and Modernization Act of 2003)
which was signed into law by President Bush earlier this month.
In this issue, we look at some aspects of the new law that will
take effect in the near future.
HMOs are
First to Benefit.
While the major
portions of the recently enacted Medicare Act don’t take effect until
2006, several important provisions will become effective sooner.
The first beneficiaries of the new law will be health maintenance
organizations (HMOs), doctors and hospitals who will start receiving
increased payments in 2004.
The new law
reverses a 4.5 percent pay cut that was scheduled for 2004 for Medicare
doctors and substitutes a 1.5 percent increase in 2004 and 2005.
Hospitals will not experience fee cuts in fiscal year 2004 and will
be protected from cuts in the next three years if they submit quality data
to Medicare. (See article: “Hospitals to Receive Bonus for Quality” in
the July 23, 2003 Elder
Care Law Alert).
Rural providers will receive additional payments.
$1.3 billion is
earmarked in 2004 and 2005 for HMOs that participate in Medicare.
The new payment rates will be set by the Secretary of Health and
Human Services (HHS) in January. In
recent years, many HMOs have discontinued their participation in Medicare,
leaving many seniors scrambling for coverage and discouraging proponents
of privatization. HMOs, which limit seniors’ choice of doctors and other
health providers to those on a list, are a key component in the expanding
role of private insurers in Medicare.
The increased
payments to Medicare HMOs are intended to encourage them to stay with
Medicare, according to Tommy Thompson, current Secretary of HHS. With the
new law, HMOs will have some options as to how they use their increased
payments; they will be able to reduce premiums for enrollees, improve
benefits, offset increases in payments to doctors and hospitals, or simply
retain them for future use.
Opponents of
the new Medicare law cite the increased payments to HMOs as evidence of
the Bush Administration’s strong bias towards private insurers, despite
their higher costs. According
to Robert Berenson, a health care expert with the Urban Institute (http://www.urban.org/),
it is estimated that by 2006 the government will be paying HMOs 25 percent
more than the government would pay under traditional Medicare for the same
beneficiaries.
Health
Savings Accounts.
Also in 2004,
Americans with high-deductible medical insurance policies will be able to
put thousands of dollars per year into tax-free health savings accounts.
Over $6 billion has been allocated to allow individuals with health
insurance deductibles of over $1,000 (or $2,000 for couples) to place an
amount equal to their annual deductible in these accounts -- up to $2,600
a year for individuals and $5,150 a year for families.
Though this benefit is not intended primarily for seniors, people
age 55 to 65 can make additional contributions and build a medical nest
egg.
Money deposited
in health savings accounts can be invested and then withdrawn tax-free to
pay for insurance premiums and other health costs. The account will stay
with the owner for his or her lifetime and upon death any unused portions
can be transferred tax-free to a spouse.
These accounts present a significant tax savings opportunity,
especially for individuals in higher tax brackets.
Medicare
preventive benefits coverage will expand in 2005.
At that time Medicare will include coverage of services such as a
one-time initial preventive physical exam within 6 months of when a person
with Medicare first becomes enrolled in Medicare Part B, screening blood
tests for early detection of cardiovascular diseases, and diabetes
screening tests for people at high risk.
The Drug
Discount Card.
The first
significant impact of the new law for many Medicare beneficiaries will be
a short-lived drug discount card that should be available by May or June
2004. While the majority of
seniors won’t receive drug benefits from the new law until 2006, the
temporary prescription drug discount cards may help some seniors,
especially those with low incomes who do not qualify for Medicaid.
The rules for
the operations of the drug card program were issued on December 10th.
The cards will be issued by private companies including insurers, retail
pharmacies, Medicare+Choice plans, and pharmaceutical benefit managers.
The private issuers will set an enrollment fee, which will not
exceed $30 per year and cards meeting federal standards will receive the
endorsement of Medicare.
Discounts will
be determined by the companies, not by Medicare.
Each private issuer will negotiate discounts with drug companies
and pass part of the savings on to card-holders.
The government estimates that consumers participating in the card
program will be able to save about 10 to 15% of their total prescription
spending.
Consumers will
most likely be confused with the many cards available.
There will be at least two Medicare-approved cards and likely many
more. To make the choice even
more complicated and stressful, participants will be able to choose only
one card. Since cards put out
by different issuers are likely to offer different discounts for different
drugs made by different companies, consumers will have to compare cards
for the one that offers the best discounts based on their individual
prescriptions and anticipated drug needs.
Once consumers choose a card, they will pretty much be locked in,
with only one switch permitted--at the end of 2004.
Card issuers
will be allowed to establish a formulary (a list of recommended drugs).
But, if an issuer uses a formulary, it will be required to offer
discounts on at least one drug in each of more than 200 drug categories.
Issuers will also be allowed to change their discounts weekly, but
the government will try to monitor price increases as a way of preventing
price gouging and “bait and switch” tactics.
Tom Scully, outgoing administrator of CMS, said pricing information
will be posted and updated on the Medicare website (www.medicare.gov)
and also will be available from the Medicare help line at 1-800-Medicare.
The drug
discount card is voluntary. It
will be available to any Medicare beneficiary who is enrolled in Part A or
Part B, except those entitled to Medicaid coverage on outpatient drugs.
Officials estimate that only about 7.2 million of the 40 million
Medicare recipients will participate in the cards.
Low income
individuals who are not receiving Medicaid are the ones likely to receive
the greatest benefit from the discount card plan.
Medicare beneficiaries with family incomes of less than 135 percent
of the federal poverty level ($12,123 for individuals and $16,362 for
couples this year) can qualify for a subsidy of up to $600 per year.
The full $600 credit will be available during 2004, even though the
discount cards will not be available until near mid-year.
For those who join late, this credit may be reduced.
Consumers who
qualify for the $600 subsidy will be able to use it to purchase approved
prescription (but not over the counter) drugs. To qualify, beneficiaries
may not have drug coverage from Medicaid, Tricare, or other private or
government sources.
Early next
year, Medicare will send letters to every enrollee to inform them about
the availability of these discount cards. Individuals will be able to
apply for the discount card program or for the $600 credit by filling out
a Medicare form at home and mailing it in.
No visit to a government office will be required.
Mr. Scully has stated that the government intends to use IRS and
Social Security records to verify participant’s income levels.
The drug
discount card program will expire on
January 1, 2006
when the new Medicare prescription
drug benefit becomes available. The
drug card regulations were published in the Federal Register on
December 15, 2003
.
To access this information online, go to http://www.gpoaccess.gov;
then choose Federal Register under “Executive Resources”; then search
volume 68 (2003) for “drug discount card.”
Are
Heating Costs Getting You Down? Program
Available to Assist Seniors with a Limited Income
Written
By: Geriatric Planning
Specialist,
Michael
F. Rentko
The
Pennsylvania Department of Public Welfare (DPW) offers a program which may
allow you to receive assistance with your heating costs this winter.
The program is known as the Low-Income
Home Energy
Assistance Program
or LIHEAP. Assistance is
available for individuals who rent or own their residence.
LIHEAP is especially valuable to seniors on a fixed income.
LIHEAP offers
both cash and crisis grants available from
November 12, 2003
to
March 25, 2004
.
According to the LIHEAP brochure, cash grants are “... sent
directly to your utility company or fuel provider, and it [payment] will
be credited on your bill. (In some cases, the check may be mailed to you
directly.)” Crisis grants are available for families “... who have an
emergency and are in danger of being without heat.
Emergency situations include: having broken heating equipment (like
a furnace) or leaking lines; a fuel shortage that may leave you without
heat; or having utility service shut off.”
Eligibility
is based on maximum income limits established by the Department of Public
Welfare. A household of one
individual can have a maximum income of $12,123; household of two
individuals can have a maximum income of $16,362; and a household of three
individuals can only have a maximum income of $20,601.
The income amount increases with the size of the household and
these figures are available with the application.
There are no resource eligibility requirements for this program;
however, interest and dividends from resources are counted as income.
Individuals can use statements for income verification for the past
30, 60 or 90 day period.
Applications
can be printed from the LIHEAP website at www.dpw.state.pa.us/oim/oimliheap.asp.
You can also request applications by contacting the statewide
hotline at 1-866-857-7095 or your local County Assistance Office
Expansion
of PACE/PACENET Prescription Programs Set
Written By:
Geriatric Planning Specialist,
Michael F. Rentko
, and Attorney
Jeffrey A. Marshall
, CELA*
On
November 26, 2003
, Governor Edward
Rendell signed legislation that will expand
Pennsylvania
’s PACE/PACENET
prescription programs. These
programs provide prescription drug coverage for low income
Pennsylvania
residents who are over
age 65 and who are not receiving prescription coverage through Medicaid.
Eligibility is determined based on the applicant’s income for the
prior calendar year.
The
new rules will become effective
January 1, 2004
.
The new law raises the income limit for PACE eligibility to $14,500
for individuals and $17,700 for married couples.
PACE co-payments will change.
Participants will pay $9 for brand-name drugs instead of $6.
The co-payment for generics will remain the same at $6.
Co-payments will be indexed for inflation using the prescription
drug consumer price index.
The
PACENET program provides less generous benefits for seniors with higher
incomes. The PACENET income
limits will be raised to $23,500 for individuals and $31,500 for couples.
PACENET benefits will now begin after the participant has incurred
a $40 per month deductible in un-reimbursed prescription costs.
The $40 deductible is cumulative and applied to subsequent months
to determine eligibility. Thus, the annual total cumulative deductible
cannot exceed $480 per year. (Previously,
benefits began after a participant paid a $500 annual deductible). PACENET
participants have co-payments of $8 for generics and $15 for brand-name
prescriptions.
The
PACE legislation also contains a number of cost-containment measures.
The new law is available online at: http://www2.legis.state.pa.us/WU01/LI/BI/BT/2003/0/HB0888P2919.pdf
(scroll down to Section 519 for the revised eligibility rules).
Individuals
can obtain PACE/PACENET applications and even apply online at
http://www.fhsc.com/pennsylvania/paceenrollment/.
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*Attorney
Marshall
is
certified as an Elder Law Attorney by the National Elder Law Foundation
under authorization from the Pennsylvania Supreme Court
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