The New Medicare

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The New Medicare

• Rick Stark

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Medicare Modernization ActKey Points

• Retention of Original Medicare
• Addition of Rx coverage, Part D
• Revision of Medicare Choice Program
• Addition of Health Savings Account Plans
• New Employer Role and Responsibility
• Changes in Medicaid

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New Terms

• CMS
• MMA
• H.S.A.
• MA MA-PD
• CCP, PFFS

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New Terms II

• PDP
• Dual Eligibility
• AEP, SEP, IEP
• TROOP

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Terms Defined

• Centers for Medicare and Medicaid Services
  (replaces HCFA)
• Medicare Prescription Drug, Improvement and
  Modernization Act of 2003
• Health Savings Account
• Medicare Advantage Medicare Advantage and
  Prescription Drug Plan

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Definitions

• Coordinated Care Plans Private Fee For Service
  Plans
• Prescription Drug Plan
• Individuals Eligible for Medicare and Medicaid

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More Definitions

• Annual Election Period Special Election Period
  Initial Election Period
• True Out Of Pocket

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What is Medicare?

• Health Insurance component of Social Security
  Administered by CMS
• Provides health benefits for individuals age 65
• Certain disabled individuals under age 65
• (ERSD) End Stage Renal Disease

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What is Medicare 2

• Original Medicare is a fee for service plan
• Part A Hospital Insurance
• Part B Medical Insurance
• Part A is financed by payroll taxes, Part B by
  general revenues and monthly premiums from
  participating beneficiaries

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Medicare Overview

• 1965 Social Security Established 2 programs under
  the Dept of HEW Medicare (adm by SSA) and
  Medicaid a Federal assistance to State
  (entitlement) program
• 1977 Health Care Financing Adm (HCFA)was created
  to better coordinate these programs

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Medicare Overview 2

• 1980 HEW was divided into Dept of Education and
  Dept of Health and Human Services
• 2001 HCFA was renamed CMS
• 2003 Passage of the Medicare Modernization Act

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Medicare Quiz Question

• Q Who is this and what is he doing? Bonus
  who is seated to his left?

• A LBJ (President Lyndon Johnson), signing the
  Medicare and Medicaid programs into law in 1965.
  This ceremony honored former President Truman (on
  right), who began speaking about health care in
  1945.

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In General, How Does Medicare Work?
Original Medicare Original Medicare Medicare Advantage(Part C) Part D(effective 1/1/2006)
Part A Part B Medicare Advantage(Part C) Part D(effective 1/1/2006)
What It Covers Inpatient hospital care Medical care Physician Outpatient Part A and Part B Prescription drugs
Premium None 78.20/month in 2005 87.58/month in 2006 (estimated) Varies Will vary by plan but estimated at 32 per person per month in 2006
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In General, How Does Medicare Work? (cont.)
Original Medicare Original Medicare Medicare Advantage(Part C) Part D(effective 1/1/2006)
Part A Part B Medicare Advantage(Part C) Part D(effective 1/1/2006)
Enrollment Timing Automatic if already receiving Social Security benefits otherwise, active enrollment is required Initial enrollment Turning age 65 automatic if already receiving Social Security benefits otherwise, active enrollment is required General 1/1 3/31 each year Special Premium increase waived if individual delayed Part B enrollment due to employer coverage Must be enrolled in Part B Initial enrollment Nov. 15, 2005 May 15, 2006 Can change plans annually if participant continues drug coverage (creditable coverage) Penalty for late enrollment (unless proof of creditable coverage)
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The Basics

• Medicare Part D is administered by the private
  sector
• Fully insured products administered by carriers
  called PDPs or MA-PDs
• Self insured Part D plans can be administered by
  a carrier or administrator (PBM) on behalf of an
  employer
• CMS provides subsidies for private sector
• Direct subsidy and reinsurance to PDPs and MA-PDs
  for all products offered on a fully insured basis
• Direct subsidy to Employer for an actuarially
  equivalent self or insured employee sponsored
  prescription drug plan as long as the carrier
  does not already collect a subsidy

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Medicare Part D Covered Services

• What is covered?
• Any drug not specifically excluded by 1927(k) of
  MMA (I.e. benzodiazepines, barbiturates, drug
  used for anorexia, etc.) or any drug not covered
  under Part B (IV therapy drugs administered in
  the home)
• A drug on a health plans formulary
• A drug that is medically necessary
• A drug not excluded from the plan, such as
  cosmetic drugs, footcare, etc.
• Formulary must cover at least 1 drug in each
  classification
• Prefer that 2 options are given

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Medicare Part D Formularies

• Appropriate access must be given to drugs used as
  widely accepted medical practice for
• Asthma, diabetes, chronic stable angina, atrial
  fibrillation, heart failure, thrombosis, lipid
  disorders, hypertension, chronic obstructive
  pulmonary disease, dementia, depression, bipolar
  disorder, schizophrenia, benign prostatic
  hyperplasia, osteoporosis, migraine,
  gastroesophageal reflux disease, epilepsy,
  Parkinsons disease, end stage renal disease,
  hepatitis, tuberculosis, community acquired
  pneumonia, rheumatoid arthritis, multiple
  sclerosis and HIV.
• Also must include all or substantially all
  antidepressants, antipsychotics, anticonvulsants,
  anticancer, immunosuppressants, antineoplastics,
  and HIV/AIDS therapies.

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Standard Medicare Part D Drug Benefit An Example
Total prescription drug expenses Retiree pays Medicare pays Retirees total out-of-pocket costs
0 to 250 100 of expenses between 0 and 250 0 of expenses between 0 and 250 No more than 250
251 to 2,250 25 of expenses between 251 and 2,250 75 of expenses between 251 and 2,250 No more than 750
2,251 to 5,100 100 of expenses between 2,251 and 5,100 0 of expenses between 2,251 and 5,100 No more than 3,600
Over 5,100 The greater of 5 of the cost of the drug or a copayment of 2 for generic drugs or a 5 copayment for brand-name drugs Generally, 95 of expenses over 5,100 3,600 payments once the total expenses exceed 5,100
The amount retirees pay will increase each year
after 2006 based on Medicares total cost for
prescription drugs. Premiums are also expected to
increase annually.
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Whos Eligible for Extra Help?

• Limited income and resources defined as
• Income less than 150 of federal poverty level
• 14,355 for individuals in 2006
• 19,245 for couples in 2006
• Limited liquid assets
• 11,500 for individuals
• 23,000 for couples in 2006
• The Social Security Administration is sending
  applications to those who may qualify for the
  extra benefit
• If you receive an application, you should
  complete it. Submitting this application does
  not enroll you for Medicare drug coverage

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Medicare Advantage Plans

• New name for MedicareChoice plans
• Medicare managed care plans
• Preferred Provider Organization plans (PPOs)
• Private-Fee-for-Service plans
• Available in some states
• Medicare Specialty Plans

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Health Savings Accounts (HSAs)

• Newly available in 2004.
• Similar to MSAs, but much more flexible.
• Open to everyone with a qualified high deductible
  health insurance plan.
• The health plan is paired with an HSA account to
  cover eligible expenses not covered by the
  insurance policy.
• Eligible individuals can not be covered under
  another health plan that is not a qualified high
  deductible plan.
• Specified disease coverage, hospital indemnity,
  and auto insurance do not count as other
  coverage.
• Vision, dental, accident, and disability also do
  not count as other coverage.
• Eligible individuals must not be entitled to
  Medicare and must not be eligible to be claimed
  as a dependent on another persons tax return.

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MSA vs. HSA
MSA HSA
Contribution Source Either individual or employer, not both Both individual and employer
Contribution Levels Single65 of deductible Family75 of deductible Up to 100 of deductible with a maximum of 2,600 for single coverage 5,150 for family coverage Note Subject to change based on IRS rules
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MSA vs. HSA
MSA HSA
Deductible Ranges For 2003 1,700-2,500 single 3,350-5,050 family For 2004 1,000-2,600 single 2,000-5,150 family
Maximum Out-of-Pocket (includes deductible/any expenses incurred once deductible is met.) For 2004 3,350 single 6,150 family For 2004 5,000 single 10,000 family
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MSA vs. HSA
MSA HSA
Who is Eligible? Self-employed and small employers (average 50 or less) Individual must be covered under a qualified high-deductible health plan, below Medicare eligibility age, and not covered under any other health plan.
Is there a catch-up contribution provision for older workers No Yes, individuals age 55 or older may contribute more to the account per year. Starting in 2004, an additional 500 contribution is allowed, increasing 100 per year, up to 1,000 per year in 2009 and thereafter
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Employer Options Decisions
Provide Retiree Coverage?

• In order to qualify as creditable coverage, the
  Retiree drug benefit must be equal or greater in
  value to Medicare Part D actuarially on a gross
  basis.
• Employer Sponsors will need to provide a
  disclosure statement re Creditable Coverage to
  all Medicare Eligible Retirees by November 15th
  of each year.
• In subsequent years, can be handled in SPD or
  newsletter.
• Must be done annually.
• Keep documentation on file for 6 years.

Is Rx Coverage Creditable?
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Coverage is not Creditable

• Employer must decide whether to
• Upgrade coverage to make creditable or
• Discontinue coverage
• If decision is to discontinue, Employer should
  advise retirees to purchase Medicare Part D

Creditable
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New Covered Preventive Services

• Beginning January 2005
• Welcome to Medicare physical
• Initial physical exam
• Referral for screening and other preventive
  services
• Cardiovascular screening blood tests
• Screening blood tests for cholesterol and other
  lipids or triglyceride levels
• Diabetes screening tests
• Fasting plasma glucose test
• Other tests appropriate for persons at high risk

MMA
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Subsidies for Full-Benefit Duals

• Institutionalized Dual Eligibles
• Never pay anything premiums, deductibles,
  co-pays
• Duals under 100 FPL
• Income must be less than 9,310 for an
  individual 12,490 for couple
• Eligible for Medicaid
• Pay no premium, never pay more than 1 for
  generics/5 brand

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Low Income, Non-Medicaid

• Income under 135 FPL pay no premium
• Never pay more than 1 generic/5 brand
• Income must belt12,569/16,862 couple
• Liquid assets lt6,000/9,000 couple
• Income under 150 FPL pay sliding scale premium
• Never pay more than 15 after a 50 deductible
• Income must be lt13,965/18,735 couple
• Liquid assets lt10,000/20,000 couple
• Income over 150 FPL (or excess assets)
  standard coverage and standard premiums

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Medicare Gaps

• Original Medicare consisted of Parts A and B.
• Medigap plans were created to fill Gaps in
  coverage (deductibles, copays, prescriptions,
  etc.)
• Ten standardized options (since 1991) Plans A
  J
• These plans are sold by private companies the
  benefits for each plan are the same but the cost
  may vary.
• There are no family medigap plans one plan
  for each person.
• As long as you pay your premium, you cannot be
  dropped.
• New Suplement plans added. High deductible F,
  and new plans K and L.
• Supplements H, I, J discontinued.

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Unprecedented growth in Medicare

• ??????
• 62 Million Beneficiaries (151)
• 898 Billion (316)

• ????
• 41 Million Beneficiaries
• 284 Billion

Costs are growing faster than of beneficiaries.
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Unprecedented growth in Medicaid

• Growing at a rate greater than Medicare
• State Funded Desire to provide more Federal
  assistance and structure
• Apply private sector methodologies to moderate
  cost
• Health care used to consume 19 of income of
  elderly back in 1965 introduction of Medicare
  was the answer, lowering to 12
• Now, even with Medicare, health care is consuming
  upwards of 22.6 of income by current estimates,
  increasing the ranks of those needing low income
  assistance and growing Medicaid ranks

Source American Institutes for Research
Calculation using NHE, CPI, CPS, and Trustees
Report
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Movement away from entitlement
Recognition that Government health care programs
must change from entitlement approach to
embracing standard insurance and business
practices Reluctance of Employers to continue to
sponsor rich retiree health care programs and
pensions Private sector active for the first
time as part of delivery system of Medicare.
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Demographics are also changing

• Living longer, expected to rise even more in next
  10 years
• Emphasis on lifestyle
• Introduction of Consumerism and taking
  responsibility for your own health and a greater
  share of health care costs
• Baby Boomers coming of age

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Challenges for Beneficiaries

• Learning about Part D
• Comparing features of plans available within a
  region, including premiums, cost-sharing,
  formularies and pharmacy networks
• Learning about low-income subsidies
• Learning about enrollment, including premium
  penalty for delayed enrollment and annual plan
  lock-in

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Challenges for Beneficiaries

• Learning about Part D
• Comparing features of plans available within a
  region, including premiums, cost-sharing,
  formularies and pharmacy networks
• Learning about low-income subsidies
• Learning about enrollment, including premium
  penalty for delayed enrollment and annual plan
  lock-in

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Challenges for Beneficiaries

• Enrolling in Part D
• Enrolling in low-income subsidy program, if
  eligible at Social Security or DHHS
• Using the New Benefit
• Tracking total and out-of-pocket drug spending
• Coordinating Part D with other sources of drug
  coverage

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Challenges for Florida

• Beneficiary education will be critical
• Ease confusion
• Help transition dual eligibles to Part D
• Provide information about Plan choice
• Many unknowns
• Will new prescription drug-only plans be
  affordable?
• Will seniors sign up for Part D and low income
  subsidies?
• Will Rx plans cover popular medications
• Important to monitor access to needed medications
  and out of pocket prescription drug spending

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Challenges for Florida

• Reaction of Medicare beneficiaries
• Public education is critically needed
• Key to success
• Will private plans be continue to participate?
• Will employers take subsidies and participate in
  retiree health plans
• Will low income beneficiaries be favorable to the
  new structure
• Uncertain effects on financing and stability of
  Medicare over the long term

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Unauthorized Entities

• Agents beware of selling unauthorized entities
• Public awareness stressed with penalties for
  agents who sell them
• third-degree felony, punishable by up to five
  years in prison and a 5,000 fine per count.
  Agent held financially responsible for unpaid
  claims.
• Call Consumer Helpline at [phone]
• They attempt to escape regulation from either the
  state or ERISA regulation
• 80 of unauthorized entities characterized
  themselves as one (or a combination) of four
  arrangements
• Associations
• Professional Employer Organizations
• Unions
• Single-employer ERISA plans
• 252 Million in medical claims went unpaid and
  only 52 million recovered on behalf of
  policyholders

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Characteristics of Unauthorized Entities

• Adopted names that were familiar to consumers or
  similar to legitimate firms
• Marketed their products through licensed agents
• Established relationships with provider networks
  and administrators to offer health benefits
• Set premiums below market rates
• Marketed to employers or individuals that were
  seeking affordable insurance alternatives (small
  employers, self-employed individuals or workers
  in industries such as construction or
  transportation who are more likely to be
  uninsured
• Paid initial claims while collecting additional
  premiums before ceasing claims payments

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Questions?
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Overview

• Give the big picture of the subject
• Explain how all the individual topics fit together

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Topic Two

• Explain details
• Give an example
• Exercise to reinforce learning

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Summary

• State what has been learned
• Define ways to apply training
• Request feedback of training session

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Where to Get More Information

• Other training sessions
• List books, articles, electronic sources
• Consulting services, other sources