The Two Faces of Medicare Part D

1

• The Two Faces of Medicare Part D
• Presented By
• Joanne M. Sica

September 2008
Pharmacy Benefits Academy
2
Facts and Figures

• The Medicare Modernization Act of 2003 introduced
  Medicare Part D
• Medicare Part D became effective January 1, 2006
• By 2030, the number of Medicare-eligible
  beneficiaries is expected to double

3
Employer Options

• RDS Retiree Drug Subsidy
• EGWP Employer Group Waiver Plan
• 800 Series EGWP
• PDP Prescription Drug Plan

• MA Medicare Advantage
• MA-PD Medicare Advantage Prescription Drug
• Wrap Around
• Combination

4
Retiree Drug Subsidy

• Designed by CMS to allow retention of employer or
  union-sponsored benefits
• To offset expense of benefit offering
• CMS sets the manner and amount of subsidy and
  compliance requirements for qualification
• Changes from year to year

5
Retiree Drug Subsidy

• Most popular option
• Considered to be the easiest to comprehend,
  implement and administer
• Had fewer compliance requirements
• Tax free subsidy of 28 of allowable Rx costs
  between the threshold and limit amounts
• Adjusted annually

6
Retiree Drug Subsidy

• This was the first year that clients who elected
  to receive the subsidy reconciled retiree
  eligibility and their Rx claims
• B/D crossover drugs
• RDS Eligibility File
• Reprocess claims for qualified covered retirees
  for accuracy and completeness
• Accuracy of Reconciliation File
• Money left on the table
• Estimated value to plan sponsor was overstated

7
Employer Group Waiver Plan

• Employer or union sponsor contracts directly with
  CMS to provide plan benefits
• Receives payment directly from the government
• May be financially superior to RDS for employers
  or union sponsors with large Medicare-eligible
  population
• Includes subsidy for administrative costs and
  profit margins
• Payments adjusted for health risk status of
  beneficiary
• Low income subsidy
• Catastrophic reinsurance payments (80 of drug
  costs that exceed maximum out-of-pocket limit

8
Employer Group Waiver Plan

• 800 Series EGWP
• Contract with third party Part D sponsor
• Alleviates administrative burden of employer PDP
  (EGWP)
• Savings realized through reduced premiums or a
  pass through of CMS payments
• Additional fees to third party Part D sponsor for
  administrative and regulatory burden

9
Wrap Around

• Supplements Medicare benefit
• Medicare-eligible beneficiary required to enroll
  in a commercial Part D plan
• Employer or union sponsor supplements plan by
  providing additional coverage
• Deductible phase
• Coverage gap phase
• Additional drugs

10
Wrap Around

• Employer or union sponsor no longer primary
  pharmacy benefit provider
• Fewest compliance or regulatory requirements
• Administratively challenging

11
Summary

• Under any of these options, employer bears some
  responsibility
• Weigh pros and cons of each option
• Assess and quantify the financial implications of
  each option
• Assess ability to manage the processes required
  by CMS for each option