Banking Practice

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MEDICARE PART D Presented by RAM
Benefits October 20, 2005
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What is a Medicare Part D?
The Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA) added a new
prescription drug program to Medicare
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How does the Medicare program work?

• The average participant will expect to pay a
  premium of approx. 37 per month an annual
  deductible of 250.

• The Medicare beneficiary will pay 25 for drug
  costs up to an out of pocket limit 2250.
  Medicare will pay the remaining 75 of the first
  2250 spent.

• After this initial coverage is met, there is a
  gap in coverage where the beneficiary pays the
  entire amount of the drug cost.

cont
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How does the Medicare program work?

• Medicare coverage picks up again with a
  catastrophic benefit after the beneficiary
  actually spends 3600 for covered drugs in a
  year (the true out of pocket (TrOOP) limit).

• Once that level is attained the beneficiary
  pays 5 of the drug costs and Medicare pays the
  remaining 95.

• Plans may offer more coverage but may not offer
  less than these benefits.

• Lower income beneficiaries may qualify for
  lower or no premiums, reduced cost-sharing, no
  gap coverage.

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Who will it effect?
Beginning January 1, 2006, Medicare
beneficiaries who enroll in the part D plan are
eligible for a standard prescription drug benefit
as defined by Centers for Medicare Medicaid
Services (CMS)
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When does this take place?
Open Enrollment for the new Medicare Part D,
Prescription Drug Coverage, will begin on
November 15, 2005 and will extend through May 15,
2006.
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What is my responsibility as an employer?
All eligible employees (retirees or Medicare
eligible dependents) must be notified in writing
by November 15, 2005 as to whether or not their
current prescription drug plan is credible or
non-credible.
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How is creditable coverage defined?

• Coverage is deemed creditable if the actuarial
  value of the coverage equals or exceeds the
  actuarial value of standard Medicare
  prescription drug coverage.

• For plans that have multiple benefit options,
  regulation requires that entities apply the
  actuarial value test separately for each benefit
  option.

• The determination of creditable coverage status
  does not require an attestation by a qualified
  actuary unless the entity is an employer or
  union electing the retiree drug subsidy.

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Whats involved in applying for the Drug Subsidy?

• The final regulations summarize the
  requirements for an employer to qualify for the
  subsidy as follows

• Submit an actuarial attestation certifying that
  the employer health coverage is actuarially
  equivalent to the Medicare Part D prescription
  drug benefit.
• Provide Medicare-eligible individuals covered
  under the employers plan with a notice of
  creditable prescription drug coverage.

Cont
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Whats involved in applying for the Drug Subsidy?

• Maintain records for 65 years after the
  expiration of each plan year, and make them
  available for government audit. The records
  include the certifying actuaries work papers,
  supporting cost documentation on which the
  subsidy is based, and any other information
  indicated by CMS.

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A prescription drug plan is deemed creditable if
it

• Provides coverage for brand and generic
  prescriptions

• Provides reasonable access to retail providers
  and, optionally, for mail order coverage.

• The plan is designed to pay on average at least
  60 of participants prescription drug expenses.

• Satisfies at least one of the following

• The prescription drug coverage has no annual
  benefit maximum or a maximum annual benefit
  payable by the plan, of at least 25,000 or

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A prescription drug plan is deemed creditable if

• The prescription drug coverage has an actuarial
  expectation that the amount payable by the plan
  will be at least 2,000 per Medicare eligible
  individual in 2006.
• For entities that have integrated health
  coverage, the integrated health plan has no more
  than a 250 deductible per year, has no annual
  benefit maximum or a maximum annual benefit
  payable by the plan of at least 25,000 and has
  no less than a 1,000,000 lifetime combined
  benefit maximum.

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What is the purpose of the notice?
If the prescription drug coverage is creditable,
the Medicare eligible enrollee can elect to waive
the Part D coverage through Medicare until such
time as he/she loses the coverage or the plan
becomes non-creditable. If coverage is
creditable, no penalty applies. If coverage is
non-creditable the individual elects not to
enroll in the Medicare Part D plan, a 1 penalty
per month will apply to the premium.
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When does the notice need to me mailed?
Notices must be sent no later than November 15,
2005. In addition, an updated notice must be
given if the plan coverage changes from
non-creditable to creditable or vice versa. A
notice should also be given to any
employees/retirees that are approaching
eligibility for Medicare.
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Where can I find the notice?
On the web http//www.cms.hhs.gov/medicareform
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Thank You!
RAM Benefits Minnetonka, MN www.rambenefits.com