Subsidy Reconciliation Process

1
Medicare Part D

• Subsidy / Reconciliation Process
• With Part D Advisors, Inc

2
Goals and Objectives

• Part D Overview
• Discuss required steps and data requirements to
  file for the Subsidy
• Identify key areas of concern where mistakes are
  commonly made
• Examine and dissect the Cost Report
• Requirements for Final Reconciliation

3
What is Part D Subsidy

• The Medicare Modernization Act of 2003 (MMA)
  became law in December 2003.
• Created the Medicare Part D drug benefit (RDS
  program) that became available to Medicare
  beneficiaries 1/1/06
• Created incentive for employers already
  sponsoring retiree coverage including Rx to keep
  those programs in place by way of offering a
  subsidy (RDS)

4
What is Part D Subsidy

• Why Apply for the RDS?
• Provides Plan Sponsors with a tax-free subsidy of
  28 of allowable retiree prescription drug costs
  over the deductible and under the limit
• Average recovery has been about 550 per RMEI
• That is, 100 RMEIs 55,000/year
• When is the deadline for filing Final
  Reconciliation?
• RDS final reconciliation deadline for its
  inception year (2006) was recently extended from
  March 31, 2008 to June 30, 2008.

5
Who is eligible to receive the RDS?

• The following sponsors of qualified retiree
  prescription drug plans are eligible to receive
  the RDS
• private employers that sponsor ERISA group health
  plans
• governments
• churches
• union health funds
• provided that coverage is at least actuarially
  equivalent to the standard Medicare Part D drug
  benefit

6
The Application

• The Application
• An electronic application must be submitted each
  year (90 day before the beginning of each
  subsequent plan year)
• A 30-day extension may be requested (only one
  permitted a plan year)
• Application includes
• Actuarial Attestation
• Required Data (e.g., enrollment and claims)
• Required Documentation

7
Definitions

• RMEI Retired Medicare Eligible Individual
• UBOI Unique Benefit Option Identifier (defined
  by plan sponsor)
• Authorized Representative Only person
  authorized to bind plan to receive subsidy
• Account Manager Project manager from
  application to final reconciliation. Either
  handles all aspects and/or subcontracts with full
  oversight

8
Todays Presentation

• 850 Total Retired Employees
• One health plan administrator, one Rx design 1
  UBOI
• Medicare eligibility is static
• Rx rebate assumption is 5

9
Cost Report ExampleSample Employer with 1,000
RMEIs
Allowable Retiree Cost
Gross Retiree Cost
Threshold Reduction
Limit Reduction
Gross Eligible
Cost Adjustment
Month 01 02 03 04 05 06 07 08 09 10 11 12 Total
Subsidy
100,000.00
350.00
124,650.00
6,232.50
118,417.50
33,156.90
225,000.00
50,250.00
1,750.00
153,000.00
7,650.00
145,350.00
40,698.00
205,000.00
22,000.00
13,000.00
185,000.00
9,250.00
175,750.00
49,210.00
220,000.00
8,000.00
15,000.00
177,000.00
8,850.00
168,150.00
47,082.00
200,000.00
4,000.00
19,750.00
196,250.00
9,812.50
186,437.50
52,202.50
220,000.00
3,000.00
25,000.00
182,000.00
9,100.00
172,900.00
48,412.00
210,000.00
2,000.00
35,000.00
173,000.00
8,650.00
164,350.00
46,018.00
210,000.00
1,750.00
37,500.00
175,750.00
8,787.50
166,962.50
46,749.50
215,000.00
1,500.00
60,000.00
148,500.00
7,425.00
141,075.00
39,501.00
210,000.00
1,250.00
57,500.00
161,250.00
8,062.50
153,187.50
42,892.50
220,000.00
4,000.00
75,000.00
151,000.00
7,550.00
143,450.00
40,166.00
230,000.00
3,250.00
90,000.00
136,750.00
6,837.50
129,912.50
36,375.50
230,000.00
201,000.00
429,850.00
1,964,150.00
98,207.50
1,865,942.50
522,463.90
2,595,000.00
10
Basics of the RDS Process

• Actuarial Attestation for Credible Coverage
• Data Gathering
• Entity needs to identify all relevant GHPs and
  benefit options and gather eligibility and NCPDP
  claim files within its possession and from any
  TPA, insurer, etc.
• Creditable Coverage Notices
• Preparing the RDS Application
• Retired Medicare Eligible Individual (RMEI) Lists
• Cost Reporting
• Payment Requests
• Final Reconciliation
• Audits

11
Preparing the RDS Application Key Steps

• Assess the Unique Benefit Option Identifiers
  (UBOIs)
• Select the Authorized Representative (AR) and
  Account Manager (AM)
• Register on the RDS webpage maintained by CMS
• Obtain Login IDs for AR and AM
• Establish electronic signature
• Get a unique Plan Sponsor ID for each Group
  Health Plan
• Get a unique Application Number for each Plan
  Year
• Establish RDS Payment Frequency
• Complete all portions of the Application
  electronically on the RDS secure website

12
More about UBOIs

• UBOIs need to be separated or combined for
  purposes of the actuarial attestation so that
  they can pass the gross and net tests.
• When separate UBOIs are established, the
  person(s) managing the subsidy need to
  communicate to the RDS any members that move back
  and forth between UBOIs.
• When members are in more than one UBOI (like mail
  order and retail) then their costs need to be
  tracked by member!
• We typically find that plans separate benefit
  options by
• Plan Design
• Retail vs Mail Order
• Vendors
• These are not always the best or correct way!!!

Back to Preparing the Application
13
Preparing the RDS Application Key Steps

• Assess the Unique Benefit Option Identifiers
  (UBOIs)
• Select the Authorized Representative (AR) and
  Account Manager (AM)
• Register on the RDS webpage maintained by CMS
• Obtain Login IDs for AR and AM
• Establish electronic signature
• Get a unique Plan Sponsor ID for each Group
  Health Plan
• Get a unique Application Number for each Plan
  Year
• Establish RDS Payment Frequency
• Complete all portions of the Application
  electronically on the RDS secure website

14
PDA Cost Report Example
Allowable Retiree Cost
Gross Retiree Cost
Threshold Reduction
Limit Reduction
Gross Eligible
Cost Adjustment
Month 01 02 03 04 05 06 07 08 09 10 11 12 Total
Subsidy
100,000.00
350.00
124,650.00
6,232.50
118,417.50
33,156.90
225,000.00
50,250.00
1,750.00
153,000.00
7,650.00
145,350.00
40,698.00
205,000.00
Gross Retiree Cost 225,000.00 -Threshold 100,00
0.00 -Limit Reduction 350.00 Gross
Eligible Cost
22,000.00
13,000.00
185,000.00
9,250.00
175,750.00
49,210.00
220,000.00
Gross Eligible Cost 124,650.00 x Rebate
Percentage 5.00 Eligible Cost
Gross Eligible Cost 124,650.00 - Cost
Adjustment 6,232.50 Allowable Retiree Cost
Allowable Retiree Cost 118,417.50 x Subsidy
Percentage 28 Subsidy
8,000.00
15,000.00
177,000.00
8,850.00
168,150.00
47,082.00
200,000.00
4,000.00
19,750.00
196,250.00
9,812.50
186,437.50
52,202.50
220,000.00
3,000.00
25,000.00
182,000.00
9,100.00
172,900.00
48,412.00
210,000.00
124,650.00
6,232.50
118,417.50
33,156.90
2,000.00
35,000.00
173,000.00
8,650.00
164,350.00
46,018.00
210,000.00
1,750.00
37,500.00
175,750.00
8,787.50
166,962.50
46,749.50
215,000.00
1,500.00
60,000.00
148,500.00
7,425.00
141,075.00
39,501.00
210,000.00
1,250.00
57,500.00
161,250.00
8,062.50
153,187.50
42,892.50
220,000.00
4,000.00
75,000.00
151,000.00
7,550.00
143,450.00
40,166.00
230,000.00
3,250.00
90,000.00
136,750.00
6,837.50
129,912.50
36,375.50
230,000.00
201,000.00
429,850.00
1,964,150.00
98,207.50
1,865,942.50
522,463.90
2,595,000.00
15
Counting of RMEIs
850
Number of Retirees in the Plan
550
Number of Spouses to Retirees and Widows
1,400
Members in the Retiree Group
- Members not yet eligible for Medicare
400
Total Number of RMEIs
1,000

• Caveats
• This average number of RMEIs is used to simplify
  the example.
• RMEI counts change on a month-to-month basis as
  eligibility changes.
• These changes must be monitored regularly and
  coordinated with the RDS.

16
RMEI Submission Data Elements

• Application ID (assigned by RDS)
• SSN and/or Health Insurance Claim Number
• Name
• Date of Birth
• Gender
• Dates of Coverage (Effective and Term)
• Relationship to Retiree
• Applicable UBOI

17
Submission of RMEI Data to RDS
0000012345,078051120,078051120A,Hilda,A,Whitcher,1
9270416,2,20060101,20061231,UBOI1,01,ADD 000001234
5,862413711,862413711A,Clarence,E,Smith,19301204,1
,20060101,20061231,UBOI1,01,ADD 0000012345,2190999
99,718462358B,Edna,M,Rogers,19370614,2,20060101,20
061231,UBOI1,02,ADD ------------------------------
-------------------------------------- 0000012345,
713894318,713894318A,Florence,C,Williams,19310505,
2,20060101,20061231,UBOI1,01,ADD 0000012345,771031
414,771261824B,Edgar,J,Jones,19271127,1,20060101,2
0061231,UBOI1,02,ADD
0000012345,078051120,078051120A,Hilda,A,Whitcher,1
9270416,2,20060101,20061231,UBOI1,01,ADD,Y,00,2006
0101,20061231 0000012345,862413711,862413711A,Clar
ence,E,Smith,19301204,1,20060101,20061231,UBOI1,01
,ADD,Y,00,20060101,20061231 0000012345,219099999,7
18462358B,Edna,M,Rogers,19370614,2,20060101,200612
31,UBOI1,02,ADD,Y,00,20060101,20061231 -----------
--------------------------------------------------
------- 0000012345,713894318,713894318A,Florence,C
,Williams,19310505,2,20060101,20061231,UBOI1,01,AD
D,Y,00,20060101,20061231 0000012345,771031414,7712
61824B,Edgar,J,Jones,19271127,1,20060101,20061231,
UBOI1,02,ADD,Y,00,20060101,20061231
RDS Secure Website
0000012345,078051120,078051120A,Hilda,A,Whitcher,1
9270416,2,20060101,20061231,UBOI1,01,ADD 000001234
5,862413711,862413711A,Clarence,E,Smit,19301204,1,
20060101,20061231,UBOI1,01,ADD 0000012345,21909999
9,718462358B,Edna,M,Rogers,19370614,2,20060101,200
61231,UBOI1,02,ADD -------------------------------
------------------------------------- 0000012345,7
13894318,713894318A,Florence,C,Williams,19310505,2
,20060101,20061231,UBOI1,01,ADD 0000012345,7710314
14,771261824B,Edgar,J,Jones,19271127,1,20060101,20
061231,UBOI1,02,ADD
Plan Sponsor
0000012345,078051120,078051120A,Hilda,A,Whitcher,1
9270416,2,20060101,20061231,UBOI1,01,ADD 000001234
5,862413711,862413711A,Clarence,E,Smit,19301204,1,
20060101,20061231,UBOI1,01,ADD 0000012345,21909999
9,718462358B,Edna,M,Rogers,19370614,2,20060101,200
61231,UBOI1,02,ADD -------------------------------
------------------------------------- 0000012345,7
13894318,713894318A,Florence,C,Williams,19310505,2
,20060101,20061231,UBOI1,01,ADD 0000012345,7710314
14,771261824B,Edgar,J,Jones,19271127,1,20060101,20
061231,UBOI1,02,ADD
0000012345,078051120,078051120A,Hilda,A,Whitcher,1
9270416,2,20060101,20061231,UBOI1,01,ADD 000001234
5,862413711,862413711A,Clarence,E,Smit,19301204,1,
20060101,20061231,UBOI1,01,ADD 0000012345,21909999
9,718462358B,Edna,M,Rogers,19370614,2,20060101,200
61231,UBOI1,02,ADD -------------------------------
------------------------------------- 0000012345,7
13894318,713894318A,Florence,C,Williams,19310505,2
,20060101,20061231,UBOI1,01,ADD 0000012345,7710314
14,771261824B,Edgar,J,Jones,19271127,1,20060101,20
061231,UBOI1,02,ADD
RDS
18
RMEI Updates from the RDS
PDP
CMS Database
0000012345,078051120,078051120A,Hilda,A,Whitcher,1
9270416,2,20060101,20061231,UBOI1,01,ADD,10,00,200
60101,20060331
RDS Secure Website
Plan Sponsor
0000012345,078051120,078051120A,Hilda,A,Whitcher,1
9270416,2,20060101,20061231,UBOI1,01,ADD 000001234
5,862413711,862413711A,Clarence,E,Smit,19301204,1,
20060101,20061231,UBOI1,01,ADD 0000012345,21909999
9,718462358B,Edna,M,Rogers,19370614,2,20060101,200
61231,UBOI1,02,ADD -------------------------------
------------------------------------- 0000012345,7
13894318,713894318A,Florence,C,Williams,19310505,2
,20060101,20061231,UBOI1,01,ADD 0000012345,7710314
14,771261824B,Edgar,J,Jones,19271127,1,20060101,20
061231,UBOI1,02,ADD
0000012345,078051120,078051120A,Hilda,A,Whitcher,1
9270416,2,20060101,20061231,UBOI1,01,ADD
RDS
19
Calculation of GRC
Claims for Active Members
Plan Sponsor Claims for RDS Plan Year
Claims for Retired Non-Medicare Members
Claims incurred outside of the RMEIs Medicare
eligibility
Claims for RMEIs
Claims covered byMedicare Part B
Claims not covered by Medicare
Claims incurred during an RMEIs dates of
Medicare eligibility
Claims covered by Medicare Part D
20
Calculation of GRC
Allowable Retiree Cost
Gross Retiree Cost
Threshold Reduction
Limit Reduction
Gross Eligible
Cost Adjustment
Month 01 02 03 04 05 06 07 08 09 10 11 12 Total
Subsidy
100,000.00
350.00
124,650.00
6,232.50
118,417.50
33,156.90
225,000.00
50,250.00
1,750.00
153,000.00
7,650.00
145,350.00
40,698.00
205,000.00
22,000.00
13,000.00
185,000.00
9,250.00
175,750.00
49,210.00
220,000.00
8,000.00
15,000.00
177,000.00
8,850.00
168,150.00
47,082.00
200,000.00
4,000.00
19,750.00
196,250.00
9,812.50
186,437.50
52,202.50
220,000.00
3,000.00
25,000.00
182,000.00
9,100.00
172,900.00
48,412.00
210,000.00
2,000.00
35,000.00
173,000.00
8,650.00
164,350.00
46,018.00
210,000.00
Name
SSN
Gross Retiree Cost
8,787.50
1,750.00
37,500.00
175,750.00
166,962.50
46,749.50
215,000.00
Hilda Whitcher
078-05-1120
17,381.26
17,381.26
17,381.26
17,381.26
17,381.26
17,381.26
17,381.26
17,381.26
17,381.26
17,381.26
17,381.26
17,381.26
Clarence Smith
862-41-3711
4,216.07
4,216.07
4,216.07
4,216.07
4,216.07
4,216.07
4,216.07
4,216.07
4,216.07
4,216.07
4,216.07
4,216.07
1,500.00
60,000.00
148,500.00
7,425.00
141,075.00
39,501.00
210,000.00
Edna Rogers
219-09-9999
21,771.39
21,771.39
21,771.39
21,771.39
21,771.39
21,771.39
21,771.39
21,771.39
21,771.39
21,771.39
21,771.39
21,771.39
1,250.00
57,500.00
161,250.00
8,062.50
153,187.50
42,892.50
220,000.00
Florence Williams
713-89-4318
1,094.91
1,094.91
1,094.91
1,094.91
1,094.91
1,094.91
1,094.91
1,094.91
1,094.91
1,094.91
1,094.91
1,094.91
4,000.00
75,000.00
151,000.00
7,550.00
143,450.00
40,166.00
230,000.00
Edgar Jones
771-03-1414
2,837.67
2,837.67
2,837.67
2,837.67
2,837.67
2,837.67
2,837.67
2,837.67
2,837.67
2,837.67
2,837.67
2,837.67
3,250.00
90,000.00
136,750.00
6,837.50
129,912.50
36,375.50
230,000.00
2,595,000.00
Total
201,000.00
429,850.00
1,964,150.00
98,207.50
1,865,942.50
522,463.90
2,595,000.00
21
Notes About the Cost Report

• One cost report must be created for each UBOI
  setup on the Application.
• Threshold and Limit values must be calculated on
  a per RMEI basis.
• Threshold and Limit values must be coordinated
  between UBOIs when members move from one UBOI to
  another.
• When separate vendors are used for Retail and
  Mail Order, the Threshold and Limit values must
  be coordinated whether the vendors are setup for
  one or more UBOIs.

22
Retail vs Mail Order UBOIs
Name
SSN
Gross Retiree Cost
Threshold
Limit Reduction
Hilda Whitcher
078-05-1120
6,418.31
114.27
4,686.01
Clarence Smith
862-41-3711
1,600.15
221.38
0.00
Edna Rogers
219-09-9999
2,751.71
250.00
1,414.33
Retail PBM
Florence Williams
713-89-4318
731.26
87.12
0.00
Edgar Jones
771-03-1414
1,037.88
0.00
0.00
Name
SSN
Gross Retiree Cost
Threshold
Limit Reduction
Name
SSN
Gross Retiree Cost
Threshold
Limit Reduction
2,595,000.00
Total
201,000.00
429,850.00
Hilda Whitcher
078-05-1120
17,381.26
250.00
12,381.26
Hilda Whitcher
078-05-1120
17,381.26
250.00
12,381.26
Clarence Smith
862-41-3711
4,216.07
250.00
0.00
Clarence Smith
862-41-3711
4,216.07
250.00
0.00
Edna Rogers
219-09-9999
21,771.39
250.00
16,771.39
Edna Rogers
219-09-9999
21,771.39
250.00
16,771.39
Total
Florence Williams
713-89-4318
1,094.91
250.00
0.00
Florence Williams
713-89-4318
1,094.91
250.00
0.00
Edgar Jones
771-03-1414
2,837.67
250.00
0.00
Edgar Jones
771-03-1414
2,837.67
250.00
0.00
2,595,000.00
Total
201,000.00
429,850.00
2,595,000.00
Total
201,000.00
429,850.00
Name
SSN
Gross Retiree Cost
Threshold
Limit Reduction
Hilda Whitcher
078-05-1120
10,962.95
135.73
7,695.25
Clarence Smith
862-41-3711
2,615.92
28.62
0.00
Edna Rogers
219-09-9999
19,019.68
0.00
15,357.06
Mail Order PBM
Florence Williams
713-89-4318
363.65
162.88
0.00
Edgar Jones
771-03-1414
1,799.79
250.00
0.00
2,595,000.00
Total
201,000.00
429,850.00
23
Separate UBOIs
Name
SSN
Gross Retiree Cost
Threshold
Limit Reduction
Name
SSN
Gross Retiree Cost
Threshold
Limit Reduction
Hilda Whitcher
078-05-1120
17,381.26
250.00
12,381.26
Hilda Whitcher
078-05-1120
17,381.26
250.00
12,381.26
Clarence Smith
862-41-3711
4,216.07
250.00
0.00
Clarence Smith
862-41-3711
4,216.07
250.00
0.00
Edna Rogers
219-09-9999
21,771.39
250.00
16,771.39
Edna Rogers
219-09-9999
21,771.39
250.00
16,771.39
Total
Florence Williams
713-89-4318
1,094.91
250.00
0.00
Florence Williams
713-89-4318
1,094.91
250.00
0.00
Edgar Jones
771-03-1414
2,837.67
250.00
0.00
Edgar Jones
771-03-1414
2,837.67
250.00
0.00
2,595,000.00
Total
201,000.00
429,850.00
2,595,000.00
Total
201,000.00
429,850.00
Name
SSN
Gross Retiree Cost
Threshold
Limit Reduction
Hilda Whitcher
078-05-1120
17,381.26
250.00
12,381.26
UBOI 1
Edna Rogers
219-09-9999
21,771.39
250.00
16,771.39
Edgar Jones
771-03-1414
2,837.67
250.00
0.00
2,595,000.00
Total
201,000.00
429,850.00
Name
SSN
Gross Retiree Cost
Threshold
Limit Reduction
Clarence Smith
862-41-3711
4,216.07
250.00
0.00
UBOI 2
Florence Williams
713-89-4318
1,094.91
250.00
0.00
2,595,000.00
Total
201,000.00
429,850.00
24
PDA Cost Report Example (per UBOI)
UBOI 1 (Self Funded) (Retail)
UBOI 2 (HMO) (Mail Order)
25
RDS Annual Cycle
2006
2007
September 1, 2005
September 1, 2006
September 1, 2007
2008
26
Final Reconciliation

• Final Reconciliation Cost Reporting is similar to
  the Interim Cost Reporting.
• Changes
• Cost Report must be created using REAL numbers.
• Actual rebate figures must be attained.
• Subject to Federal False Claims Act.

27
Medicare Audits by OIG

• Interim audits have already been started by the
  Office of the Inspector General.
• One audit of a national BCBS program uncovered
  problems with their own RDS application (if they
  have problems with their own plan, how are they
  going to properly administer their clients
  applications?)
• Both random and targeted audits are expected once
  the first Final Reconciliation deadline passes in
  mid-2008.
• Medicare has a 6-year window to audit RDS
  applications.
• It is the Plan Sponsors duty to maintain all
  records used in claiming subsidy.
• The Plan Sponsor must maintain these records for
  the full 6-year period.
• No guidance as to the scope or severity of these
  audits is currently available. However, Medicare
  audit activity with respect to health care
  providers are historically strenuous.

28
A Final Note about Audits and Rebates

• Quote from the publication titled CMS Guidance
  on Calculating and Reporting Rebates and Similar
  Price Concessions under the Retiree Drug Subsidy
  Program released by CMS on July 23, 2007

In the event the PBM refuses to provide CMS
auditors or the OIG access to drug-event-specific
aggregate rebate data as required under its
vendor agreement with the RDS Plan Sponsor, CMS
reserves the right to impose sanctions against
the RDS Plan Sponsor as appropriate.
29
Subsidy in Review

• Subsidy complexity has grown
• The process in 2005 was straight-forward
• The RDS has since added steps and increased
  complexity
• The process has grown beyond the capability of
  many Plan Sponsors and beyond the service
  offerings of many third parties
• While the cost report seems simple on the
  outside, there is a lot of work that goes into
  creating it
• Final Reconciliation is coming June 30, 2008

30
Question Answer

• Thank you for Joining!
• Presentation Courtesy of
• John Eggertsen and Andrew Madonna from
• Part D Advisors, Inc.