These low-income subsidies are intended to reduce or eliminate enrollees’ out-of-pocket expenses associated with the drug benefit, including premiums, deductibles, copayments, and costs in the coverage gap (sometimes called the doughnut hole). Part D plans are required to offer a statutorily defined standard benefit or one that is actuarially equivalent.

WHO QUALIFIES FOR LOW-INCOME SUBSIDIES AND WHAT HELP DO THEY GET?

Dual eligibles who qualify for Medicaid on the basis of their income and assets automatically qualify for Medicare prescription drug low-income subsidies.

Additionally, those who receive premium and/or costsharing assistance from Medicaid through the Medicare
Savings Programs (QMB, SLMB, QI), and those only eligible for SSI cash assistance are also automatically deemed eligible for low-income subsidies and need not apply for them.

Dual eligibles and others deemed eligible for low-income subsidies pay no Part D plan premiums or deductibles, and copayments for brand-name drugs, depending on their income. Though nominal, these copayments are a new expense for many dual eligibles who were not charged for drugs under their state Medicaid programs. Dual eligibles in nursing homes have no drug copayments.

Other low-income Medicare beneficiaries must meet an income and resource test and submit an application to determine if they qualify for low-income subsidies. These individuals must apply separately for the additional assistance through the Social Security Administration (SSA) or their state Medicaid program. The level of assistance for other low-income beneficiaries who qualify for drug benefit subsidies varies based on their income and resources. In general, greater assistance is targeted to those with lower incomes and resources (Figure 1).

HOW IS ELIGIBILITY DETERMINED?

Income and other resource levels are used to determine eligibility for the low-income subsidy. Social Security benefits, Veterans benefits, public and private pensions, annuities, and in-kind support are counted as income. Eligibility is based solely on the income of the applicant (and spouse, if applicable), regardless of whether there are other household members with income.

Resource levels used to determine eligibility for low income subsidies are higher (more generous) than those used for SSI and Medicaid. Resources are defined as assets that can typically be converted to cash within 20 days, such as stocks, bonds, and checking, savings, and
retirement accounts. An applicant’s principal home, car, and life insurance policies do not count toward the resource limit. Individuals with Medicare and Medicaid $0 $0 No copays benefits in nursing homes

HOW DO BENEFICIARIES APPLY FOR SUBSIDIES?

Beneficiaries who are not automatically eligible for low income subsidies must apply for this assistance through SSA or their state Medicaid programs. Signed applications (even those not entirely complete) may be submitted in person, by mail, by phone, or online through the SSA Web site. Documenting income or resources is not required. Applicants found eligible in 2006 retain eligibility for the remainder of the year. After 2006, SSA and states can set their own redetermination timeframes.

If beneficiaries apply for the Part D low-income subsidy through their state Medicaid program, Medicaid must also screen for eligibility for benefits under the Medicare Savings Programs. However, SSA is neither required to screen for Medicare Savings Program eligibility nor refer applicants to Medicaid for screening. Since SSA has processed the vast majority of low-income subsidy applications, many beneficiaries may have missed a key opportunity to learn about Medicare Savings Program or Medicaid benefits for which they might also qualify.

HOW DOES DRUG PLAN ENROLLMENT WORK?

Beneficiaries who apply and are found eligible for the low-income subsidy must also enroll in a Medicare drug plan for the subsidy to take effect. In 2006, the Administration facilitated enrollment in drug plans for one million beneficiaries who qualified for the subsidy but had not signed up for a plan prior to the May 15, 2006 enrollment deadline.

In 2006, beneficiaries who apply and qualify for the low income subsidy after the enrollment deadline have a special enrollment period that enables them to sign up for a Part D plan for the remainder of the year, or they will be automatically enrolled. Those who are
automatically enrolled can switch plans once before the next enrollment period which begins on November 15.

Individuals who qualify for the low-income subsidy after May 15th will not be subject to the late enrollment penalty in 2006. However, like all other Medicare beneficiaries, those with low incomes who do not have drug coverage in 2006 and who later decide to enroll in a Part D plan will face a penalty for late enrollment – although the penalty will be reduced for those eligible for low-income subsidies.

Dual eligibles, unlike other low-income beneficiaries, were automatically enrolled in plans with premiums at or below the state average at the beginning of 2006. They are permitted to switch plans throughout the year, unlike other Part D enrollees who will be able to switch plans only during the annual coordinated enrollment period at the end of each year.

Source: www.medicare.gov

Annual Coordinated Election Period (AEP)

The Annual Coordinated Election Period runs from November 15 through December 31 each year. During this time beneficiaries may change prescription drug plans, change Medicare Advantage plans, return to original Medicare, or enroll in a Medicare Advantage plan for the first time. Enrollment changes take effect on January 1.

General Enrollment Period (GEP)

Medicare beneficiaries who did not enroll in Part B when they first became eligible for Medicare may elect Part B coverage during the General Enrollment Period, which extends from January 1 through March 31 each year. Enrollment becomes effective on July 1 of the same year.

Beneficiaries who delay enrollment in Part B will be assessed a late enrollment penalty on their Part B premium. The penalty is 10% for each full year of delayed enrollment for as long as the beneficiary remains covered under Part B.

Someone who enrolls in Part B during the General Enrollment Period also has a Special Enrollment Period (SEP) for Part D. From April through June of each year a new Part B enrollee may make one election to join a Part D plan. Because beneficiaries who only have Part A and not Part B are not eligible to enroll in a Medicare Advantage plan, the SEP enables beneficiaries who elect Part B during the General Enrollment Period to enroll in a Medicare Advantage plan with drug coverage (MA-PD).

Open Enrollment Period (OEP)

The Open Enrollment Period provides Medicare beneficiaries with one opportunity to enroll in, disenroll from, or change a Medicare Advantage plan. Like the General Enrollment Period, the Open Enrollment Period extends from January 1 through March 31 each year. Unlike enrollment in Part B, the change in Medicare Advantage enrollment or disenrollment becomes effective the month after the change is made.

Only beneficiaries who are eligible to enroll in a Medicare Advantage plan may make a change during the Open Enrollment Period. In other words, a beneficiary who wants to change must have both Medicare Part A and Medicare Part B and must live in the area served by the Medicare Advantage plan.

Beneficiaries may not add or drop Part D drug coverage during the Open Enrollment Period. Those who already have drug coverage can only change to another option with drug coverage. Those who do not have drug coverage may not change to an option that provides drug coverage. Permissible changes during the Open Enrollment Period include:

• MA-PD to a different MA-PD

• MA-PD to Original Medicare and a PDP

• Original Medicare and a PDP to an MA-PD

• MA-only plan to a different MA-only plan

• MA-only plan to original Medicare

• Original Medicare to an MA-only plan

Beneficiaries who want to use the Open Enrollment Period to return to Original Medicare from an MA-PD must do so by enrolling in a PDP. Enrollment in a PDP during either the Annual Coordinated Election Period or the Open Enrollment Period terminates enrollment in a Medicare Advantage plan. Because beneficiaries are generally limited to changing their prescription drug coverage during the Annual Coordinated Election Period, MA-PD enrollees who want to return to Original Medicare during the Open Enrollment Period have a Part D Special Enrollment Period that allows them to make one enrollment into a PDP.

Limited Open Enrollment Period (L-OEP)

Congress created a new enrollment period for 2007 and 2008, the Limited Open Enrollment Period, as part of the Tax Relief and Health Care Act of 2006. The Limited Open Enrollment Period allows someone in Original Medicare to enroll in a Medicare Advantage plan without drug coverage (MA-only plan) at any time of the year. Enrollment becomes effective the month after the choice is made. A beneficiary in an MA-only plan may not use the Limited Open Enrollment Period to return to Original Medicare.

The Centers for Medicare & Medicaid Services (CMS) has indicated that beneficiaries who use the Limited Open Enrollment Period to join a private fee-for-service plan without drug coverage will be able to keep their PDP. However, those who use the limited open enrollment period to enroll in an HMO, local PPO, or regional PPO that does not offer drug coverage will lose their prescription drug coverage.

Beneficiaries who lose drug coverage as a result of a choice made during the Limited Open Enrollment Period will be assessed a late enrollment penalty on their Part D premiums for any month in which they did not have drug coverage.

CMS has stated that MA-only plans will be required to contact potential enrollees to make sure they understand that they will lose their prescription drug coverage and to confirm that they still want to join the plan before enrollment is effectuated. In response to a letter from beneficiary advocates raising concerns about CMS’s interpretation of the new law, CMS has indicated that it will establish a Special Enrollment Period on a case-by-case basis to allow beneficiaries to disenroll from the MA-only plan and to return to their PDP if they were unaware that they would lose their drug coverage.

Special Enrollment Period (SEP)

Special Enrollment Periods allow beneficiaries to make an enrollment change outside of the GEP, the AEP, the OEP and the L-OEP.

Beneficiaries who delay enrolling in Part B because they are covered by employer-sponsored health insurance as an active worker or as a dependent of an active worker are not limited to enrolling in Part B during the GEP. They have an SEP that runs for eight months from the time they (or their spouse) retire or they lose their health insurance. Part B coverage starts the month after the election is made, and no late premium penalty is assessed.

A number of SEPs exist for Medicare Advantage and PDP enrollment and disenrollment. For example, someone who moves out of a Medicare Advantage Plan or PDP service area has an SEP to enroll in a plan that serves their new home. Beneficiaries who move into, reside in, or move out of a nursing home may also have an SEP. Individuals who are eligible for Medicare and Medicaid have an SEP that allows them to change Part D drug plans at any time. CMS has the authority to create SEPs for exceptional circumstances.

For more details about Part D SEPs see the PDP Eligibility, Enrollment and Disenrollment Guidance, http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/CurrentPDPEnrollmentGuidance.pdf.

The Medicare Advantage SEPS are described in the Medicare Managed Care Manual, Chapter 2, Medicare Advantage Enrollment and Disenrollment, http://www.cms.hhs.gov/HealthPlansGenInfo/Downloads/mc86c02.pdf.