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2015 Medicare Part D [What it is = How it works]?

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Update on the Medicare prescription drug benefit program

[By Staff Reporters]

Part D

Medicare Part D, also called the Medicare prescription drug benefit, is a United States federal-government program to subsidize the costs of prescription drugs and prescription drug insurance premiums for Medicare beneficiaries. It was enacted as part of the Medicare Modernization Act of 2003 (which also made changes to the public Part C Medicare health plan program) and went into effect on January 1, 2006.

Medicare Part D Premiums

The monthly Medicare Part D base premium is set to pay 25.5 percent of the cost of standard coverage, established by bids submitted annually by Part D plans. CMS releases the Medicare Part D base premium in early August each year. Actual premiums are based on this set premium, but can vary greatly. The premium for 2014 was $32.42.

As of 2011, beneficiaries with higher incomes must pay a premium adjustment based on their income. This premium adjustment is called the Income-Related Monthly Adjustment Amount (IRMAA), and is paid directly to the Federal government (deducted from Social Security, Railroad Retirement Board, or Office of Personnel Management benefits).

Medicare Part D Deductible

The annual deductible for the standard Medicare Part D benefit was $310 in 2014, which is a decrease of $10 from the 2013 deductible. No Medicare drug plan may have a deductible more than $310 in 2014, although some plans may have a lower deductible or no deductible at all.


matrix pills


CMS Part D 2015 Standard Benefit Model Plan Details

Here are the highlights for the CMS defined Standard Benefit Plan changes from 2014 to 2015. The chart below shows the Standard Benefit design changes for plan years 2011, 2012, 2013, 2014 and 2015. This “Standard Benefit Plan” is the minimum allowable plan to be offered.

  • Initial Deductible: will be increased by $10 to $320 in 2015
  • Initial Coverage Limit: will increase from $2,850 in 2014 to $2,960 in 2015
  • Out-of-Pocket Threshold: will increase from $4,550 in 2014 to $4,700 in 2015
  • Coverage Gap (donut hole): begins once you reach your Medicare Part D plan’s initial coverage limit ($2,960 in 2015) and ends when you spend a total of $4,700 in 2015. In 2015, Part D enrollees will receive a 55% discount on the total cost of their brand-name drugs purchased while in the donut hole. The 50% discount paid by the brand-name drug manufacturer will still apply to getting out of the donut hole, however the additional 5% paid by your Medicare Part D plan will not count toward your TrOOP. Enrollees will pay a maximum of 65% co-pay on generic drugs purchased while in the coverage gap.
  • Minimum Cost-sharing in the Catastrophic Coverage Portion of the Benefit**: will increase to greater of 5% or $2.65 for generic or preferred drug that is a multi-source drug and the greater of 5% or $6.60 for all other drugs in 2015
  • Maximum Co-payments below the Out-of-Pocket Threshold for certain Low Income Full Subsidy Eligible Enrollees: will increase to $2.65 for generic or preferred drug that is a multi-source drug and $6.60 for all other drugs in 2015.


Medicare Part D Benefit Parameters for Defined Standard Benefit 2011 through 2015 Comparison
Part D Standard Benefit Design Parameters: 2015 2014 2013 2012 2011
Deductible – (after the Deductible is met, Beneficiary pays 25% of covered costs up to total prescription costs meeting the Initial Coverage Limit. $320 $310 $325 $320 $310
Initial Coverage Limit – Coverage Gap (Donut Hole) begins at this point. (The Beneficiary pays 100% of their prescription costs up to the Out-of-Pocket Threshold) $2,960 $2,850 $2,970 $2,930 $2,840
Total Covered Part D Drug Out-of-Pocket Spending including the Coverage Gap – Catastrophic Coverage starts after this point. See note (1) below. $6,680.00 (1) $6,455.00 (1) $6,733.75 (1) $6,657.50 (1) $6,447.50 (1)
Out-of-Pocket Threshold – This is the Total Out-of-Pocket Costs including the Donut Hole. 2015 Example:    $320 (Deductible) +(($2960-$320)*25%) (Initial Coverage) +(($6680.00-$2960)*100%) (Cov. Gap) = $4,700 (Maximum Out-Of-Pocket Cost prior to Catastrophic Coverage – excluding plan premium) $4,700 $320.00 $660.00 $3,720.00 $4,700.00 $4,550 $310.00 $635.00 $3,605.00 $4,550.00 $4,750 $325.00 $661.25 $3,763.75 $4,750.00 $4,700 $320.00 $652.50 $3,727.50 $4,700.00 $4,550 $310.00 $632.50 $3,607.50 $4,550.00
Total Estimated Covered Part D Drug Out-of-Pocket Spending including the Coverage Gap Discount (NON-LIS) See note (2). $7,061.76 plus a 55% brand discount $6,690.77 plus a 52.50% brand discount $6,954.52 plus a 52.50% brand discount $6,730.39 plus a 50% brand discount $6,483.72 plus a 50% brand discount
Catastrophic Coverage Benefit:
   Generic/Preferred    Multi-Source Drug (3) $2.65 (3) $2.55 (3) $2.65 (3) $2.60 (3) $2.50 (3)
    Other Drugs (3) $6.60 (3) $6.35 (3) $6.60 (3) $6.50 (3) $6.30 (3)
Part D Full Benefit Dual Eligible (FBDE) Parameters: 2015 2014 2013 2012 2011
   Deductible $0.00 $0.00 $0.00 $0.00 $0.00
   Copayments for    Institutionalized    Beneficiaries $0.00 $0.00 $0.00 $0.00 $0.00
Maximum Copayments for Non-Institutionalized Beneficiaries
    Up to or at 100% FPL:
        Up to Out-of-Pocket Threshold
      Generic/Preferred       Multi-Source Drug $1.20 $1.20 $1.15 $1.10 $1.10
      Other $3.60 $3.60 $3.50 $3.30 $3.30
     Above Out-of-Pocket      Threshold $0.00 $0.00 $0.00 $0.00 $0.00
    Over 100% FPL:
        Up to Out-of-Pocket Threshold
      Generic/Preferred       Multi-Source Drug $2.65 $2.55 $2.65 $2.60 $2.50
      Other $6.60 $6.35 $6.60 $6.50 $6.30
     Above Out-of-Pocket      Threshold $0.00 $0.00 $0.00 $0.00 $0.00
Part D Full Subsidy – Non Full Benefit Dual Eligible Full Subsidy Parameters: 2015 2014 2013 2012 2011
Eligible for QMB/SLMB/QI, SSI or applied and income at or below 135% FPL and resources < $8,580 (individuals) or < $13,620 (couples) (4)
   Deductible $0.00 $0.00 $0.00 $0.00 $0.00
    Maximum Copayments up to Out-of-Pocket Threshold
      Generic/Preferred       Multi-Source Drug $2.65 $2.55 $2.65 $2.60 $2.50
      Other $6.60 $6.35 $6.60 $6.50 $6.30
   Maximum Copay above    Out-of-Pocket    Threshold $0.00 $0.00 $0.00 $0.00 $0.00
Partial Subsidy Parameters: 2015 2014 2013 2012 2011
Applied and income below 150% FPL and resources between $8,581-$13,300 (individuals) or $13,621-$26,580 (couples) (category code 4) (4)
   Deductible $66.00 $63.00 $66.00 $65.00 $63.00
   Coinsurance up to    Out-of-Pocket    Threshold 15% 15% 15% 15% 15%
    Maximum Copayments above Out-of-Pocket Threshold
      Generic/Preferred       Multi-Source Drug $2.65 $2.55 $2.65 $2.60 $2.50
      Other $6.60 $6.35 $6.60 $6.50 $6.30


(1) Total Covered Part D Spending at Out-of-Pocket Threshold for Non-Applicable Beneficiaries – Beneficiaries who ARE entitled to an income-related subsidy under section 1860D-14(a) (LIS)

(2) Total Covered Part D Spending at Out-of-Pocket Threshold for Applicable Beneficiaries – Beneficiaries who are NOT entitled to an income-related subsidy under section 1860D-14(a) (NON-LIS) and do receive the coverage gap discount. For 2015, the weighted gap coinsurance factor is 90.693%. This is based on the 2013 PDEs (85.9% Brands & 14.1% Generics)
(3) The Catastrophic Coverage is the greater of 5% or the values shown in the chart above. In 2015, beneficiaries would be charged $2.60 for those generic or preferred multisource drugs with a retail price under $52 and 5% for those with a retail price greater than $52. As to Brand drugs, beneficiaries would pay $6.60 for those drugs with a retail price under $132 and 5% for those with a retail price over $132.
(4) The actual amount of resources allowable may be updated for contract year 2015.

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 Medicare and Medicaid drug capsules

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7 Responses

  1. Prescription Drug Benefit Survey: [Most employers spend 16% or more of their healthcare budget on pharmacy benefits for their employees]

    Buck Consultants at Xerox recently released the fifth annual “Prescription Drug Benefit Survey”. Here’s what they found:

    • 77% of employers spend 16% or more of their healthcare budget on employee pharmacy benefits.
    • Almost 5% of employers spend more than 30% on pharmacy.
    • A specialty drug costs at least $2,500 per month or $75,000 per year.
    • 22% of respondents do not know the portion of drug spend attributed to specialty medications.
    • Utilization management programs, like prior authorization, are used by 77% of responders.

    Source: Buck Consultants, February 25, 2015


  2. Percent of Enrollees Paying Part D Medicare’s Income-Related Premiums

    According to an issue brief by the Kaiser Family Foundation, an estimated 5% of the 42.2 million Medicare beneficiaries enrolled in Part D plans pay higher income-related amounts in addition to their specific Part D plan monthly premium amounts. Below is the data:

    Of the 2.1 million Part D enrollees who pay the Part D income-related premium:

    • 0.8 million (2%) pay 35% of Part D program costs.
    • 0.7 million (2%) pay 50% of Part D program costs.
    • 0.2 million (1%) pay 65% of Part D program costs.
    • 0.4 million (1%) pay 80% of Part D program costs.

    Note: Data is from 2015.


  3. Drug costs

    Thanks to government and pharmaceutical spending on medical research, several drugs have been created to give those facing serious illness hope. But, while the creation of these drugs are a wonderful thing to those suffering the economy is paying.

    Specialty drugs can cost more then $600 per treatment, $4,000 or more a month and can reach expenditures up to $100,000 a year. By 2020 the overall spending for specialty drugs could potentially reach $400 billion, or 9.1% of national health spending. In 2009, .12 cents out of every dollar spent went to specialty drugs. Now, that amount has risen to .32 cents out of every dollar.

    But what does the increase of prices for specialty drugs have to do with anything, when most individuals have a health plan that pay for medical expenditures?

    Employer based health plans could cause employees to see a change of benefits, increasing deductibles and overall shifting of the more expensive bills being passed towards the employee. Employees have responded to this thought in the sense that they have put a cap on their contributions to their premium and have even left the academic medical centers for services from their community hospital to avoid paying higher bills.

    Most health plans have required help from PBMs (Pharmacy benefit managers) in negotiating cost of drugs and in the long run, saving money. Currently, PBM’s advice towards the rising prices is have insurers, employers and their other customers offer patients to try other drugs and increase care management. But, narrowing of drug formularies’ are requiring patients and physicians to choose from a more condensed list. Forcing patients to chose options that may be worrisome to those facing serious illnesses.

    Sovaldi, the hepatitis C drug, cost around $1,000 per pill. This pill has been deemed as a miracle for those facing this illness. But if lists are condensed, patients are forced to chose and they cannot afford to pay out of pocket; it could mean patients facing hepatitis C to choose a cheaper drug, to save money. But the cheaper, older drugs do not always give out the same benefit as the new. They could be choosing an option that will cause more suffering and may in fact have increase in direct costs.

    Specialty drugs will continue to come forward and introduce their selves into the healthcare world, their goal to help those in need is a wonderful thing. The price tag that is tagged along with the benefits given by the drugs, will cause a lot of expenditure issues for Medicare and Medicaid beneficiaries and others covered by private insurers. Unless various stakeholders gather and cohesively design a sustainable solution, prices for specialty drugs will continue to rise along with the price to control illness will be a never ending battle.

    Vicky Parikh MD MPH
    [Executive Director, Reliance Health Executive Director and the
    Mid-Atlantic Medical Research Centers]


  4. 58% of Part D Covered Drugs Subject to Coinsurance

    Avalere recently conducted an analysis on prescription drug coverage for Medicare Part D (PDPs) and Medicare Advantage (MA-PDs) plans. Here are some key findings from the report:

    • The percentage of covered drugs facing coinsurance rose from 35% in 2014 to 58% today among PDPs.
    • 24.6 million Medicare beneficiaries are currently enrolled in PDPs.
    • 96% of PDP members are enrolled in plans with more than 1 tier requiring coinsurance, vs. 39% in 2014.
    • Medicare rules cap the amount of coinsurance for specialty tiers at 33% of the cost of the product.
    • The maximum cap on non-preferred brand tiers is 50%, while preferred brand tiers are capped at 25%.
    • Medicare Advantage plans currently charge coinsurance for 26% of covered drugs.

    Source: Avalere, March 10, 2016


  5. Part D 2018

    Annual Part D Medication costs of $3,919 for 2017 and $3967 for 2018.



  6. Medicare Donut Hole 2020 Update

    via Ann Miller RN MHA


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