Medicare-Endorsed Drug Discount Card Program FAQs
A new Medicare-endorsed drug discount card program could bring financial relief to low income seniors and to disproportionate share hospitals and clinic pharmacies that serve these patients. The Medicare law, which was enacted in December 2003, directed the government to implement a discount card plan by June 2004 that would enable Medicare enrollees to purchase pharmaceuticals at 10-25 percent off of retail prices.
The government has selected 28 private companies to operate the various discount cards enrollment is scheduled to begin in May. The companies will offer 49 different cards, 30 of which will be available to all Medicare beneficiaries; 19 are regional or state-based cards. In addition, the government has approved 43 sponsors representing 84 Medicare Advantage managed care plans to offer discount programs exclusively to their members.
The card program will also include a $600 subsidy for low-income beneficiaries. The low-income program could potentially bring in a new source of revenue for hospital pharmacies that serve large volumes of low income patients. Beneficiaries with annual incomes under 135 percent of the federal poverty line ($12,569 for singles or $16,862 for married) and are not enrolled in Medicaid (or other insurance coverage) will qualify for the $600 subsidy. Of the 7.3 million beneficiaries that are expected to sign up for the program, the government predicts 4.7 million will be eligible for the $600 subsidy.
Although it is unlikely that the discounts obtained under the card programs will be lower than 340B-discounted prices, pharmacies must participate in a particular beneficiary’s card program in order for them to receive the $600 reimbursement from the card sponsor. To help our members better understand how the program will work and how it may impact 340B hospital pharmacies, PHPC has produced a Frequently Asked Questions (FAQ) document about the drug discount card program. PHPC has prepared an expanded version of the FAQ on the members- only section of the PHPC website that addresses specific concerns for 340B hospitals.
If you are a member of PHPC with a specific question not addressed in this section, e-mail Ellyn Seestedt at Ellyn.seestedt@safetynetrx.org with your question. We will publish the question and response (without identifying information) on the website unless you specifically request that it not be publicly displayed.
What is the Medicare drug discount card?
Who is eligible to use the discount card?
What is the $600 “transitional assistance” benefit?
Are eligible Medicare beneficiaries required to join the discount card program?
What are the standards for becoming a card sponsor?
Are discount card plans required to cover all drugs?
What kind of assistance does the discount card offer to Medicare beneficiaries?
How do beneficiaries enroll in the discount card program?
How do beneficiaries apply for the $600 “transitional assistance”?
What if beneficiaries do not use the entire $600 subsidy in 2004? Does it expire?
May beneficiaries use a discount card if they participate in a State pharmacy assistance program?
May beneficiaries change discount cards?
May beneficiaries enrolled in Medicare managed care plans receive discount cards?
Will beneficiaries be able to review and compare drugs covered by competing drug card plans?
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Are pharmacies required to participate in the drug discount card program?
Are pharmacies based in 340B hospitals permitted to participate?
How can a pharmacy enroll in the program?
Is a pharmacy allowed to sign up with more than one discount card sponsor?
Is a sponsor allowed to turn away pharmacies that would like to join its program?
How can a pharmacy view which drugs are on a particular discount card’s formulary?
Are there drugs excluded from coverage under the discount card?
Does the discount card apply to drugs currently reimbursable under Medicare Part A or B?
Does the discount card program promote generic substitution?
May a 340B hospital outpatient pharmacy dispense to cardholders drugs purchased through the 340B program?
At what price may the pharmacy charge the cardholder?
Are there special rules governing how a pharmacy must charge for drugs purchased through 340B?
How is the pharmacy paid for its services and what is the payment arrangement?
What happens if the pharmacy fills a prescription for a cardholder that belongs to a discount card plan in which the pharmacy does not participate?
Is the pharmacy required to direct the beneficiary to a participating pharmacy if it doesn’t participate in the beneficiary’s discount card plan?
What happens if the pharmacy fills a prescription with a drug not covered by a discount card’s formulary?
May a sponsor change the drugs covered under its formulary and change the prices that may be charged?
May the pharmacy ask the beneficiary to use his or her $600 subsidy to pay for the pharmacy’s drugs if the drug is not covered by a discount card’s formulary?
May the pharmacy waive a cardholder’s co-pay?
May a card sponsor obligate participating pharmacies to give discounts on other items such as over-the-counter drugs and durable medical equipment?
BACKGROUND
As a result of the Medicare reform and prescription drug legislation enacted on December 8, 2003, Medicare will begin offering a Medicare Part D drug benefit to beneficiaries. However, the drug benefit will not be in operation until January 2006. As an interim means to lowering drug costs for Medicare beneficiaries, the legislation gives most Medicare beneficiaries access to temporary prescription drug discount cards that are expected to reduce drug costs by approximately 10-25 percent below retail prices. The card program will begin on June 1, 2004 and will end in January 2006 when the Part D drug benefit begins. Medicare beneficiaries with income levels at or below 135 percent of the federal poverty line (FPL) will be eligible for a $600 subsidy in 2004 and an additional $600 in 2005.
All Medicare beneficiaries except for those dually enrolled in Medicaid and Medicare or beneficiaries enrolled in a State waiver program that provides prescription drug coverage (i.e. Pharmacy Plus waiver).
The discount card program offers “transitional assistance,” or a subsidy, for certain low income beneficiaries. Medicare will provide $600 in 2004 and up to an additional $600 in 2005 to Medicare beneficiaries whose incomes are equal to or lower than 135 percent of the FPL ($12,569 for single individuals or $16,862 for married individuals in 2004 - these income levels will vary slightly for subsequent years) if they do not have certain other drug coverage, including Medicaid, TRICARE, group health insurance or health private insurance coverage, or FEHBP. Generally, once a person qualifies for the $600 subsidy, he or she is qualified until the new Medicare drug benefit begins. When applying the $600 toward prescription drug purchases, beneficiaries at or below 100 percent of FPL will pay 5 percent coinsurance and beneficiaries above 100 percent of FPL will pay a 10 percent coinsurance. Of the 7.3 million beneficiaries that are expected to sign up for the program, the government predicts 4.7 million will be eligible for the $600 subsidy.
No. The card program is voluntary for all beneficiaries. However, those enrolled in Supplemental Security Income (SSI) program are presumed to be eligible for the $600 subsidy and will be notified about their presumptive enrollment.
Twenty-eight private companies (sponsors) have been selected by the government to operate the program. Some card sponsors will be offering more than one card program for seniors and people with disabilities, with a total of 49 different card programs generally available. Thirty of these cards will be available nationwide to all eligible beneficiaries nationwide, and the remaining 19 will only be offered to eligible beneficiaries living in specified service areas. In addition, 43 sponsors, representing 84 Medicare Advantage HMO plans (formerly Medicare+Choice), will offer cards to the beneficiaries enrolled in their health plans. To see a list of sponsors, click here.
There are several different categories of cards including the following: national cards, regional cards, State cards, and separate cards for beneficiaries enrolled in Medicare Advantage HMOs, long term care facilities, or Indian health, or who reside in the U.S. Territories.
Beneficiaries may enroll in only one Medicare-endorsed drug discount card program. If a State or other entity has a non-Medicare card, the beneficiary may enroll in that card, but they may not “combine” the discounts.
The discount card will be offered by private, non-governmental sponsors. Medicare itself will not operate its own discount card program. Most discount card sponsors are pharmacy benefit managers (PBMs). In addition to PBMs, some sponsors are insurers, pharmacy delivery systems and pharmaceutical manufacturers.
In order to operate a Medicare drug discount card program, sponsors must have one million covered lives already in a pharmacy benefit program, have three years experience in operating a discount card program, and meet the business stability and integrity requirements established by the Centers for Medicare & Medicaid Services (CMS). Multiple organizations were able to combine capabilities to meet card sponsor requirements, such as the joint program called Pharmacy Care Alliance, developed by the National Association of Chain Drug Stores and ExpressScripts.
Sponsors must have a network that is large enough to provide convenient access to beneficiaries. The access requirements are as follows: (1) in urban areas, 90 percent of Medicare beneficiaries must live within 2 miles of a participating pharmacy; (2) in suburban areas, 90 percent of Medicare beneficiaries must live within 5 miles; and (3) in rural areas, 70 percent of beneficiaries must live within 15 miles.
Discount card programs may offer a mail order option in addition to their contracted retail pharmacy network, but they are prohibited from providing a mail order only program, and they may not require enrollees to use mail order pharmacies.
No. Sponsors have established formularies so that they can negotiate deeper discounts on certain drugs in exchange for placing those drugs on their formularies. Medicare has established that each card must carry a minimum of one drug within each of 209 therapeutic classes. There are incentives for card sponsors to include more than one drug in each class, but there is no guarantee that a particular drug will be on a drug card’s formulary. In addition, sponsors may change their formularies at any time.
What kind of assistance does the discount card offer to Medicare beneficiaries?
Starting June 1, 2004, Medicare beneficiaries will be given a choice to sign up with a discount card program that will give them access to brand name and generic drugs priced at approximately 10-25 percent below retail prices. Because discount card sponsors are permitted to use formularies, beneficiaries will not be able to use their cards for any drugs, just those available on the sponsor’s formulary. However, patients should have a choice of at least one drug in every therapeutic category. The anticipated 10-25 percent discount is modest compared to 340B prices which are less than half of retail prices.
In early April 2004, the Department of Health and Human Services (HHS) will publish a guide on how to access the discount card program. The guide will be available electronically at www.Medicare.gov and in printed form by calling 1-800-MEDICARE. HHS will also work with State agencies to distribute educational material to seniors. Two or three weeks later, HHS will mail a shorter overview of the program to every Medicare household. In May, beneficiaries will begin to receive enrollment material from various sponsors. To enroll, the beneficiary will select the discount card program of his or her choice and submit basic information to the card’s sponsor using an enrollment form that also requires disclosure of the patient’s Medicare and Medicaid status.
Beneficiaries interested in applying for the $600 subsidy must submit a separate application. The Social Security Administration will mail information to Medicare beneficiaries who are likely to be eligible for the $600 credit based on their Supplemental Security Income (SSI) status. Individuals must have an income of less than 135 percent of the FPL in order to qualify for transitional assistance.
Sponsors can charge an enrollment fee of up to $30 per year. Many sponsors are waiving or discounting the enrollment fee to boost enrollment. For low income seniors, the enrollment fee is customarily waived.
Beneficiaries may access the $600 subsidy upon initial enrollment or at any time following enrollment. Beneficiaries must submit income information, answer questions regarding their retirement and health benefits, and attest that their income is below 135 percent of the FPL. While beneficiaries are not required to submit tax forms with their initial applications and income information for the subsidy, tax forms may be required if eligibility is denied and a beneficiary whishes to appeal the denial.
Applications for transitional assistance are submitted to CMS. CMS will verify the information in the applications and notify the approved discount card program of the beneficiary's eligibility and enrollment outcome. After a beneficiary is enrolled, he or she may start using the $600 subsidy to purchase prescription drugs on the first day of the following month.
Individuals found to be ineligible for either the discount card or the $600 subsidy may request a reconsideration if they continue to believe that they qualify.
Beneficiaries qualifying for transitional assistance may purchase any non-formulary drug with the $600 benefit, except for the drugs explicitly excluded from coverage under the discount card program (e.g., barbiturates). The cost of non-formulary drugs is likely to be more expensive though, so beneficiaries will have an incentive to buy drugs on the formulary.
If a beneficiary seeks a non-formulary drug after using up the subsidy, he or she must either switch to a formulary drug to take advantage of the discount card discount or pay the usual and customary price charged by the pharmacy for the non-formulary drug.
Regardless of whether a drug is on or off formulary, a beneficiary can only use his or her $600 subsidy to purchase a drug if the purchase is made at a pharmacy participating in the beneficiary’s particular discount card program. Beneficiaries may not use the subsidy at a pharmacy that does not participate in their drug discount card’s program.
To encourage Medicare beneficiaries to enroll in the program quickly, while allowing sufficient time for beneficiaries to learn about the drug card program and their option to join, CMS will provide eligible low income beneficiaries with the full $600 subsidy in 2004. In most cases, funds made available but not spent in one calendar year may carry over into the following year and remain available for use through early 2006.
If a beneficiary applies for transitional assistance in 2005, the $600 will be prorated depending on when a beneficiary first applies for the funds. The $600 will be reduced for late enrollees every quarter by $150 starting in April 2005.
Many States operate State pharmacy assistance programs (SPAPs) which subsidize the cost of prescription drugs for low income elderly patients. SPAPs are generally funded by State revenue, patient co-pays and deductibles, and manufacturer rebates. Medicare beneficiaries enrolled in SPAPs may sign up for a discount card, although this opportunity does not extend to beneficiaries enrolled in Medicaid or a Medicaid-approved waiver program that provides drug benefits, such as the MaineRx program. SPAPs may, at an individual State’s discretion, provide for payment of the enrollment fee and/or the coinsurance for beneficiaries receiving transitional assistance. States offering discount cards, such as Arizona’s CoppeRx, may at the State’s option offer to pay the enrollment fee and/or reimburse for coinsurance.
An eligible beneficiary may enroll in an approved discount card program at any time after May 1, 2004. After the initial election, the beneficiary is locked into his or her program until 2005 when the beneficiary may choose a different card program during a coordinated election period between November 15 and December 31, 2004.
In addition, a beneficiary may change cards during a special election period under certain circumstances, such as if the beneficiary has a change in residential status to a long term care facility, moves outside of the area served by the beneficiary's approved program, or elects to enroll or disenroll from a Medicare managed care plan.
Eighty-four Medicare Advantage plans (formerly called Medicare + Choice plans) will offer discount card programs exclusively to their managed care plan members. For a list of these plans, click here. These managed care enrollees are automatically signed up for the exclusive cards sponsored by their health plans. They may opt out of their plan’s card program, but then they may not enroll into an alternative discount card program. In wrapping the discount card around the plan's drug benefit (if any), the plan can apply the $600 transitional assistance toward drug benefit co-payments and deductibles, as well as apply the balance of the $600 to additional drugs that either are not covered under the plan's benefit or exceed the plan's benefit cap.
Medicare will establish a price comparison website starting in May 1, 2004, that will provide a mechanism for Medicare beneficiaries to compare negotiated prices, enrollment fees, and other card program features. Beneficiaries may also access the price lists by calling 1-800-MEDICARE. The prices displayed on the CMS website will be a drug's maximum price for an approved sponsor's service area. Actual prices may vary, but will not be more than the posted prices. The published prices relate to how much beneficiaries can expect to pay for their drugs, not the cost of the drugs to the participating pharmacies.
Three Medicare-approved drug discount card sponsors - Long Term Care Pharmacy Alliance, PBM Plus and Computer Sciences Corporation - have received "special endorsements" to provide card programs and transitional assistance to residents of long term care facilities through the sponsors’ long term care pharmacy networks. Computer Sciences Corporation also received a special endorsement to serve American Indians and Alaska Natives who use Indian Health Service, Indian Tribe and Tribal Organization, and Urban Indian Organization pharmacies.
A special endorsement to provide discounts only (not transitional assistance) was also granted to sponsors who serve residents of the U.S. Territories, which include American Samoa, Commonwealth of the Northern Mariana Islands, Guam, Commonwealth of Puerto Rico, and the Virgin Island, through retail pharmacies in these regions and sponsors’ mail order programs.
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