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September, 2006:
:: Did you receive an erroneous Part D premium reimbursement?
:: Review of Medicare Coverage Options
:: Part D Definitions - Enrollment Periods
:: Refresher: What to do (and not do) when you are in the Donut Hole (Coverage Gap) for my 2006 Plan?
:: Reminder - A Medicare Part D Plan’s List of Covered Medications (Formulary) Can Change
:: Update: Part D Scams!
:: Closing Notes
Did you receive an erroneous Part D premium reimbursement?
Short Summary:
If you received a reimbursement of your Medicare Part D premiums and then a letter from the government explaining the mistake and asking that you return the money - you may want to explore your options before returning the reimbursement. The repayment issue is not resolved and you may actually be entitled to keep the refund. For further information, please contact CMS (1-866-292-8080) and ask about your rights and obligations with respect to repaying the erroneous refund.
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The Details: A mistaken Part D premium refund was paid? How did this happen?
In early September, a number of our clients contacted us about receiving Medicare Part D premium refunds - a bit of a surprise to us all. In fact, Over 230,000 Medicare Part D beneficiaries were erroneously reimbursed by the Center for Medicare and Medicaid Services (CMS) for their Medicare prescription drug benefit premium.
How much money was involved? Beneficiaries were reimbursed for nearly 50 million dollars in Medicare Part D premiums. Many of these 230,000 beneficiaries were reimbursed by direct deposit into their bank accounts. Most of these beneficiaries also received a letter stating that the Social Security Administration will no longer deduct the monthly prescription drug benefit premium from their Social Security checks. This letter also was in error, and premiums will continue to be deducted.
To correct this mistake, the Center for Medicare Services (CMS) began sending letters to all of the beneficiaries receiving refunds outlining their options for returning the money. CMS also opened a toll-free number so beneficiaries can receive more information about this error and who was affected.
What to do? Right now this is an open question – there is a possibility that beneficiaries may be able to keep their reimbursement - but please don’t spend that money yet! As noted, in late August, CMS asked that the mistaken refunds should be repaid to the government. However, this week two consumer advocacy groups have sued the government alleging that at least a portion of the 230,000 Medicare beneficiaries erroneously sent refunds should not be required to repay these refunds. As reported by Kevin Freking of the Associate Press:
"The Center for Medicare Advocacy Inc. said Monday that federal law allows for waiver of [overpaid refunds] when the beneficiary is not at fault in the overpayment. The organization said it tried to forestall the litigation by asking the government to redraft a letter sent to seniors that included notice of their rights to a waiver in certain circumstances. In response to the lawsuit, the Centers for Medicare and Medicaid Services agreed Monday to stop mailing letters seeking the refund and to remove all material concerning the recovery of overpayments from its Web site. A lawyer called the actions an important first step. "The next steps are for CMS to return monies already repaid and inform all beneficiaries who received the incorrect refunds of their right, under federal law and the U.S. Constitution, to seek waiver of recovery," said Gill Deford of the Center for Medicare Advocacy. A CMS spokesman confirmed that the agency agreed not to send out any more letters about the refund and amended its Websites. The spokesman, Jeff Nelligan, said in this case, a waiver of recovery does not apply, but he did not elaborate."
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At the end of August, CMS began writing Medicare beneficiaries asking that if they received an erroneous payment, they should return it by one of the following means:
(1) Write "VOID" on the face of the check they received in error and mail it to Medicare Drug Premiums, P.O. Box 9058, Pleasanton, CA 94566-9058 or
(2) Mail a personal check or money order payable to Medicare (please note on the check the Medicare account number and send it to the same address) or
(3) Call the toll-free number to arrange for an electronic transfer directly from a bank account back to the federal government (1-866-292-8080 - Weekdays 7AM to 9PM EDT).
Medicare offered to arrange for a monthly installment plan of up to seven months to make the full repayment, to set up this plan, beneficiaries were asked to call the same toll-free number (1-866-292-8080).
CMS also originally asked that payments are returned or arrangements for reimbursements made by Saturday, September 30th.
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Do not expect to receive a telephone call about the error; CMS will make no calls to individuals who have received this erroneous payment. As always, if you do receive a call, please DO NOT give personal information to anyone calling who claims to offer assistance with this repayment to the federal government. Any calls to you could be fraudulent and may result in identity theft.
The Center for Medicare Services (CMS) is adding some "additional checks" on data in the future to ensure that this reimbursement error is not repeated.
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Review of Medicare Coverage Options
Original Medicare - The term "Original Medicare" is often used to describe your normal Medicare A and B benefits. If you have Medicare Part A and/or B coverage you can purchase a Medicare Part D (PDP) plan. If you have Medicare A and B you can also purchase a Medicare Supplement to cover a portion of the costs not covered by Original Medicare or you can enroll in a Medicare Advantage Plan (with or without Prescription Drug coverage).
PDP - Stand-alone Medicare Part D Prescription Drug Plans (PDPs) provide reduced-cost prescription drug coverage to Medicare recipients. Medicare Part D plans work together with Medicare Part A and Part B, as well as Medicare Supplements and Medicare Advantage (MA) plans that do not provide prescription drug coverage. Annual Enrollment periods for PDPs run from Nov 15 through Dec. 31, with January 1 as the plan starting date.
MA / MA-PD - Medicare Advantage Plans (MAs) and Medicare Advantage Plans with Prescription Drug Coverage (MA-PDs) are private plans that provide doctor and hospital services in place of Medicare and Medicare pays these private companies to manage the healthcare instead of paying for the beneficiary claims directly. Examples of MAs or MA-PDs that administer your Medicare Part A and Part B, as well as possibly providing Prescription Drug coverage are: Health Maintenance Organizations (HMOs), Private, Fee for Service Organizations (PFFS), or Preferred Provider Organizations (PPOs). Typically, the MA-PDs also provide additional value-added service to its Members such as additional covered days in the hospital. If you purchase a MA-PD plan, you do not need to purchase a PDP plan (see above) nor do you need a Medicare Supplement.
Medicare Supplements - Medicare Supplements or MediGap Plans provide additional coverage to your Original Medicare plans (Medicare A and B). For instance, Medicare Supplements will pay a portion of your Medicare Co-insurance. There are a series of Medicare Supplements that provide a variety of coverage options at varying premiums. Stand-alone Prescription Drug Plan (PDP) can be used together with your Medicare Supplements. A Medicare Advantage Plan (MA or MA-PD) cannot be used with a Medicare Supplement.
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Part D Definitions - Enrollment Periods
Do you still remember when you completed your 2006 Medicare Part D application? Some of you may still recall a few abbreviations on your Part D enrollment form that your agent explained as enrollment period designations - they may have been things like: IEP, AEP, OEP, and SEP.
These abbreviations will play a somewhat more important role in this year’s enrollment period and completing the wrong enrollment period designation may delay the processing of your 2007 application.
The IEP or "Initial Enrollment Period" was the period we just went through in 2005-2006 and covered November 15, 2005 until May 15, 2006. The IEP provided the initial opportunity for existing Medicare recipients to enroll into the Medicare Part D plans. Please note, for those persons who had already qualified for Medicare, the IEP also acted as the first AEP or Annual Election Period (see below). If you enrolled in the IEP, you should have received coverage beginning the first of 2006 (if you enrolled in 2005) or the first day of the month after your enrollment in 2006.
For those persons who are just turning 65 or just becoming eligible for Medicare, the Initial Enrollment Period (IEP) is a seven (7) month period that extends three (3) months before the month when a person reaches 65, plus the month where the person turns 65, plus the three (3) month period after the person turns 65. (Please note, this is the same 7 month period during which a beneficiary can also enroll in the Medicare Part B program). If you enrolled in the months before turning 65, your Part D policy begins the first day of your birthday month. If you enrolled during or after your birthday month, your Part D plan begins the first day of the next month.
Eligible Medicare Part D beneficiaries who did not enroll during their IEP now face a life-time monthly premium penalty.
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The AEP or "Annual Election Period" is the annual period from November 15 until December 31 when a Medicare beneficiary can enroll into a Medicare Part D plan or re-enroll into their existing Medicare Part D Plan or change into another Medicare Part D plan. Beneficiaries can also switch to a Medicare Advantage Plan that also has a Prescription Drug plan (MA-PD). The chosen Medicare Part D plan coverage begins on January 1st.
During the OEP or Open Enrollment Period, which runs from January 1 until March 31, Medicare beneficiaries can make additional choices regarding Medicare Advantage plans. Medicare beneficiaries who have both Medicare A and Medicare B, and who have enrolled in a Medicare Part D plan (PDP) can switch to a Medicare Advantage plan (MA-PD) - Please note however, in the OEP, you may not move to another stand alone PDP. Medicare Beneficiaries who already have a MA-PD can switch to another MA-PD or they can switch back to traditional Medicare and a stand-alone PDP. MA-PD members are not allowed to switch to a MA plan without a prescription drug plan. If a Medicare Beneficiary is in a MA plan without prescription drug coverage, they are not able to switch to a MA-PD (Medicare Advantage plan with prescription drug coverage).
The SEP or Special Election Period is the time period granted to Medicare beneficiaries who are allowed to change plans outside of the normal AEP. Examples of people who are granted an SEP are: Medicaid recipients (dual-eligibles), Victims of Hurricane Katrina, or Medicare beneficiaries who are no longer part of a creditable prescription drug plan (such as when their individual plan no longer exists). When someone involuntarily loses their existing benefits, they have a 60 day SEP during which they are able to enter into another Medicare Part D plan. Also, if someone moves out of the service area of their plan (for instance, moving to another state), they will have a 60 day SEP after the move during which they can re-enroll into a Medicare Part D plan.
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Note: Medicare beneficiaries who had Original Medicare and enroll into a MA-PD have a 12-month period (SEP) to disenroll from the MA-PD and return to Original Medicare with a PDP. Also, new MA-PD members have a three month period (OEPNEW) to change to another MA-PD
Bottom Line: Confused by the flood of abbreviations? No problem - your agent will be able to assist you with choosing the correct enrollment period.
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Refresher: What to do (and not do) when you are in the Donut Hole (Coverage Gap) for my 2006 Plan?
Unlike eating a tasty donut, the Donut Hole in the Medicare Part D coverage cannot be avoided by going around it. It is truly the gap in your coverage that spans between ordinary drug coverage and catastrophic drug coverage. In this gap, the Medicare beneficiary pays 100% of their prescription costs. According to the federal government, about 88% of Medicare beneficiaries who enrolled in a Medicare Part D plan do not have Donut Hole (or doughnut hole) coverage. The standard or model Part D coverage begins with a deductible of $250 followed by a co-pay of 25% on the next $2000 (you pay $500). Upon reaching the total medication costs of $2,250 (with $750 out of pocket), coverage ceases and the beneficiary is 100% responsible for all costs during a "blackout period" known as the "Donut Hole" or "Coverage Gap", until a new spending tier, an additional $2,850 out of pocket, is reached and coverage kicks in again at the "Catastrophic" level.
Many plans offer only a slight variation to this calculation, having no initial deductible and medication co-payment instead of co-insurance. Yet, the Coverage Gap still begins when the total retail cost of your covered medications reaches $2,250.
Medications purchased outside of the United States, or medications not included on your plan’s drug list or formulary fall outside of your Part D coverage and are not included in the initial $2,250 or any other Part D calculation.
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How do I know if I am in the Donut Hole?
First, your Part D plan provider should keep track of the retail costs and your monthly statement should provide you with an overview as you approach the $2,250 mark. Some pharmacies may even print these figures on your Medication receipts. However, in reality, some provider statements only show that the price you are now paying for your medications is higher. There is no warning or red flags indicating that you are now in the Coverage Gap. Likewise, there is possibly no indication of where you are with respect to reaching Catastrophic Coverage (or when you will exit the Coverage Gap).
As noted, Medicare Part D beneficiaries remain in the Donut Hole until their true out of pocket (TrOOP) costs exceed $3,600 (for instance, $250 deductible + 25% co-pay on the next $2000 [or $500] + an additional $2,850 out of pocket during the Donut Hole). The $3,600 does not include the portion of your prescription expenses paid by the insurance carrier or your monthly premiums.
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What do I do if I am in the Donut Hole?
So, what do you do if you find yourself in the Donut Hole, knowing that if expenses remain as they are you will not cross to the other side of the Donut Hole by the end of the year?
CMS has published a Tip Sheet for "Bridging the Coverage Gap". One suggestion by CMS is to avoid going into the Coverage Gap by using less-expensive medications or generic versions of Brand Name drugs throughout your plan (and with your physician’s assistance). In addition, Part D beneficiaries can purchase medications in larger quantities (for instance, in a 3 month quantity) and use the plan’s mail order option.
You can find the actual CMS "Bridging the Coverage Gap" document for download on this page:
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:: http://www.q1medicare.com/PartD-Medicare-PartD-PDP-Tips-From-CMS.php
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What do we NOT recommend?
Using Pharmacies Outside your Plan: Some Donut-Hole-bound beneficiaries may decide to shop at less expensive pharmacies not covered by their plan. The bad news is - these purchases are not recorded by your plan and you may not have a chance to reach Catastrophic Coverage. Recall that when you reach the catastrophic level your out of pocket falls to very low levels, $2 per month for generics, $5 per month for name brand medications or 5% of the medication’s retail cost, whatever cost is higher. It would be better to ensure that your plan for 2007 is the most cost-effective (and has a mail order option if you so desire). Remember also, your Medicare Part D plan carrier also has negotiated a discounted retail price for your medications, even when you are in the Coverage Gap.
Buying Medications Outside of the US: Many people we spoke with are thinking of buying medications from pharmacies outside of America. Again; be sure that you have no chance to qualify for the Catastrophic Coverage (see above) because naturally overseas purchases will not count toward your plan’s out-of-pocket expenses. People purchasing prescriptions via the Internet should also be aware that the FDA noted that they cannot guarantee the safety of these drugs. As reported in the news, recent testing done by the FDA has found drugs from some Internet pharmacies to be counterfeit.
Stop Paying: As a last alternative, a few people have written and asked if they can simply stop paying their Part D premiums, lose their coverage, incur the penalties and reapply for coverage starting again in January of the next year. Although this solution could appear to save money in the short term, it would be important to weigh the costs of the lifetime premium penalty.
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Preview: What will the Donut Hole look like in the 2007 Plans?
2007 will bring some increases and changes to Medicare Part D and to the Donut Hole. The initial deductible, now $250 will rise to $265 next year. The Initial Coverage Limit (or beginning of the donut hole) will also rise, from the current $2,250 to $2,400 in 2007. Your true total out-of-pocket costs to the end of the Donut Hole will change from $3,600 this year to $3,850 next year. For those that reach the Catastrophic Coverage Phase (when you have spent a total of $3,850), prescription prices will also rise, from $2 to $2.15 for generic, and from $5 to $5.35 for name brand prescriptions.
For more of a general Preview into the 2007 plans, please see:
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:: http://www.q1medicare.com/PartD-The-2007-Medicare-Part-D-Outlook.php
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Reminder - A Medicare Part D Plan’s List of Covered Medications (Formulary) Can Change
Question - Can my Medicare Part D plan’s list of medications change? Yes - However, please note a plan’s drug list or Formulary can only change with adequate notice to the members of the plan - and this first year (2006), your plan’s Formulary must remain unchanged. For more information see:
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:: http://www.q1medicare.com/PartD-CMSExemptionFromFormularyChanges.php.
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What if your medications are removed from your plan’s Formulary? Remember you have a right to ask for an exception to your plan’s drug list changes. Consult your plan’s Summary of Benefits or Evidence of Coverage documents for more details - or contact your plan’s customer service representatives to learn more about Formulary changes and how to request an exception to the Formulary.
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Closing Notes
Reminder: Important Dates:
October 1, 2006 - Medicare Part D Prescription Drug plan Marketing Activities can begin - At this time you will be able to once again gather information and evaluate the various Part D plan alternatives. Please note, no enrollments may be accepted before November 15, 2006.
November 15 to December 31, 2006 - Annual Coordinated Election Period - Here is your chance to join a Medicare Part D plan (or Medicare Advantage Plan) for 2007. When should you re-enroll? Probably by Mid-December to ensure coverage starting the first of January 2007.
January 1, 2007 - Your 2007 Medicare Part D plan becomes effective and you will be able to begin using your Part D benefits.
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Warning: Do Not Send your Social Security Number in an eMail.
Again, please do not send your Social Security Number in an eMail. Many Medicare beneficiaries trying to check their enrollment status are emailing their Social Security Numbers with the hopes of expediting a response. If you are trying to check your enrollment status, please call your insurance carrier directly (try your carrier’s Customer Service, New Member Services, or Enrollment Services). But sending your SSN in an eMail is unnecessary and could potentially lead to identity theft.
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Last updated on: 07/05/2009
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Life Insurance plays an important role in your families financial stability.
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