Government Issues Final Rules for the Medicare Prescription Drug Benefit
Some Significant Improvements Are Made but a Number of Concerns Remain

Summary
On Friday, January 21st, the Centers for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services issued the final regulations regarding the new Medicare prescription drug benefit. In these final regulations, CMS has made some significant improvements to the proposed version issued last summer, but a number of the concerns raised by NMHA in our comments to the proposed regulations have not been adequately addressed.

Background
Last December, Congress passed legislation to establish a Medicare prescription drug benefit that is scheduled to go into effect in January 2006. To receive this voluntary new benefit, Medicare beneficiaries will have to enroll in either a private drug plan (PDP) that only covers medications or leave the Medicare fee-for-service program and join a managed care plan (MA-PDP) covering all Medicare benefits including medications. Beneficiaries will have to pay premiums estimated at $35 a month for basic coverage as well as a $250 deductible and cost-sharing of 25% for the next $2,000 in drug costs. No coverage will be provided for drug costs between $2,250 and $5,100. For drug costs over $5,100, beneficiaries will receive catastrophic coverage and will have to pay either 5% co-insurance or $2 to $5 co-pays whichever is greater.

Low-income beneficiaries will receive more generous coverage. They will not be subject to the large gap in coverage and will have lower cost-sharing requirements. Individuals eligible for both Medicare and Medicaid (i.e., the dual eligibles) currently receive prescription drug coverage through their states' Medicaid programs, but their drug coverage will be transferred from Medicaid to Medicare beginning January 1, 2006. They will have to enroll in the lowest cost plans offered in their areas in order to avoid having to pay premiums, and these plans may have very restrictive formularies.

Summary Chart of Medicare Drug Benefits

¹And assets below $10,000 for individuals and below $20,000 for couples.
²And assets below $6,000 for individuals and below $9,000 for couples.

Last summer, CMS issued proposed regulations implementing the new Medicare drug benefit in response to which NMHA developed and submitted detailed comments in early October. CMS received almost 7,700 sets of comments.

Overview of Key Issues in the Final Regulations
 CMS has made some significant improvements to the proposed rule but many concerns remain:

Appeals:

CMS has considerably shortened the deadlines plans must meet for appeals of coverage denials and requests for exceptions from formulary restrictions and cost-sharing tiers. For example, standard determinations and exceptions (the first level of appeal), decisions must be made in 72 hours instead of 14 days as provided in the proposed regulations. For expedited determinations and exceptions requests, the deadline will be 24 hours instead of 72 hours as CMS previously proposed.

CMS has declined to require that plans cover the medication at issue while a beneficiary appeals a coverage denial or restriction which NMHA had urged in our comments to the proposed rule.

Formularies:

CMS declined to provide special exemptions from restrictive formularies for mental health medications in the final regulations. CMS does indicate, in non-binding formulary review guidance that accompanied the final rule, that national treatment guidelines for depression, bipolar, and schizophrenia will be used as benchmarks for evaluating proposed formularies. In this non-binding guidance document, CMS also indicates that plans may be required to include a majority of antidepressants, antipsychotics, and anticonvulsants in their formularies.

CMS extended the amount of notice that plans must give enrollees before they make a change to their formularies from 30 days to 60 days.

Although CMS declined to require plans to "grandfather" coverage of mental health medications on which beneficiaries have been previously stabilized, it did add a requirement that plans establish a transition process for new enrollees prescribed Part D medications that are not on the new plan's formulary. CMS states that these transition policies should focus on vulnerable populations including dual eligibles and people with mental illness.

Involuntary Disenrollment:

Although CMS made some improvements to provisions allowing plans to involuntarily disenroll beneficiaries for disruptive behavior, NMHA continues to have grave concerns regarding the discriminatory impact this provision will have on individuals with mental illness and the fact that CMS declined to ensure that those beneficiaries subjected to disenrollment will continue to have access to prescription drug coverage.

CMS has made a number of improvements to the definition of disruptive behavior but the definition included in the final rule is still not as protective of beneficiaries as the definition in the preexisting Medicare+Choice (M+C) regulations.

CMS states that individuals with mental illness warrant special consideration, but it declined to provide a special enrollment period for individuals disenrolled for disruptive behavior. CMS states that it may include a special enrollment period or require the plan to continue coverage until the annual enrollment period when the beneficiary may change plans. However, this language is not included in the regulatory text. Since CMS is establishing new special enrollment periods for enrollees in a number of other situations, it is unclear why it refuses to provide this essential protection for individuals disenrolled for disruptive behavior.

Transfer of Coverage for Dual Eligibles:

We continue to have grave concerns regarding the transfer of prescription drug coverage for dual eligibles from Medicaid to Medicare. In the final rule, CMS pushed the date for beginning automatic enrollment of the duals to begin as soon as it is determined which plans will be participating in Part D (which is likely to be some time in September). However, CMS states that it will not be able to ensure that the plans into which the dual eligibles are auto-enrolled adequately address their needs. Instead, CMS will try to ensure these beneficiaries and "community organizations" have the information needed in a timely manner to determine the most appropriate plan for each beneficiary. In addition, CMS clarifies that the dual eligibles will have the ability to change plans whenever they want. However, the federal assistance with cost-sharing that will be provided to the dual eligibles will only cover the premium for the lowest cost plan in their area which may well not offer adequate coverage.

CMS declined to include a "grandfathering" requirement in the final rule to protect dual eligibles from harmful gaps in coverage or being forced to abruptly switch medications. Instead, the final rule requires plans to have transition processes to help dual eligibles and other enrollees transfer from existing coverage. This transition process requirement is vague and does not specifically require continued coverage for any length of time for those already stabilized on specific medications.

CMS specifically states that it cannot delay the transfer of the dual eligibles or extend Medicaid coverage beyond January 2006 without a statutory change. NMHA will pursue legislative changes at the state and federal levels to allow Medicaid coverage for dual eligibles to be extended either with federal matching funds or state-only funding.

Please contact Kirsten Beronio at kberonio@nmha.org or 202-675-8413 if you have any questions about the new regulation.