Medicare Prescription Drug Benefit: An Overview of Implementation for Dual Eligibles

Publication Date: February 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Health

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Abstract:

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) established a new voluntary prescription drug benefit under a new Medicare Part D. The new benefit was effective January 1, 2006. Prescription drug coverage is provided through private prescription drug plans (PDPs) or Medicare Advantage prescription drug (MA-PD) plans. This new benefit changes the coverage of prescription drugs for the approximately 6 million individuals who are dually eligible for both Medicare and full Medicaid benefits. In the past, these individuals had their drug costs paid by Medicaid. Effective January 1, 2006, their prescription drug costs are covered by the new Part D benefit instead of Medicaid.

In transitioning to the new Medicare benefit, the Centers for Medicare and Medicaid Services (CMS) established an auto-enrollment process for dual eligibles that was intended to assure there was no gap in coverage. The auto-enrollment process was random among Part D plans with premiums at or below the low-income benchmark premium (which is a weighted average of premiums in the area).

CMS made considerable efforts to have a smooth implementation of the new Part D benefit. It established a backup process for any dual eligible arriving at a pharmacy without necessary documentation. The process included establishing several contractual relationships for the following activities: 1) establishing a new electronic eligibility inquiry (E1) system for pharmacists; 2) providing a point-of-sale (POS) contractor to pay claims for dual eligibles who were not immediately identified as enrolled in a PDP; and 3) hiring an enrollment contractor to work with drug plans and pharmacists to follow up on dual eligibles who were not enrolled in a plan, and to ensure that claims were billed to the appropriate parties. CMS also required Part D plans to develop and implement transition policies for individuals whose previously covered drugs were not on the plan's formulary.

Despite CMS' efforts, the program experienced a number of problems during the initial days of operation -- particularly related to the transition of dual eligibles. There have been a number of reports about individuals who were unable to fill prescriptions because eligibility could not be verified or the drug plan's transition policies were not applied. Pharmacists have also reported difficulty in getting timely and accurate information from the Medicare toll-free line, the PDP customer service representatives, and the newly established E1 system.

Since January 1, 2006, CMS has released additional guidance for drug plans and pharmacists, and has dedicated additional resources to try and resolve these issues. In addition, as of January 24, 2006, 25 states and the District of Columbia had decided to step in temporarily and pay for drugs for dual eligibles who would otherwise have a gap in coverage due to transition policy problems. The federal government will reimburse states for these costs. This report will be updated.