2016 Medicare Part D Updates
Medicare Part D is an optional prescription drug coverage program available to anyone who is eligible for Medicare benefits. It was enacted through the Medicare Prescription Drug, Improvement, and Modernization Act, passed by Congress in December 2003. Part D did not go into effect until 2006 though.
For a monthly premium, enrollees may add Part D to an existing Medicare Part A or Part B coverage program. The monthly premium amount will vary per enrollee, but there are no income or health restrictions applied to Part D. And, no one can be denied based upon number of medications prescribed.
It is important to note that although the plan is option, if a person does not enroll when they first become eligible for Original Medicare benefits, they will be penalized when they eventually do enroll.
Types of Medicare Part D coverage
Medicare Part D is an extensive program made up of approximately 40-50 approved private prescription drug insurance plans. These plans are each approved and monitored by the Centers for Medicare and Medicaid Services (CMS), an agency of the federal government, but private insurance carriers administer them. These plans fall into two categories from which enrollees may choose:
- Stand-alone plans offer only prescription drug coverage. These plans are intended for those who already receive other medical benefits through a Medicare fee-for-service plan.
- Medicare Advantage (also known as Medicare Part C or MA) plans offer coverage for both prescription drugs and medical services in one simplified plan.
The most favorable time to apply for either type of Part D plan is immediately upon eligibility or during the annual open enrollment period. It is possible to apply at any time; however, you may face penalties or increased monthly premiums.
Medicare Part D 2016 model: Four basic provisions
Part 1 – The initial deductible for 2016 is $360, which is up from $320 in 2015. Most, but not all Part D plans have an initial deductible. However, several plans do not, rather providing “first dollar coverage.” A deductible is a set amount of money that a person must pay every single year before their plan will start to pay for their prescriptions. In 2016, no deductible is permitted to exceed $360 a year.
Part 2 – Coverage. Each plan provides the enrollee with coinsurance or a medication copayment. Most often, coverage extends to a point where the total retail cost of the medication reaches $3,310 in 2016 ($2,960 for 2015).
Part 3- The Coverage Gap or “Donut Hole.” Once in this coverage gap, the enrollee pays a larger portion of their prescription drug costs. In 2015, the enrollee paid 45 percent for brand name drugs and 65 percent for generic drugs. And in 2016, the enrollee will pay only 42 percent for generic drugs and 45 percent for brand name drugs. Under the Affordable Care Act, the amount that Medicare will cover while the enrollee is within the donut hole will increase over time until the year 2020. That year, the enrollee will only pay 25 percent of the costs of their prescription drugs.
Part 4 – Catastrophic coverage. When an enrollee has spent more than $4,850 for prescription medications they will be protected by a catastrophic coverage clause. This means the out-of-pockets cost of medication is substantially reduced.
Standard benefit changes from 2015 to 2016 calendar year
As with any insurance plan, standard benefits may change slightly from year to year. The Centers for Medicare and Medicaid Services (CMS), the agency overseeing Medicare, has announced the following important changes for the 2016 calendar year:
- The initial deductible has increased from $320 in 2015 to $360 in 2016. Once this deductible is met, the beneficiary pays covered costs at the rate of 25-100 percent after the initial coverage limit is met.
- The initial coverage limit has increased from $2,960 in 2015 to $3,310 in 2016. The initial coverage limit is where the so-called “donut hole” coverage gap begins. Beneficiaries must pay 100 percent of prescription costs until they reach the out-of-pocket threshold.
- The out-of-pocket threshold has increased from $4,700 in 2015 to $4,850 in 2016. The out-of-pocket threshold refers to the total costs paid by the beneficiary, including the “donut hole.”
- Specifically, the “donut hole” coverage gap began once a beneficiary reaches the initial coverage limit and ends when the beneficiary reaches the out-of-pocket threshold. In 2015 that amount was $2,960, but in 2016, the gap will begin once the limit of $3,310 is reached and it will end when total spending reaches $4,850.
- In 2015 and 2016, all Medicare Part D enrollees received a 55 percent discount on brand name drugs purchased during the “donut hole” Coverage Gap. Brand name drug manufacturers will absorb 50% of this discount, while Part D plans will pay the additional 5%. For 2015, enrollees purchasing generic drugs during the coverage gap will have a copay of not more than 65 percent; this increases to 42 percent in 2016.
- Minimum cost sharing during catastrophic coverage in 2016 will be a rate of the greater of 5 percent or $2.95 per generic or preferred drugs that are considered multisource drugs. For all other drugs, the 2016 rate will be the greater of 5 percent or $7.40. Specifically, enrollees will be charged $2.65 for generic or preferred multisource drugs with a retail sale price under $51, but 5 percent for those with a retail sale price greater than $51; this amount increases to $2.95 in 2016. For brand drugs, beneficiaries will pay $6.60 for drugs with a retail sale price under $127 and 5 percent for those with a retail sale price over $127. In 2016, this amount increases to $7.40.
- Maximum copayments below the out-of-pocket threshold have increased for certain low-income, full subsidy-eligible enrollees. The 2016 rate for these enrollees will be $2.95 for generic and preferred drugs that are considered multisource drugs, with a rate of $7.40 for all other drugs.
Other noteworthy Medicare changes in 2016
- In the current plan year, the Annual Notice of Change (ANOC) and Evidence of Coverage (EOC) documents will be mailed out earlier than in past years. All beneficiaries should have received these documents by September 2015. Insurance plans offering Low-Income Subsidy (LIS) rider provisions must also be sent to beneficiaries by this date.
- With the exception of the above-mentioned documents, plan providers may not send out any additional 2016 plan information until October 1, 2015.
- The 2016 Annual Election Period (AEP) and Open Enrollment Period (OEP) ran from October 15 to December 7, 2016. New enrollees should receive membership cards and welcome kits prior to the January 1, 2016 effective dates for their plans.
- Coverage gap discounts have increased in 2016. Those who reach the “donut hole” Coverage Gap get a 42 percent generic drug discount, while also continuing to receive the 45 percent discount on brand name drugs purchased.
- Enrollees in a Medicare drug or health care plan that has consistently received less than a three-star rating from the Center for Medicare and Medicaid Services (CMS) will receive an alert from CMS about a special enrollment period. These enrollees may choose to move to a higher-rated plan outside of standard enrollment periods, without incurring any penalties.
- All enrollees are also offered the opportunity to switch to a 5-star, CMS-rated plan at any point during the coverage year. Enrollees may choose to exercise this option only once per calendar year. This special enrollment option began in 2012 as a way to elevate consistently high-rated Medicare Advantage and Prescription Drug plans. It is likely to continue, due to its consumer popularity and the CMS-stated goals of increasing overall Medicare Part D quality. This program provides an important incentive for participating insurers to strive for 5-star ratings. It also provides better coverage options for enrollees.
- Each year, the Federal Poverty Level (FPL) guidelines determine which enrollees are eligible for full or partial benefits through the Low Income Subsidy (LIS) program. The income requirements are 135 percent of the FPL (approximately $15,889 if you are single or $21,505 for married couples) for full benefits, and partial benefits for income levels up to 150 percent of the FPL.
- 2016 Medicare Part D plan information is available to consumers by email through the Plan Reminder Service. It is sent to the same email addresses at which enrollees currently receive Medicare quarterly newsletters. And, it will contain standard benefit changes and enrollment information.
Important reminders for all participating Part D plans
- Monthly premiums may increase each calendar year.
- Plan benefits may vary depending upon your income level.
- Covered drug lists and formularies may change with no less than 60 days’ notice.
Medicare Part D can certainly become complex and confusing as changes occur each year, especially for consumers who are newly eligible. For the most up-to-date information available for your area, you are encouraged to visit www.medicare.gov. On this website, users can
- Learn which Medicare plans are available in their coverage areas
- Find physicians who participate in Medicare
- Learn which preventive screenings and other health and drug services are covered under Medicare
- Find information on the quality of nursing homes and other health facilities
- View Medicare publications, such as quarterly newsletters
For those already enrolled in Medicare or Medicare Part D, logging into www.MyMedicare.gov can provide a wealth of information. Users may: track their existing claims or deductible status; view personal plan eligibility information; learn of free or discounted preventive services available; review ratings of current plans; and search for new or highly-rated plans.