Part D Basics

Part D is the name for the Medicare Prescription Drug Program which began in 2006. Under Part D, the Centers for Medicare and Medicaid Services (CMS; the federal agency which administers the Medicare program) contracts with private insurance companies to provide prescription drug benefits to Medicare beneficiaries.

In order to get benefits under Part D, Medicare beneficiaries must enroll in one of the plans offered by these private insurance companies (in most regions there are hundreds of plans to choose from) and pay premiums, deductibles and co-payments set by the plans.  The plans also receive payments from CMS.  Of the 44 million Medicare beneficiaries, 23.9 million are enrolled in a Part D plan.

The Low Income Subsidy

Nearly 40% of Medicare Part D enrollees (9.2 million) receive assistance with premiums and cost-sharing in the form of a Low Income Subsidy (LIS).  The LIS, also know as “extra help,” is administered by CMS and the Social Security Administration (SSA).  Medicare beneficiaries who also qualify for Medicaid or SSI automatically qualify for the subsidy.  Other beneficiaries with incomes below 150% of the federal poverty level and resources below certain amounts ($11,710 for a single person, $23,410 for a couple in 2007) can qualify for the subsidy by applying through SSA.  LIS recipients receive varying degrees of assistance depending on their Medicaid eligibility, income and resources.  All LIS recipients have special enrollment privileges and are exempt from the coverage gap (a.k.a. ‘donut hole’).  SSA and CMS estimate that there are an additional 3.3 million beneficiaries who are eligible for, but not yet receiving the subsidy.

Even with the subsidy, many low income beneficiaries have trouble affording their prescriptions.  Low income people are generally in worse health than the rest of the population and, as a result, rely on more medications.  Co-payments add up for these beneficiaries and choices have to be made between groceries, rent, heating and medications.  Furthermore, systemic delays and frequent errors in CMS and plan systems often make it difficult for LIS recipients to get medications at the subsidized price to which they are entitled.

Dual Eligibles

Dual eligibles are individuals who are eligible for both Medicare and Medicaid.  Before Medicare Part D began, dual eligibles received drug coverage from Medicaid.  Under Medicare Part D, Medicaid can no longer provide drug coverage to dual eligibles so dual eligibles must rely on Part D for drug coverage.  As a result, at the inception of Part D, over 6 million dual eligibles were automatically moved form Medicaid into Part D plans.  The results were disastrous as many individuals were not enrolled into plans and were left without any drug coverage.

New dual eligibles continue to face significant delays (5 weeks or more) in auto-enrollment and Low Income Subsidy processing.  As a result of the delays, dual eligibles continue to have trouble accessing medications at the subsidized prices.

Dual eligibles automatically qualify for the LIS.  There are currently 6.9 million dual eligibles enrolled in Medicare Part D.  Dual eligibles represent 75% of all LIS recipients and nearly 30% of all Part D enrollees.