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March 26, 2009
(Updated April 8, 2009)
CMS Revises Indexed Medicare Part D Amounts for 2010
In an April 6, 2009 announcement,1 the Centers for Medicare & Medicaid Services (CMS) revised and made final the indexed Medicare Part D standard benefit and Retiree Drug Subsidy (RDS) amounts for 2010, previously announced in an advance notice.2 This Capital Checkup features charts comparing the final 2010 numbers and the 2009 numbers.
The Medicare Modernization Act (MMA) requires CMS to announce indexed Medicare Part D standard defined benefit amounts each year that reflect the increase in drug costs. In 2010, the Medicare Part D standard defined benefit amounts will increase by 4.66 percent, a rate that is based on drug cost increases of 5.79 percent in 2009 (a decrease from 7.54 percent one year earlier), adjusted by CMS for prior year revisions.
RDS Amounts
For 2010, plan sponsors eligible for the RDS will receive 28 percent of Part D prescription drug expenses between $310 and $6,300. The table below compares those numbers to the numbers for 2009.
| RDS Amounts | ||
|---|---|---|
| 2009 | 2010 | |
| Cost Threshold* | $295.00 | $310.00 |
| Cost Limit** | $6,000.00 | $6,300.00 |
|
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Standard Benefit Design Parameters
The table below compares the standard benefit design parameters for 2010 to the amounts for 2009.
| Standard Benefit Design Parameters | ||
|---|---|---|
| 2009 | 2010 | |
| Deductible | $295.00 | $310.00 |
| Initial Coverage Limit* | $2,700.00 | $2,830.00 |
| Out-of-Pocket Threshold** | $4,350.00 | $4,550.00 |
| Total Covered Part D Drug Spending before Catastrophic Coverage*** | $6,153.75 | $6,440.00 |
|
||
In 2010, if an individual is in a Medicare Part D Prescription Drug Plan (PDP) with the standard benefit, he or she will pay a deductible of $310 and 25 percent of allowable Part D prescription drug costs between $310 and $2,830 ($630). The individual then hits a coverage gap, where he or she is responsible for 100 percent of prescription drug costs until he or she reaches the out-of-pocket maximum of $4,550. After the individual incurs total drug costs of $6,440, he or she becomes eligible for catastrophic coverage, which generally covers 95 percent of prescription drug expenses. The chart below explains how the Medicare Part D standard benefit design will work in 2010.
| Medicare Part D Standard Benefit Design: 2010 |
|---|
|
How It Works in 2010:
|
| Copayments in Catastrophic Coverage Portion of Benefit | ||
|---|---|---|
| 2009 | 2010 | |
| Generic/Preferred Multi-Source Drug* |
$2.40 | $2.50 |
| Other Drug | $6.00 | $6.30 |
|
||
Implications for Plan Sponsors
Plan sponsors should note the new benefit amounts for planning purposes for 2010 - both with respect to expected RDS income and to the design of their Medicare Part D prescription drug plan that is offered to retirees.
Prior to finalizing benefits designs for 2010, plan sponsors may wish to analyze the benefits of contracting with a Medicare Prescription Drug Plan (PDP) as opposed to retaining the RDS. In many instances, contracting with a PDP may produce a greater cost savings than the RDS because the reimbursement insurers get from CMS can be greater than what plan sponsors obtain in direct subsidy.
Plan sponsors that continue to apply for the RDS should take several actions to make sure that RDS income continues and that they are prepared for potential audits by the HHS Office of Inspector General (OIG):
- Review RDS income and assure it meets expectations,
- Assure that the contract with the RDS administrator or Pharmacy Benefit Manager accurately reflects charges for RDS and contains all language required by CMS, and
- Review internal policies and controls to assure that deadlines are met and only appropriate personnel have access to RDS information and the RDS Web site.
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As with all issues involving the interpretation or application of laws, health plan sponsors should rely on their legal counsel for authoritative advice on the integration of Medicare with their employee benefit plans. Sibson Consulting can be retained to work with plan sponsors and their attorneys on issues related to Medicare Part D.
- 1
- The announcement is available on the CMS Web site. See Attachment IV 2010 Part D Benefit Parameters on page 37. (Return to the Capital Checkup text.)
- 2
- The advance notice is available on the CMS Web site. (Return to the Capital Checkup text.)
Capital Checkup is Sibson Consulting's periodic electronic newsletter summarizing activity in Washington with respect to health care and related subjects. Capital Checkup is for informational purposes only. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.