Dewonkify – Medicare Part D

Medicare is a federal program that provides health insurance coverage for people who are age 65 or older.  Individuals younger than 65 may qualify if they have certain disabilities or have End-Stage Renal Disease (ESRD).  Medicare is comprised of four parts—Parts A, B, C, and D.  Over the past few weeks, Capitol Health Record has dewonkified each of the four parts.

Definition:  Medicare Part D is a voluntary benefit that provides outpatient prescription drug coverage to beneficiaries.  The Part D benefit is operated through private plans; beneficiaries have the option of choosing either prescription drug coverage as part of their Medicare Advantage plan (more information is available here) or as a stand-alone prescription drug plan (PDP) which can be purchased in addition to traditional Medicare (Part A and Part B).

Used in a Sentence: “The Medicare Part D benefit provides seniors a way to afford their medications when they do not have other affordable drug coverage options.”

History:  The Medicare prescription drug benefit was added to Medicare as part of the Medicare Modernization Act of 2003 (MMA).  Prior to the passage of the MMA, many Medicare beneficiaries lacked access to prescription drug coverage.

When it was enacted, the standard benefit structure was as follows:  the beneficiary paid a deductible.  Once the deductible was met, the beneficiary paid 25 percent of the costs of his/her drugs and the plan paid the other 75 percent of the costs, up to the initial coverage limit (which, in 2010, was $2830 in total drug costs).  At this point, the plan stopped covering the costs of the beneficiary’s drugs (otherwise known as the “doughnut hole” or “coverage gap”) until the beneficiary’s drug costs exceeded the catastrophic coverage limit (which was $6440 in total drug costs in 2010).  At this point, the beneficiary would pay 5 percent, the plan would pay 15 percent, and Medicare would pay 80 percent of the costs for medications.  This unusual benefit design was meant to provide some drug coverage for all beneficiaries.

Many beneficiaries were very frustrated with the gap in coverage (doughnut hole).  The Affordable Care Act (“ACA”) contained provisions to incrementally address the gap in coverage, and by the year 2020, beneficiaries will no longer experience such a gap.  More information about the doughnut hole and the ACA provisions is available here.

More information about the 2014 Medicare Part D program is available here.  An overview of the Medicare Part D payment system is available here.

When the benefit first launched in 2005, the then-Bush Administration encountered some initial issues related to the launch of the website and enrollment.  While much different in scope, some politicians have compared problems with the launch of the Part D program to the problems currently being experienced with the ACA rollout (more information is available here).

Premiums:  Medicare Part D premiums vary depending on the beneficiary’s plan choice and geography.  Some plans, called “enhanced plans” provide greater coverage for prescription drugs, but usually have a higher premium.  In 2014, the standard average Medicare Part D monthly premium is estimated to be $31.

Like Medicare Part B, individuals who lack prescription drug coverage either through a former employer, Medicaid, or some other source, will face a late enrollment penalty if they delay signing up for Part D.  (More information on the Part D late enrollment penalty is available here.)

Dewonkify — Medicare Part C

Medicare is a federal program that provides health insurance coverage for people who are age 65 or older.  Individuals younger than 65 may qualify if they have certain disabilities or have End-Stage Renal Disease (ESRD).  Medicare is comprised of four parts — Parts A, B, C, and D.  Over the next few weeks, Capitol Health Record will dewonkify each of the four parts.

Definition:  Medicare Part C is otherwise known as “Medicare Advantage” (formerly “Medicare+Choice”).  These are private plans that are approved by Medicare to cover all of the services provided by Part A and Part B.  Some Medicare Advantage plans offer coverage for items not otherwise covered by Medicare (like hearing aids and eyeglasses).

Used in a Sentence:  “The premiums of Americans enrolled in Medicare Part C (Medicare Advantage) have fallen by 16 percent since 2010, Health and Human Services Secretary Kathleen Sebelius has said.” From “Where is Republican anger over Obama’s health care law?” by Juan Williams, Washington Post, September 27, 2012

History:  Medicare Advantage began as an alternative to traditional Medicare.  Some policymakers believed that private insurance companies would be able to provide beneficiaries with better, more coordinated care at a lower cost to beneficiaries and the federal government.  Medicare Advantage plans operated by private insurance companies and are available in almost every county in the country.  Medicare Advantage plans can be either health maintenance organization (HMO) plans, private fee-for-service (PFFS) plans, or regional or local preferred provider organizations (PPOs).  (More information is available here.)

Premiums:  Medicare beneficiaries pay a premium to enroll in Medicare Advantage plans; premiums vary depending on the plan offerings in the area.  Most Medicare Advantage plans also offer prescription drug coverage (called MA-PD plans).  In 2012, the average premium charged for a Medicare Advantage plan offering drug coverage was $51.43 per month.  Approximately 87 percent of Medicare beneficiaries can choose an MA-PAD plan with a $0 premium (though beneficiaries would still have to pay their Medicare Part B premium).  More information is available here.

Enrollment:  In 2012, approximately 27 percent of Medicare beneficiaries chose to enroll in a Medicare Advantage plan.

Dewonkify – Medicare Part B

Medicare is a federal program that provides health insurance coverage for people who are age 65 or older.  Individuals younger than 65 may qualify if they have certain disabilities or have End-Stage Renal Disease (ESRD).  Medicare is comprised of four parts — Parts A, B, C, and D.  Over the next few weeks, Capitol Health Record will dewonkify each of the four parts.

Definition:  Medicare Part B primarily pays for care provided by doctors and other health care professionals (like nurse practitioners), outpatient services, durable medical equipment (DME), home health, and some preventive services.

Used in a Sentence:  “The premiums for Medicare Part B will remain flat in 2014 and seniors have saved $8.3 billion on Part D prescriptions since the Affordable Care Act was enacted in 2010, the Department of Health and Human Services announced Monday. Medicare Part B covers medically necessary services, as well as preventive services.” From “Medicare Part B Premiums Won’t Go Up in 2014,” by Kelly Kennedy, USA Today, October 28, 2013

History:  Medicare Part B began in 1965 under the same legislation that enacted Medicare Part A and the Medicaid program.

Enrollment:  In 2012, 46.4 million Americans were enrolled in Medicare Part B.

Financing:  Medicare Part B is financed through general revenues and premiums collected from beneficiaries.  Because of the way it is financed, technically Medicare Part B can never be insolvent.  However, because the federal government pays 75 percent of the cost of Part B, many policymakers have begun to grow concerned about the increased cost of the program and have proposed ways to reduce these federal expenditures.

Sustainable Growth Rate (SGR):  Medicare Part B pays for services provided by physicians and other health care professionals using the SGR formula.  Unless Congress acts by the end of this year, physicians who treat Medicare beneficiaries will see their reimbursement cut by approximately 24 percent (the exact amount will be determined when the Centers for Medicare and Medicaid Services (CMS) releases its final rule implementing the Physician Fee Schedule).

Over the past decade, Congress has enacted more than 15 short-term fixes to address the SGR (see infographic).  In July the House Energy and Commerce Committee passed legislation to permanently address the SGR.  Last week, the House Ways and Means Committee and Senate Finance Committee jointly released a draft discussion guide which closely follows the Energy and Commerce proposal.

Premiums:  Medicare beneficiaries pay monthly premiums, which are adjusted each year and account for roughly 25 percent of Part B costs.  Currently most beneficiaries pay a monthly premium of $104.90 per month.  Individuals with higher incomes pay a higher monthly premium.  (More information on Medicare Part B premiums is available here.)  Individuals who lack other coverage (generally through a current or former employer) who delay signing up for Part B may be assessed a permanent late enrollment penalty.  (More information on the late enrollment penalty is available here.)

Out-of-Pocket Costs:  In addition to the monthly premium, beneficiaries have an annual deductible of $147 for 2013.  Beneficiaries also are assessed a copayment of 20 percent of the Medicare-approved cost of the service.  (More information is available here.) 

MedPAC To Meet This Week

The Medicare Payment Advisory Commission (MedPAC) will be meeting in Washington, DC this Thursday, November 7th, and Friday, November 8th, to discuss Medicare policies and recommendations. The agenda for the November meeting is available here.

MedPAC did not hold their scheduled meeting in October due to the government shutdown.

Bicameral, Bipartisan SGR Proposal Released

On Thursday, October 31, 2013, the Senate Finance Committee and the House Ways and Means Committee released a draft discussion of their proposal to permanently fix the sustainable growth rate (SGR) formula, which Medicare uses to reimburse physicians and other health care professionals.  (More information on the SGR is available here.)  This discussion draft is similar to legislation that unanimously passed out of the House Energy and Commerce Committee in July 2013.  (More information on the Energy and Commerce legislation is available here.)

The discussion draft would prevent the imposition of the SGR cuts (estimated to be 24 percent for 2014), but does not call for any payment increases through 2023.  Beginning in 2024, health care professionals who participate in advanced alternative payment models (see below) would be eligible for a two percent update, while all other health care professionals would receive a one percent update.  The Energy and Commerce Committee legislation called for a 0.5 percent increase in reimbursement over 5 years.

The discussion draft also seeks to adjust reimbursement based in part on performance.  Beginning in 2017, penalties that would have been assessed under three quality incentive programs – the Physician Quality Reporting System (PQRS), the Value-Based Modifier, and the Electronic Health Record (EHR) Meaningful Use program – would be made available to health care professionals who have demonstrated ability to deliver high-quality healthcare.

In addition, the discussion draft encourages health care professionals to participate in alternative payment models (APMs) that involve two-sided risk and measure the quality of care provided (e.g., patient-centered medical homes, accountable care organizations (ACOs), etc.).  Providers who obtain a significant portion of their revenue from such APMs would be eligible for bonus payments.

Finally, the discussion draft contains provisions designed to encourage care coordination for individuals who have complex chronic care needs by developing new payment codes for these services beginning in 2015.  The discussion draft seeks to improve the accuracy of the valuation of services provided to beneficiaries and sets a target for the identification and revaluation of misvalued services.  Under the proposal, professionals would be required to consult with appropriate use criteria when ordering advanced imaging and electrocardiogram services.

Interestingly, like the Energy and Commerce Committee legislation, this discussion draft does not contain any offsets.  The Congressional Budget Office (CBO) previously estimated a ten year freeze to physician payments would cost $139.1 billion; the Energy and Commerce legislation was estimated by CBO to cost $175 billion over ten years.  While this discussion draft has not yet been officially scored by CBO, sponsors reportedly have been working to reduce the overall score of their proposal relative to the Energy and Commerce Committee’s legislation.

So far the discussion draft has received positive feedback from the House Energy and Commerce Committee.  The American Medical Association (AMA) and American Medical Group Association (AMGA) have issued statements indicating they are pleased the issue is moving forward and are currently reviewing the discussion draft.

Dewonkify – Medicare Part A

Medicare is a federal program that provides health insurance coverage for people who are age 65 or older.  Individuals younger than 65 may qualify if they have certain disabilities or have End-Stage Renal Disease (ESRD).  Medicare is comprised of four parts — Parts A, B, C, and D.  Over the next few weeks, Capitol Health Record will dewonkify each of the four parts.

Definition:  Medicare Part A pays primarily for inpatient hospital stays, care in skilled nursing facilities, home health care, and hospice care.

Used in a Sentence: “Republicans have suggested a push to reduce the deficit with entitlement cuts, such as means testing for Medicare and a possible merger of Medicare parts A and B for hospitals and doctor services.” From “GOP Senators Ready Entitlement, Tax Proposals for Budget Conference” by Alan K. Ota, published in CQ (subscription required).We also have a program called the Seal of Recognition that may be worth your time and consideration.  You could submit your materials supporting the Trigen SureShot and our nursing team would evaluate the content to make sure it is consistent with the AORN Recommended Practices.  If approved, you would receive the AORN Seal of Recognition logo to use on your documents for one year (can be renewed annually).

History:  Medicare Part A began in 1965 and was enacted at the same time as Part B and Medicaid.  At the time, older Americans who did not have health care coverage through their employers, had to either purchase health insurance on their own (which could be expensive) or rely on their families to help pay for their medical care.  More information on the history of the Medicare program can be found here.

Financing:  Medicare Part A is financed through a payroll tax paid by employers and employees.  Part A currently pays out more in claims than it collects in revenue and is projected to become insolvent by the year 2026.  In 2012, total expenditures (costs) for the Medicare program were $574.2 billion and total income was $536.9 billion.  Each year the independent Medicare Trustees releases a report projecting the solvency of the program.  Information on the most recent Trustees’ report is available here.

Enrollment:  Currently 50.7 million Americans are enrolled in Medicare Part A.

Eligibility:  In order to be eligible for Medicare Part A, you (or your spouse) must have worked at least 10 years (40 quarters) in Medicare-covered employment.  Some individuals under age 65 may be eligible for Medicare Part A if they are entitled to Social Security (or railroad retirement) disability benefits for at least the previous 25 months or qualify for ESRD benefits.  More information on eligibility requirements can be found here.

Out-of-Pocket Costs:  Beneficiaries enrolled in Part A pay a deductible when they are admitted to the hospital.  The amount of the deductible varies from year to year and is calculated to be $1,216 in 2014.  This deductible covers beneficiaries’ costs for the first 60 days of care within a benefit period.  Beneficiaries pay additional fees for hospitalizations longer than 60 days (for more information, see here).

Premiums:  About 99 percent of individuals who have Part A do not pay a premium.  However, some individuals may be able to enroll in Part A and pay a monthly premium:  individuals (and spouses) with fewer than 30 quarters (7.5 years) of Medicare-covered employment pay a premium of $426 and individuals (and spouses) with between 30 and 39 quarters of Medicare-covered employment pay $234.  (More information is available here.)

Government Shutdown Now Over – But What About Sequestration?

The government may be back up and running and funded under a short-term continuing resolution (CR), but the battle is far from over as Congress heads toward new deadlines to address budgetary matters.  There has been some confusion about what the current budget agreement means in terms of sequestration’s annual cuts to discretionary and mandatory programs instituted in 2012.  The law signed by the President to address the short-term continuing resolution and temporarily raise the debt ceiling does not provide federal agencies flexibility to administer new sequestration cuts at this time.  With the government spending levels remaining at FY 2013 levels for the duration of the CR, a new round of sequester cuts are not set to kick in until January 2014.

The law established a short-term budget conference committee, with a set deadline of Dec. 13, 2013 to outline recommended spending levels and program cuts.  Of note is that the committee deadline is set in advance of when the second year of the sequester will begin.  The deadline provides a window of opportunity for the new budget conferees to address how the sequester cuts are applied in FY 2014.   The conferees may contemplate making other adjustments to entitlement programs (Medicare and Medicaid) to address health care spending issues that will be negotiated during their deliberations.  In addition, Medicare payments to physicians are set to be cut by approximately 25 percent if Congress does not address the cut by December 31, 2013 and offset the cut with a payfor that would likely include cuts to other health care entities. Any of these negotiations and decisions, if ultimately accepted by Congress, could impact the size of the Medicare sequester cuts in January FY 2014.

Medicare Open Enrollment Starts Today

There has been much focus recently on open enrollment for the health insurance exchanges. In addition to the exchange open enrollment period, today, October 15, 2013, marks the beginning of Medicare’s annual enrollment period, which lasts until December 7, 2013.  Approximately 49 million Americans are enrolled in Medicare.

What does the enrollment period mean for Medicare beneficiaries?

Each year during Medicare’s annual enrollment period, current Medicare beneficiaries are allowed to make changes to their Medicare plan choices.  Beneficiaries who are enrolled in a Medicare prescription drug plan (otherwise known as Medicare Part D) can review their plan choices and determine whether they want to stick with their current plan, or switch to a new plan.  Beneficiaries who are enrolled in a Medicare Advantage plan (an MA plan, or Medicare Part C) can review their plan choices and decide if they want to keep their current plan or switch to a new plan.

What happens if a beneficiary does nothing during the annual enrollment period?

If a beneficiary is satisfied with his/her current Medicare coverage, he/she does not need to do anything.  So, if you are happy with your current Part D plan and want to keep the same plan next year, you do not need to do anything during the annual enrollment period.  Plan premiums may change; beneficiaries should have been notified by their current plans of any changes for next year.

If a beneficiary has Medicare, should they enroll in plans in the health insurance exchanges?

No.  If you have Medicare you are considered covered and do not need to obtain health insurance coverage through the exchanges.  For more information visit

For more information on Medicare coverage options, please visit or call 1-800-MEDICARE.

Health Care on the Hill – Week of October 7, 2013

With the ongoing government shutdown, the Congressional calendar has been up in the air. A number of hearings scheduled for last week were postponed, and we recommend that you reconfirm that the following hearings are still scheduled to happen the day prior.

Tuesday, October 8, 2013

10:00 a.m.
“Transforming Medicare Post-Acute Care: Issues and Options”
Senate Finance Committee Hearing
219 Dirksen Senate Office Building

Wednesday, October 9, 2013

1:00 p.m.
“The Effects of the Health Law’s Definitions of Full-Time Employee on Small Businesses”
House Small Business Subcommittee on Health and Technology Hearing
2360 Rayburn House Office Building

Thursday, October 10, 2013

10:00 a.m.
“Between Peril and Promise: Facing the Dangers of VA’s Skyrocketing Use of Prescription Painkillers to Treat Veterans”
House Veterans’ Affairs Subcommittee on Health Hearing
334 Cannon House Office Building

October 1st – Huge Day for Healthcare

The first day of the federal government shutdown occurred on October 1, 2013, the same day as the start of the open enrollment period for the health insurance exchanges.  This blog post focuses on some of the top issues impacting health care policy on this date.

HHS Operating Status

Like most other federal agencies, the Department of Health and Human Services (HHS) has implemented a contingency plan, which calls for 52% of HHS employees to be placed on furlough.

Medicare Reimbursement

Despite the government shutdown, most Medicare fee-for-service reimbursement will continue as scheduled.

On October 1, 2013, the Medicare Administrative Contractors (MACs) indicated they would “continue to perform all functions related to Medicare fee-for-service claims processing and payment.”  However, according to the HHS contingency plan, health care fraud and abuse efforts will cease during the government shutdown.  In addition, CMS will be curtailing the number of recertification and initial surveys for Medicare and Medicaid providers.

ACA Implementation

Despite the HHS furlough, October 1st marked the first day of open enrollment for the health insurance exchanges.  Initially individuals were reporting that many of the individual state-based health insurance exchange sites were not working properly and the website and toll-free number were experiencing problems or longer than average wait times.  However, as of yesterday afternoon, HHS informed reporters that more than 2.8 million individuals had visited the website since it launched earlier that morning, the call centers received more than 81,000 calls, and there were more than 61,000 live chat requests.  HHS did not announce how many individuals had successfully enrolled in a health insurance plan offered through the exchange on this first day.

Medicare and Medicaid Provider Policies

In addition to the establishment of the new health insurance exchanges, the ACA also mandated certain Medicare and Medicaid cuts to begin on October 1, 2013, including:

  • Medicare readmissions reductions:  Under the Hospital Readmissions Reduction Program (HARP) hospitals are assessed a penalty for patients with certain conditions who return to the hospital within 30 days of discharge.  When the program began on October 1, 2012, hospitals were assessed a maximum penalty of one percent of total revenue.  As of October 1, 2013, the penalty increases to two percent of total revenue.  CMS data suggests that more than 2,200 hospitals will have their Medicare payments reduced under this program.  (More information on the program is available here.)
  • Medicaid Disproportionate Share Hospital (DSH) payments:  The Medicaid program provides additional payments—DSH payments—to hospitals that see a higher than average share of low-income beneficiaries.  The ACA reduced the overall level of Medicaid DSH payments beginning October 1, 2013 when cumulatively states will receive a $500 million cut in DSH payments.

Medicaid Expansion

Under the ACA, states who choose to do so may expand their Medicaid programs to cover uninsured individuals up to 133 percent of the federal poverty level (2013 federal poverty level figures are available here).  More than half the states have chosen to expand their Medicaid programs, as seen in this map.  Expanded Medicaid coverage begins in most states on January 1, 2014.