The complex changes prescribed by Medicare Part D have residents in assisted living facilities taking a wait-and-see approach. How will they affect your facility?

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ditor’s note: This is the second of a series of articles in ECPN that will explore the impact of the Medicare Modernization Act (MMA) on your facility, the patients you serve, and the facilities with which you work.

       For better or worse, “D Day,” Part D of the Medicare Modernization Act (MMA), that is, has arrived. The Centers for Medicare & Medicaid Services (CMS), along with Prescription Drug Plans (PDPs), Medicare Advantage Plans (MA-PDs), pharmaceutical companies, and pharmacy providers of all stripes, worked feverishly over the past year to prepare for it. Stakeholders have invested untold time and money in websites, training programs, informational handouts, clinical programs, billing protocols, computer upgrades, marketing pieces, television and radio commercials, contracts, new working relationships, and teleconferences as a result of this new benefit—all to be ready for the dreaded implementation date of January 1, 2006.
       For the most part, however, the new Part D beneficiaries are mostly the “dual eligibles” (ie, beneficiaries of both Medicare and Medicaid) whom CMS enrolled prior to January 1—in a mandatory, random fashion—to PDPs that met the criteria for their coverage. The vast majority of the estimated 42 million individuals eligible for Part D have until May 15, 2006 to enroll into a plan without incurring any late penalties. For the most part, these individuals are adopting a wait-and-see posture. As the deadline closes for these voluntary eligibles, there will be another frenzy of activity around the first of May, as individuals decide whether to jump into the Part D pool.

The Impact of Part D on Assisted Living

       The implications for assisted living facilities (ALFs) will be enormous and complex. Among the over-riding reasons for this complexity are the facts that assisted ALFs are, by and large, populated by non-dual-eligible individuals and that CMS has opted not to include ALFs in its definition of long-term care “institutions.” Let us set the groundwork for examining these important facts by reviewing the assisted living landscape.
       The National Center for Assisted Living (NCAL) states, “Assisted living is a significant provider in the long-term care spectrum and continues to receive attention nationwide. Assisted living is no longer a provider category ‘in its infancy.’ It is a long- term care option that is preferred by many individuals and their families because of its emphasis on resident choice, dignity and privacy.’¹ In 2001, NCAL reported about 33,000 assisted living residences housing about 800,000 individuals.² The average facility size varied greatly, with an average of 30 beds and an average census of 23, and the average monthly fee was $1,873.² Living models ranged from a “medical” model with access to nursing personnel and adjacent nursing home facilities to a “hospitality” model focused on the living environment.² Of course, facilities can be anywhere along this continuum of medical and living services.
       Of particular importance for ALFs in their Part D preparation is the fact that funding sources for ALFs are overwhelmingly private. A survey of ALFS in 2000 showed that 67% of individuals paid for their living facilities with personal funds.³ While 38 states have some Medicaid reimbursement of assisted living services, the survey showed only 9% of individuals in ALFs had their living services paid for by Medicaid agencies.³ The implication for Part D is obvious: Most residents in ALFs are not dual eligible, most would not be eligible for Social Security low-income assistance, and most will be voluntary shoppers in the Part D PDP environment. The ALF environment lacks the close working relationship between consultant and senior care pharmacists, primary care physicians and medical directors, existing in the nursing home environment. Assisted living administrators will be dealing with a new Part D environment that is characterized by multiple pharmacy providers, multiple physicians who are not familiar with pharmacist clinical services, and a breathtaking variety of PDPs voluntarily chosen by their customers (each of which has its own particular formulary and cost control measures). As the Baby Boomers reach retirement age, there will be an unmistakable change in the level of services they need from ALFs.
       The second driving focus for assisted living is, despite NCAL’s aforementioned characterization ALFs, is that CMS does not view them as “institutional” or “long-term care.” Thus, important features of the Part D benefits reserved for institutional patients—discussed in the first article of this series, “Navigating the Medicare Modernization Act,” in the November/December 2005 issue of ECPN—do not apply to residents in ALFs. Let us take a closer look at the MMA’s Part D benefit plan, focusing on which areas emerge as most important for residents in assisted living.

Eligibility and Enrollment

       In the assisted living environment, most individuals will eligible for Part D by virtue of their Medicare status. However, most individuals are not dual eligibles, so their participation in Part D PDPs and MA-PDs will be voluntary. For the most part, individuals paying the kind of monthly fees for ALFs mentioned above will not qualify for the low-income assistance offered by the Social Security Administration. Individuals must have 2005 income no higher than $12,919 (for married couples living together, it is $17,320), with assets no more than $7,500 (for married couples living together, it is $12,000). (For more information, visit the Social Security Administration online at http://www.SSA.gov.)
       Individuals in ALFs will have no special enrollment period. They can elect to enroll anytime up to May 15, 2006 without penalty. After that time, there will be a 1% premium penalty for each month they delay. For example, if they wait 5 years and then decide they need coverage, they will pay a 60-months penalty (ie, a premium that is 60% higher each month for the remainder of the life of their coverage). This is an important incentive to sign up early, even if medication use is not heavy, in order to avoid later penalties if medication use increases. The only exception would be if individuals have “creditable coverage” from another medication insurance carrier.
       For example, if they have a retiree benefit that is as good as or better than Part D and have been notified in writing by their insurance carrier that this coverage is “creditable,” they will not suffer a penalty if they later lose the retiree benefits and wish to enroll in a Part D plan. (Hint: Individuals will need to produce the letter of creditable coverage. Keep the letter in a safe, easily remembered place so it will be available and easy to retrieve when needed.)
       On the other side of the coin is the complexity of the myriad of plans that are out there. A careful analysis must be done and a thoughtful choice made. Unlike for dual eligibles, there is no “special enrollment period.” When a non-dual-eligible resident in an ALF signs up for a plan, he or she will be locked into it, regardless of any changes in medication use or the formulary or co-pays of the plan. Residents may only change plans in an annual open enrollment period, which will probably be from November 15 to December 31 of each year.

Formularies

       A large part of the decision process for choosing a plan will be: “Which of the Part D plans will have my medications in their formulary?” There are 2 things to consider when an individual visits http://www.medicare.gov to go through CMS’ process to evaluate plans and their formularies. The first is, “Is my medication covered on the formulary?” Via CMS’ site, an individual can source out Part D plans that contain their medications on formulary. The second, perhaps more important, thing to consider is which other cost-containment barriers a PDP may implement to influence your decision.
       In addition to being “on formulary” or “off formulary,” a PDP may impose other cost-containment processes. These “edits” may not be apparent when an individual is looking at the CMS website. An individual should actually call or log onto the website of the PDP to determine if some other cost control edits are in place. These could include: limiting the quantity of medications received in a month, requiring the use of mail-order pharmacies, requiring the use of generic medications before a brand-name medication, requiring the use of some other medication as a first step, requiring doctors to certify that a specific condition is present, and, most commonly, increasing an individual’s co-pay amount for use of a “non-preferred” formulary medication. These determinations take time, but they can be very valuable in sourcing out the right plan. There may be a plan with a low deductible or no deductible and an inexpensive monthly premium, but it might entail exorbitant co-pay fees or high hurdles to jump over in order to receive an individual’s medications. Therefore, it is “buyer beware”; that there is a “yes” next to the “formulary” column does not necessarily mean the beneficiary is home free.

Benefits'

       The first article of this series outlined the standard Part D benefit. Plans can vary from this standard benefit, but CMS will hold them responsible for keeping their coverage equal to the agency’s CMS standard plan. When residents in ALFs are comparing plans, they will note that many of the PDPs have taken CMS up on its offer to alter the standard plan. There will be some with changed deductibles and other features. Many are changing the parameters of the “donut hole,” the area of coverage for which a beneficiary is responsible for 100% of payments prior to catastrophic coverage kicking in. A suggestion in evaluating plans is to find out where the donut hole occurs in each plan, if there is one. Then look at the cost of each prescription according to that plan and try to calculate a monthly expense. One can then determine when (or if) the donut hole is reached. Balance this finding with the costs of the plan.
       Paying a few dollars more per month on a premium is well worth it for a plan with a small donut hole. Conversely, saving money on monthly premiums is a good idea for a plan that has a large donut hole because an individual’s medication use is light and the hole will never be reached anyway. This comparison will help individuals understand which plan is most appropriate.

Conclusion

       Individuals residing in ALFs will most resemble those of us who have prescription drug coverage now through our employers, administered through pharmacy benefit companies. Those who pay premiums must be concerned with whether they have access to medications, and they should review coverage options every year to determine if their current plans are continuing to meet their needs.
       Residents in ALFs need to thoughtfully analyze their current prescription needs and conduct a detailed review of plans available with an eye to some of the aforementioned considerations. Decisions made cannot be easily changed, and they can either result in ready access to medications and significant savings or an expensive, slippery slope not easily avoided. Sailing in this incredibly complex environment can result in a beautiful sunset, but keep an eye out for storm clouds on the horizon.