Corporate Compliance

Note from the instructor: Part D coverage for prescription drugs and biologicals not covered under Parts A or B

Medicare Insider, December 23, 2014

Want to receive articles like this one in your inbox? Subscribe to Medicare Insider!

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  
Prompted by a number of questions in recent Medicare Boot Camp-Hospital (MBC-H) classes and preparation for a custom MBC-H/Physician class, in this week’s note we will discuss differences in coverage for certain hospital services under Parts A, B, and D of Medicare. In particular, we will explore coverage under Part D for prescription drugs and biologicals (Prescription Drugs) not covered under Parts A or B when provided to hospital inpatients or outpatients. 
Part D
Part D is an optional federal Medicare program designed to subsidize the costs of Prescription Drugs and Prescription Drug insurance premiums for individuals entitled to Medicare benefits under Part A or enrolled in Medicare benefits under Part B. Beneficiaries who enroll in most Medicare Advantage plans, as well as those who qualify for both Medicare and Medicaid (full-benefit dual eligibles) automatically receive the Medicare drug benefit. Enacted as part of the Medicare, Prescription Drug, Improvement, and Modernization Act of 2003 (the “MMA”), Part D originally went into effect on January 1, 2006 and has been subsequently amended by several federal statutes, including the Medicare Improvements for Patients and Providers Act of 2008.
Under the MMA, Medicare beneficiaries generally receive coverage for Prescription Drugs in one of two ways:
  • Enrollment in a supplemental Prescription Drug Plan (PDP) offered by a private insurance company, to supplement the health coverage they receive under Medicare Part A and/or B; or
  • Enrollment in a Medicare Advantage Plan that offers coverage for Prescription Drugs (MA-PD) as an integral part of the health coverage it provides under Medicare Part C.
Organizations offering drug plans (both PDPs and MA-PDs) have flexibility in the design of the Prescription Drug benefit packages they offer, including the establishment of formularies. Formularies are lists of Prescription Drugs that have been approved by that Plan for coverage. Even when not included on the formulary, beneficiaries may request an exception in certain circumstances. Other variables include deductibles, coinsurance, coverage, and out-of-pocket limits.
Currently, there is a coverage gap—popularly referred to as the donut-hole—during which the beneficiary bears the primary responsibility for payment of what would otherwise be covered Prescription Drugs. This gap occurs between the time the beneficiary has met the initial coverage limitation under the particular PDP or MA-PD and before he or she has reached his/her out-of-pocket threshold. Over time, the intent under Part D is for coverage to expand and cost sharing to diminish. More information on Part D can be found in related regulations—42 CFR Part 423—and the Medicare Prescription Drug Manual, Publication 100-18, which is available on the CMS Website.
Parts A and B
Medicare Parts A and B are sometimes referred to as original, traditional or fee-for-service Medicare. These are the original programs designed to cover both inpatient and outpatient hospital and other facility services, as well as professional and ancillary health care services. Part A primarily covers inpatient services provided by various health care facilities (e.g., hospitals, skilled nursing facilities, home health agencies, etc.). Part B primarily covers outpatient services provided by various health care facility (including hospitals), professional and ancillary providers. 
Under a covered Part A inpatient hospital stay, there is broad coverage for the Prescription Drugs provided during that stay, including self-administered drugs (drugs that are generally administered orally, topically, in suppository form or by subcutaneous injections). 
There is much more limited coverage for Prescription Drugs provided in the hospital outpatient setting under Part B. Most drugs administered by any method other than by infusion or deep, penetrating intramuscular injections, are considered usually self-administered and, therefore, not covered under Part B. There are three limited exceptions:
  • Statutorily covered drugs, including
o   Blood clotting factors for hemophilia patients,
o   Drugs used in immunosuppressive therapy,
o   Erythropoietin for dialysis patients, and
o   Certain oral anti-cancer drugs and anti-emetics used in certain situations.
  • Drugs provided incident to a physician’s service that are not usually self-administered; that is, drugs administered by infusion or deep, penetrating intramuscular injections; and
  • Certain self-administered drugs if they are an integral component of a procedure or are directly related to it or facilitate the performance of, or recovery from, the procedure, but not if they are the treatment itself. An example of a Prescription Drug covered under this exception would be an antibiotic ointment applied to a wound or surgical incision to guard against infection.
Potential coverage under Part D for Prescription Drugs not covered under Part B
As noted above, most Prescription Drugs otherwise medically appropriate are not covered under Part B when provided in the hospital outpatient setting. In that case, there may be coverage for those drugs under Part D. Whether there is coverage for those drugs under Part D, generally, or for a specific beneficiary, in specific circumstances, will largely depend upon the terms of coverage under that particular PDP or MA-PD. Generally, only those Prescription Drugs included on the Plan’s formulary will be covered. With respect to a specific beneficiary, coverage will also depend upon whether he or she has met the applicable deductible, has reached the initial coverage limitation and/or has reached his or her out-of-pocket threshold. 
Medicare has created a brochure for original Medicare beneficiaries (“How Medicare Covers Self-administered Drugs Given in Hospital Outpatient Settings”), which can be downloaded from the following CMS website. In its brochure, Medicare notes most self-administered drugs provided in the hospital outpatient setting will not be covered and the hospital will probably bill the beneficiary for those non-covered drugs. In that case, they recommend a Medicare beneficiary with Part D do the following:
  • Check with the hospital to see if it participates in Part D.
  • Since most hospital pharmacies do not participate in Part D, the beneficiary may need to pay up front and out-of-pocket for these drugs and submit the claim to his/her PDP for a refund.
  • Follow the instructions in the PDP’s enrollment materials on how to submit an out-of-network claim, or call the plan for information about how to submit a claim.
  • The beneficiary should keep copies of any receipts and any paperwork sent to the PDP.
The PDP will probably ask for the following additional information:
  • Certain information, like the emergency room bill showing what self-administered drugs were given. He or she may also need to explain the reason for the hospital visit.
  • The PDP may ask if the beneficiary could have reasonably obtained any of the drugs from a participating network pharmacy. For example, if he or she could have taken a dose of a drug obtained from a network pharmacy before the outpatient hospital appointment, the PDP may not pay for that drug.
To determine whether the drug is covered under Part D, the PDP will check to see whether it is included on the PDP’s formulary or qualifies under an exception. Even if the drug is covered, the PDP may only reimburse the in-network cost for the drug, minus any deductibles, copayments, or coinsurance that would normally apply. In addition, the beneficiary also may need to pay the difference between what the hospital charged and what the PDP paid. This amount will be counted toward his/her Part D out-of-pocket costs, so long as he or she submits the claim to the PDP. If the drug is not covered, the beneficiary will be obligated to pay the full amount that the hospital charged for the drug. 
Potential coverage under Part D for Prescription Drugs not covered under Part A
Presumably, Prescription Drugs that are provided in the inpatient hospital setting but are neither covered under Part A nor fall within one of the limited coverage categories under inpatient Part B, would also potentially qualify for coverage under Part D, following the same process and analysis outlined above.
Hospitals are encouraged to educate themselves and their patients with respect to the coverage policies and procedures for Prescription Drugs under Parts A, B, and D and to facilitate their patients’ ability to communicate and seek guidance from their respective PDPs and MA-PDs on these issues.

Want to receive articles like this one in your inbox? Subscribe to Medicare Insider!

Most Popular