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The Medicare Prescription Drug Benefit was passed into law nearly 20 years ago (2003) and implemented in 2006. It’s brought a massive shift from Medicaid as the primary revenue source for LTC pharmacies to Medicare Part D. While the LTC pharmacy industry had concerns about how this change would affect beneficiary access to necessary medications, the outcome was better than the legislation predicted.

During debate over the underlying legislation, we (a coalition of large LTC pharmacies) found members of Congress and the Bush Administration difficult to engage about institutionalized Medicare enrollees. We were a lonely voice, raising our hands during public hearings and in conversation with members, asking how they planned to accommodate the needs of nursing home residents. We were largely ignored – ending up with a requirement for CMS to issue a report on Standards of Practice for Long-Term Care Pharmacy Services.

CMS Engagement with Medicare Part D

While we won few, if any, concessions during the legislative process, we found CMS to be attentive to our concerns and responsive to our suggestions. Industry representatives spent many hours during 2004 discussing the needs of nursing home residents and the current standards of service.

In the end, CMS created its Long Term Care Guidance, which requires health plans to have a separate network of pharmacies that are able to provide 10 distinct services to LTC residents, including specialized packaging, delivery, 24-hour pharmacist availability, ability to provide IV medications, and other services normally provided by LTC pharmacies.

The guidance goes on to delineate formulary provisions to ensure that Medicare enrollees in nursing homes are not disadvantaged by the nonavailability of dosage forms that are commonly required in the nursing home environment. The document also requires plans to provide a transition period for non-formulary drugs to ensure beneficiaries have continuous access to required medications.

The LTC Guidance has become incorporated into the Medicare Prescription Drug Benefit Manual.

How Part D Works

Unlike Medicare Part A, pharmacies don’t get paid through the nursing homes but directly from the prescription drug plan (PDP). Prescriptions paid through the Medicare Advantage (MA) program are paid by the nursing facility under their capitation agreement with the MA plan. The formulary for each plan must comply with CMS’ formulary requirements. Unlike Medicaid, Part D formularies are allowed to have closed formularies if there are processes available to get access to non-formulary drugs.

The plan must have a CMS-approved pharmacy network for retail, LTC residents, and home infusion. The major LTC pharmacy GPOs have organized pharmacy networks to negotiate on behalf of their members. MHAGeriMed, and Innovatix have all created networks to ensure their members are included in PDP and MA networks. In its LTC Guidance Document, CMS instructs plans to make efforts to reach out to LTC pharmacies to advise them of network pharmacy participation. Individual pharmacies may choose to negotiate on their own with the plans, but given the large number of insurers, that isn’t practical except for the largest companies.

Part D Enrollment

Participation in Medicare Part D is voluntary, but if an eligible beneficiary does not enroll when first eligible, they incur a premium penalty that grows for each year of non-participation. Dual-eligible beneficiaries not receiving SNF care under Medicare Part A receive drug benefits under Part D. CMS, in an effort to make certain these folks don’t fail to enroll and find themselves without a drug benefit, automatically enrolls them in a plan designated as eligible for full subsidies. These plans can change every year, so it’s wise for pharmacies to be aware of which Part D 2023 plans will no longer be serving dual-eligibles so they can prepare for changes.

Part D Issues and Trends

Medicare Part D has been operating for 16 years and has become very popular with Medicare enrollees. As with any benefit program, there are always changes. The latest ones have been related to the rise of managed care and the passage of the Inflation Reduction Act (IRA).

The Medicare Advantage (Medicare Part C) program has undergone a surge in enrollment and is expected to surpass enrollment in traditional Medicare next year. One reason is the ability of plans to offer supplemental benefits such as dental, vision, and some personal care services that allow seniors to stay in their homes.

The IRA allows Medicare to begin negotiating rebates with drug manufacturers. This provision doesn’t pose any immediate changes to Medicare Part D, but Medicare continues to be an expensive entitlement, and rising costs continue to cause concern.

X Factors in Working with Medicare Part D

  • Keep up to date with developments in the Part D program through your state pharmacy association, ASCP, NCPA, and other professional associations.
  • Keep communicating with your facility customers to understand how enrollment is changing.
  • Monitor annual changes in dual-eligible enrollment to see which plans are likely to enroll dual-eligible beneficiaries.

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Written by: Paul Baldwin, Baldwin Health Policy Group
Paul’s pharmaceutical industry experience in public and government affairs led to becoming Executive Director of the Long Term Care Pharmacy Alliance, helping lead the industry through the Medicare Modernization Act and creation of the prescription drug benefit. Paul was VP of Public Affairs for Omnicare before founding Baldwin Health Policy Group.

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