TN 26 (04-24)

HI 03001.001 Description of the Medicare Part D Prescription Drug Program

CITATIONS:

Sections 1144 and 1860D-1 through 1860D-15 of the Social Security Act

A. Introduction to the Medicare Part D prescription drug program

Public Law 108-173, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also known as the Medicare Modernization Act (MMA), amended Title XVIII of the Social Security Act to establish a Medicare prescription drug coverage program, Medicare Part D.

B. Policy – Public Law 108-173, Medicare Modernization Act (MMA)

Effective January 1, 2006, the basic requirements for participation in the Medicare Part D prescription drug program include:

  • Entitlement to Medicare Part A or Medicare Part B (or both);

  • Residence in the service area of the beneficiary’s Medicare prescription drug plan; and

  • Citizen of the United States or lawfully present in the United States.

    NOTE: 

    An individual who is not a resident of the 50 States or the District of Columbia is not eligible for Extra Help with Medicare Part D prescription drug coverage. Additional information about Medicare Part D Extra Help is found in HI 03001.005 through HI 03001.020.

Unlike Medicare Parts A and B, SSA does not process Part D enrollments. Medicare beneficiaries enroll in a Part D plan during an enrollment period with a prescription drug provider. Participants in the Part D program must meet deductible, premium, and copayment responsibilities.

SSA administers a program to help low-income beneficiaries with their prescription drug coverage costs called Extra Help (also known as low-income subsidy, LIS, or subsidy).

C. Policy – Public Law 110-275, Medicare Improvements for Patients and Providers Act (MIPPA)

Effective with applications filed on or after January 1, 2010, or redeterminations initiated on or after that date, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), Public Law 110-275:

  • Requires SSA to transmit identity and financial data used to determine eligibility for Extra Help to the State Medicaid agencies to initiate an application for the Medicare Savings Programs (MSPs) unless the beneficiary objects;

  • Eliminates counting in-kind support and maintenance (ISM) as unearned income for Extra Help purposes; and

  • Eliminates counting the cash surrender value (CSV) of life insurance from resources for Extra Help purposes.

Effective January 1, 2009, MIPPA also eliminates any late-enrollment penalties for individuals eligible for Extra Help or deemed eligibles by statute. Previously the Centers for Medicare & Medicaid Services (CMS) administratively waived late enrollment penalties for this group; the statute eliminates the annual waiver.

NOTE: 

The MSPs are state Medicaid eligibility groups that cover Parts A premiums, Part B premiums, or both and often, cost-sharing for Medicare beneficiaries with limited income and resources. State Medicaid agencies receive applications and determine eligibility for the MSPs. For information about the MSPs, see HI 00815.023.

D. Policy – Public Laws 111-148 and 111-152, Affordable Care Act (ACA)

Effective January 1, 2011, the Affordable Care Act (ACA):

  • Over time eliminated the Part D coverage gap popularly known as the “donut hole”;

  • Requires higher-income beneficiaries pay an income-related monthly adjustment amount for their Medicare Part D prescription drug coverage premiums (IRMAA-D); and

  • Changes enrollment and disenrollment period rules for Medicare Advantage and Part D.

NOTE: 

For information regarding the income-related monthly adjustment amount, see HI 01101.000.

E. Policy - Public Law 117-169, Inflation Reduction Act (IRA)

Effective January 1, 2024, the Inflation Reduction Act (IRA):

  • Increases the income limit for full subsidy Extra Help from income below 135 percent of the Federal Poverty Level (FPL) to income below 150 percent of the FPL;

  • Increases the resource limits for full subsidy Extra Help to the highest single and married resource limits and eliminates the low single and married resource limits; and

  • Provides the full subsidy to all Extra Help beneficiaries.

NOTE: 

For information regarding low and high resource limits, see HI 03001.005.

F. Facts about the Medicare Part D prescription drug coverage program

Like Medicare Advantage (see HI 00208.066), participation in the Medicare Part D prescription drug program is voluntary. Medicare Part D coverage replaces Medicaid prescription drug coverage for beneficiaries receiving both Medicaid and Medicare. Medicaid beneficiaries have the option to disenroll from the Part D prescription drug program. However, there is no federal financial participation under Medicaid for prescription coverage for prescriptions available under Part D for Medicare beneficiaries with Part A, Part B or both.

1. Creditable coverage for Medicare Part D

Medicare-eligible beneficiaries who have prescription drug coverage through an entity such as a former or current employer, or other entity described in federal law, must be provided a disclosure by that entity informing them if their prescription drug coverage is creditable coverage (i.e., prescription coverage at least equivalent to Part D coverage). This disclosure must be provided at specific timeframes as described in federal law. HI 03001.001J explains further the term “creditable coverage”.

2. The donut hole

Most Medicare drug plans have a coverage gap or “donut hole.” The coverage gap begins after the beneficiary and drug plan have spent a certain amount of money for covered drugs, which results in the beneficiary paying all costs out-of-pocket for prescriptions up to a yearly limit. In 2010, the ACA gradually eliminated the coverage gap in Medicare prescription drug coverage with the gap completely disappearing by 2020. Beneficiaries in 2010, subject to the coverage gap, who were not paying IRMAA, received a one-time $250 rebate payment. The first decrease in the gap began in 2011 when beneficiaries who entered the gap received a 50% discount when purchasing Part D-covered brand name prescription drugs and a 7% discount for generic drugs. Out-of-pocket costs during a coverage gap continued to decrease until 2020. In 2025, due to the IRA, there will no longer be a coverage gap. Instead, beneficiaries who have spent a certain amount of money on covered drugs will pay up to 25% of all costs out-of-pocket for prescriptions up to a yearly limit.

NOTE: 

There is no coverage gap in Extra Help, so there is no donut hole. Extra Help beneficiaries did not receive the $250 rebate and are not impacted by the removal of the coverage gap.

3. Contact information

Refer all questions regarding enrollment or choosing a prescription drug plan (PDP) or Medicare Advantage with prescription drug coverage (MA-PD) to the Medicare.gov website, Explore your Medicare coverage options, or 1-800-MEDICARE (TTY 1-877-486-2048). Beneficiaries can also obtain assistance selecting a plan through their State Health Insurance Assistance Program (SHIP). SHIP telephone contact information is in the “Medicare & You” handbook and may also be obtained by selecting the State at Home | State Health Insurance Assistance Programs (shiphelp.org).

Refer all questions regarding premiums to the PDP or MA-PD plan.

4. Deemed Eligibles for “Extra Help” low-income subsidy

Medicare-entitled beneficiaries receiving SSI, full Medicaid coverage, or who participate in a Medicare Savings Program (MSP, as defined in HI 00815.024), except Qualified Disabled and Working Individuals (QDWI), are deemed eligible for a low-income subsidy. This means they do not have to file an application for Extra Help. Individuals who receive Extra Help will be auto-enrolled by CMS into a Part D plan unless the beneficiary opts out of Part D or selects a specific plan on their own.

  • SSA and the States share files with CMS to determine these deemed eligibles and CMS notifies deemed eligibles that they are already eligible for the LIS and need not file an Extra Help application.

  • CMS also notifies SSA of those who are deemed eligible for Extra Help. This information is available in the Medicare Application Processing System (MAPS).

If there is any doubt about an individual’s deemed status (e.g., there is no record on MAPS), take an Extra Help application.

G. SSA’s Part D roles and responsibilities

We maintain five primary roles in the administration of the Medicare Part D program:

  1. 1. 

    Providing general information to the public about the Medicare Part D program;

  2. 2. 

    Processing and making initial determinations on Extra Help applications, redeterminations, and appeals;

  3. 3. 

    Screening Part D questions for referral to CMS;

  4. 4. 

    Deducting Part D (and MA-PD) premiums that do not exceed $300 a month from Title II benefits when the beneficiary requests withholding. (If there is an arrearage, SSA cannot deduct the total of the current premium plus arrearage if it exceeds $300.) PDP or MA-PD premium withholding requests are not made to SSA; the beneficiary requests the PDP or MA-PD to have the premium withheld from the Title II benefit. The PDP or MA-PD transmits that information to CMS, and CMS requests SSA to withhold the Part D premium. SSA only deducts if the monthly premium (or premium plus any arrearage) does not exceed $300 and there are sufficient Title II benefits to pay the premiums; and

  5. 5. 

    Determining when IRMAA is applicable and deducting IRMAA-D from Social Security benefits when there are sufficient funds to cover the cost. However, if the Social Security benefit payment is not enough to cover the entire monthly IRMAA-D, CMS will bill the beneficiary for the IRMAA-D. Office of Personnel Management (OPM) annuitants will also have IRMAA-D withheld from their benefit payment. The Railroad Board will bill IRMAA-D separately.

Our responsibilities also include:

  • Coordinating Extra Help outreach activities;

  • Sending data used to make the Extra Help determination to the States to initiate an application for MSPs unless the claimant declines to apply for the MSPs through the Extra Help application. SSA sends data to the States Monday through Friday, except Federal holidays. Data will not be sent on individuals that are already deemed or where there is a duplicate application;

  • Providing the beneficiary with information about MSP and referrals to the State health insurance assistance programs (SHIPs);

  • Providing MSP model applications in English and 10 additional languages to beneficiaries upon request. SSA provides those applications as a courtesy; SSA does not complete or help complete MSP applications; and

  • Sharing IRMAA data with the Railroad Retirement Board (RRB), Office of Personnel Management (OPM), and Centers for Medicare & Medicaid Services (CMS) when appropriate.

NOTE: 

To become eligible for an MSP, beneficiaries apply directly with the Medicaid State agency or its designee. Unless the beneficiary declines having information shared with the State, filing an Extra Help application also starts an application for the MSPs with the State. SSA transmits Extra Help application data (LIS leads data) with States, and States must initiate an application for the MSPs upon receipt of the leads data. The State may then contact the beneficiary for any information that is missing from the leads data but needed for the MSP determination. For more information regarding SSA’s role in MSP applications, see HI 00815.024.

H. CMS’ Part D responsibilities

CMS has Federal oversight responsibility for the Medicare program, including Part D and MA-PD.

CMS’ responsibilities include:

  • Approving and selecting competitive bids from PDPs and MA-PDs;

  • Publishing regulations governing Medicare and State Medicaid agency policies and State agency procedures involving subsidy eligibility and State requirements for using Extra Help data for MSP determinations;

  • Establishing enrollment periods, including Special Enrollment Periods (SEPs). Information about various SEPs can be found in HI 03001.001J in this section;

  • Determining and notifying those who are deemed eligible for the Extra Help;

  • Determining the actual dollar value of the subsidy for the beneficiary;

  • Enrolling beneficiaries eligible for Extra Help in a Part D plan if they fail to choose a plan on their own;

  • Assigning beneficiaries with Extra Help to a new Part D plan when their plan terminates or when an increase in their plan premium would cause them to have a premium liability the next year;

  • Sending notices to beneficiaries who lose deemed eligibility. (The notice includes an SSA application for Extra Help); and

  • Collecting IRMAA-D for direct-bill beneficiaries and for Social Security, RRB and OPM beneficiaries whose Federal benefits are insufficient to cover the full amount.

I. Medicare prescription drug coverage plans and premium payment

Medicare-approved prescription drug coverage plans are offered by private companies and may cover a range of generic and brand-name prescription medications that vary by plan. Copays, deductibles, premiums, and coverage vary by plan. Medicare beneficiaries who choose to enroll or disenroll in Part D must do so by enrolling or disenrolling with a prescription drug plan; they may also enroll through CMS using the www.medicare.gov website or by calling 1-800-MEDICARE.

1. Referring all contacts and questions on Medicare Part D

Refer all questions regarding the following Medicare Part D topics to the Medicare toll-free number, 1-800-MEDICARE (1-800-633-4227), or, for TTY users, 1-877-486-2048:

  • Enrollment,

  • Disenrollment, or

  • Choosing a PDP or MA-PD

Refer questions on any of the following Medicare Part D topics to the PDP or MA-PD, or to the Medicare toll-free number:

  • Charges,

  • Deductibles,

  • Copayments,

  • Premiums, (not IRMAA)

  • Premium withholding, or

  • Coverage of drugs or medical supplies under Part D.

NOTE: 

Although there are certain classes and types of drugs that must be covered by any Medicare-approved PDP or MA-PD, the specifics of which drugs are covered vary from plan-to-plan.

Follow the instructions for screening IRMAA questions or inquiries in HI 01101.040. If a beneficiary questions an IRMAA determination or decision, see HI 01101.050.

2. Payment options

PDPs and MA-PDs provide payment options to all beneficiaries responsible for paying all or part of their Part D monthly premiums.

Beneficiaries may pay Part D premiums by:

  • Direct payment to the PDP or MA-PD,

  • Electronic billing (e.g., electronic funds transfer (EFT) or credit card), or

  • Deduction from monthly Title II Social Security benefits. SSA will not withhold Part D premiums if there are insufficient benefits available to cover the full premiums after other deductions. If the beneficiary’s Medicare Advantage or Medicare prescription drug coverage premium (or premium plus arrearage) exceeds $300.00, SSA cannot withhold from the benefit check. SSA notifies CMS that the PDP or MA-PD must direct-bill the beneficiary.

NOTE: 

Currently, Part D premiums are not withheld from OPM benefits. However, RRB members can have their Part D prescription drug plan premiums withheld from their RRB monthly benefit payments and should contact their PDP or MA-PD to request withholding of these premiums.

If the beneficiary pays IRMAA-D, the amount of the IRMAA-D ordinarily is withheld from the Title II, or OPM benefit. (RRB bills separately.) If the amount of the benefit is insufficient to cover the IRMAA-D entirely, CMS will bill for the entire IRMAA-D amount. For more IRMAA-D information, see HI 01101.001.

J. Medicare Part D enrollment periods and coverage effective dates

Beneficiaries do not enroll in Medicare Part D through SSA. Those who choose to enroll in a Part D plan do so with CMS, a prescription drug plan or by joining a Medicare Advantage plan with prescription drug coverage.

Beneficiaries may be able to change plans each year during the Annual Election Period (AEP), or by using a Special Election Period (SEP), the Medicare Advantage Open Enrollment Period (MA-OEP), or other enrollment period for which they are eligible.

Beneficiaries who want Medicare Part D prescription drug coverage must enroll during an enrollment period as explained in the chart below. To enroll in a PDP or MA-PD, the beneficiary must reside within the PDP’s or MA-PD’s service area.

NOTE: 

An incarcerated individual does not meet the requirement of residing in the service area of a plan, even if the correctional facility is located within the plan’s geographical service area. For Medicare Advantage and Part D eligibility and enrollment purposes, an incarcerated individual is a person confined to a correctional facility such as a jail or prison, escaped from confinement, under supervised release, on medical furlough, required to reside in mental health facilities, half-way houses or live under home detention, or confined completely or partially in any way under a penal statute or rule.

Type of Enrollment Period

Description

Effective Date of Part D Coverage

Initial Enrollment Period (IEP)

The IEP for Part D generally follows the Part B IEP rules, which is usually the 7-month period that begins 3 months before the month of entitlement to Medicare, through 3 months after the month Medicare entitlement begins.

Beneficiaries eligible for Medicare prior to age 65, e.g., for disability, have another IEP for Part B and Part D based upon attaining age 65.

IMPORTANT: If a beneficiary joins an MA Plan during their IEP, the beneficiary can change to another MA Plan (with or without drug coverage) or go back to Original Medicare Part A / Part B (with or without a drug plan) within the first 3 months of having Medicare Part A & Part B.

For End Stage Renal Disease (ESRD) or Amyotrophic Lateral Sclerosis (ALS, also known as "Lou Gehrig's disease") beneficiaries:

See instructions:

DI 45001.001 End-Stage Renal Disease (ESRD) Entitlement Provisions

DI 11036.001 Amyotrophic Lateral Sclerosis (ALS) – Medicare Waiting Period Waived – Field Office (FO)

DI 45605.001 Amyotrophic Lateral Sclerosis (ALS) - Medicare Waiting Period Waived - Processing Center (PC

NOTE: 

Prior to 2021, Medicare beneficiaries with ESRD could only join an MA plan under certain circumstances. Starting January 1, 2021, the 21st Century Cures Act (P.L. 114-255) section 17006(a), allows all Medicare-eligible individuals with ESRD to enroll in MA plans (including MA-PD plans).

For Medicare entitled beneficiaries who receive retroactive awards:

The IEP begins the month the notice of entitlement is received and continues for 3 additional months after the notice.

EXAMPLE: Jackson received a Medicare determination notice on 06/01/2008. The notice stated Jackson's Medicare Part A was effective 07/01/2007.

Jackson's Part D initial enrollment period begins in 06/2008 and ends 09/30/2008.

Enrollment requests are effective the 1st of the month following the month the enrollment was made, but not earlier than the Medicare entitlement date.

Annual Election Period (AEP)

The AEP occurs every year from October 15 through December 7.

During the AEP beneficiaries can enroll in, change, or disenroll from a Part D Plan.

IMPORTANT: Late-enrollment penalties may apply (see HI 03001.001K in this section).

Coverage is effective January 1st of the following year, (e.g., enrollments during the AEP of 2023 will have coverage effective January 1, 2024; enrollments during the AEP of 2024 will have coverage effective January 1, 2025).

Special Enrollment Period (SEP)

SEPs are enrollment periods outside of the prescribed enrollment period (e.g., usual IEP and AEP) that allow a beneficiary to join, drop, or change a Part D plan. SEPs apply, but are not limited to, the following scenarios:

  • Individuals who were not eligible for Part D because they were incarcerated and are now released;

  • A change in permanent residence outside of the plan’s service area;

  • A plan goes out of business or is terminated;

  • Loss or change of prescription drug coverage through an employer or union (current or retiree); or

  • The government or the plan provides incorrect information that makes enrollment late.

  • Beneficiary enrolls in Premium Part A or Part B using an exceptional condition SEP. For more information about exceptional conditions see:

    HI 00805.382 Special Enrollment Period (SEP) for Exceptional Conditions and

    HI 00805.387 Special Enrollment Period (SEP) for Other Exceptional Conditions.

IMPORTANT: Beneficiaries who have Extra Help (LIS) have an opportunity to change plans one time per calendar quarter in the first three quarters of the calendar year (Jan. - March, April - June, and July - Sept.). These individuals can use the AEP if they want to join, drop, or change plans in the 4th quarter. These individuals also have an SEP to join, drop, or change plans if they are auto/facilitated enrolled in a new plan by CMS.

The SEP effective date is determined by the PDP/MA-PD and CMS and depends on the SEP type and circumstances.

Refer all questions regarding SEP enrollment or coverage to 1-800-MEDICARE or to the PDP or the MA-PD.

K. Medicare Part D late enrollment

If an individual goes 63 or more days in a row without Part D or other creditable coverage once they are eligible for Medicare, they may incur a late enrollment penalty fee when the individual does enroll in a Part D plan in the future. The PDP or MA-PD uses CMS data to establish the penalty. The penalty fee is 1% of the national base beneficiary premium amount ($34.70 for 2024 and $32.74 for 2023) for each month for which a beneficiary is eligible for Part D coverage but not enrolled (and did not have other creditable coverage). This penalty is generally permanent, like Part B surcharges.

The term “creditable prescription drug coverage” may include:

  • Coverage under a PDP or MA-PD;

  • Medicaid coverage;

  • Some Group Health Plan (GHP) coverage;

  • State Pharmaceutical Assistance Program participation;

  • VA coverage; or

  • Military service-related coverage including TRICARE.

NOTE: 

There are no late-enrollment penalties for deemed or Extra Help eligibles.

L. References

  • HI 00815.025 SSA Outreach to Low-Income Medicare Beneficiaries – Extra Help and Medicare Savings Programs

  • HI 03020.055 Income Limits for Subsidy Eligibility

  • HI 03030.025 Resource Limits for Subsidy Eligibility

  • HI 03050.000 Redeterminations


To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/0603001001
HI 03001.001 - Description of the Medicare Part D Prescription Drug Program - 04/22/2024
Batch run: 09/27/2024
Rev:04/22/2024