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Note from the Instructor: Coverage of prescription drugs under Medicare Parts A, B, C, and D

Medicare Insider, June 23, 2015

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This week’s note from the instructor is written byJudith L. Kares, JD, regulatory specialist for HCPro.  

                                                                                       
During several recent custom and open-registration Medicare Boot Camps-Hospital Version, participants have expressed confusion about coverage of prescription drugs under Medicare Parts A, B, C, and D. Each part of Medicare provides some coverage for prescription drugs, primarily depending upon whether those drugs are medically necessary to care for the condition for which they are prescribed and the setting in which they are provided. 
 
In this note, we will discuss drug coverage available under Parts A, B, and C, including the limitations of such coverage. In a subsequent note, we will focus on Part D, which is the most recently implemented part of Medicare, specifically designed to close some of the gaps in Medicare coverage for prescription drugs. We will also explore the potential for additional coverage for prescription drugs under Part D when those drugs are not covered under other parts of Medicare.
 
Coverage under Part A
 
Part A is primarily responsible for inpatient facility services, including services provided to hospital inpatients. Most prescription drugs provided to hospital inpatients during covered Part A days are covered as long as they are “reasonable and necessary” for the care and treatment of the inpatient for whom they are prescribed. Coverage under Part A, however, is generally limited to 90 regular inpatient benefit days per benefit period, during which the beneficiary is only responsible for certain deductible and coinsurance amounts. Each time an old benefit period ends and a new benefit period begins, the beneficiary once again has 90 covered benefit days during that benefit period.
 
In addition, each beneficiary covered under Part A has 60 lifetime reserve benefit days, during which he or she is only responsible for certain coinsurance amounts. Unfortunately, lifetime reserve days do not renew; once used, they are gone forever.  
 
Coverage under Part B
 
Coverage of prescription drugs provided to hospital outpatients under Part B is more limited. Generally, outpatient hospital drugs are not covered unless they fall within one of the following three exceptions:
  • Certain categories of outpatient drugs covered by statute;
  • Outpatient drugs that are provided “incident to” a physician’s services and are “not usually self-administered,” as determined by the MAC with jurisdiction for those hospital services; and
  • Certain self-administered drugs if they are an integral component of a procedure, are directly related to it, or facilitate the performance of, or recovery from, the procedure. 
Under the first exception, the following categories of outpatient drugs are covered by statute:
  • Blood clotting factors for hemophilia patients;
  • Drugs used in immunosuppressive therapy;
  • Erythropoietin for dialysis patients; and
  • Certain oral anti-cancer drugs and anti-emetics used in certain situations.
 
Under the second exception, although the MACs are tasked with the responsibility of determining which drugs meet the “incident to” rules and are “not usually self-administered,” Medicare provides the following guidelines:
  • Generally, only those drugs administered by injection, including infusion, are considered to be “not usually self-administered;” and
  • If administered by injection (other than infusion), only those drugs administered by deep, penetrating, intramuscular injection are considered to be “not usually self-administered.”
 
The MACs are required to report a list of those drugs determined to be “usually self-administered,” and, therefore, not covered, to Medicare. They are also supposed to post that list (referred to as the “Self-Administered Drug” [SAD] list) on their websites.
 
Medicare continues to stress the limited nature of the third exception. This exception applies only when certain self-administered drugs are an integral component of a procedure, are directly related to it, or facilitate the performance of, or recovery from, the procedure. There is no coverage when the self-administered drug is the treatment itself, regardless of whether it is medically necessary. A prime example would be a hospital emergency room providing insulin to a patient suffering from hyperosmolar hyperglycemic syndrome. Since the patient is an outpatient and the insulin (which is self-administered) is the treatment, rather than an integral component, it would not be covered.
 
It is important for both hospitals and beneficiaries to understand that Medicare has made a decision to cover only certain drugs provided to hospital outpatients under Part B. That coverage determination is not necessarily related to whether those drugs are medically appropriate for the care and treatment of a specific patient.
 
Some coverage may also be available under Part B for prescription drugs provided to hospital inpatients when there is no coverage under Part A (e.g., patient is not entitled to Part A or has exhausted Part A inpatient days). Coverage under inpatient Part B is generally on the same terms and conditions as those that would have applied had the services been provided in the outpatient setting.
 
Coverage under Part C
 
Medicare, as originally implemented in 1965, only included coverage under Parts A and B. Under “original” Medicare, beneficiaries continue to have broad choice of providers for their Part A (inpatient) and Part B (primarily outpatient) services delivered in the traditional manner. Beginning in the 1980s, Medicare began to provide coverage under Part C, using a variety of managed care, risk-based delivery models. At a minimum, these private entity managed care plans (currently referred to as “Medicare Advantage Plans” or “MA Plans”) must provide coverage for all of the services, including prescription drugs, covered under Parts A and B. In addition, since their inception, MA Plans (and their predecessors) were permitted to offer additional benefits in the form of reduced cost sharing or additional services. Many of them elected to offer expanded outpatient drug coverage.
 
Since the implementation of Part D on January 1, 2006, many MA Plans are required, or have elected to, provide drug coverage under Part D. An MA Plan that provides drug coverage under Part D is referred to as an MA-PD Plan.
 
Continuing discussion
 
As noted above, we will continue this discussion in a subsequent note, focusing on Part D, which is the most recently implemented part of Medicare. Part D was specifically designed to close some of the gaps in coverage for prescription drugs. We will also explore the potential for additional coverage under Part D when certain prescription drugs are not covered under Parts A, B, or C.
 
In the meantime, you can find additional information in the following source authorities:
 



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