Early this month, the Center for Medicare and Medicaid Services announced 2013 payment and policy updates for both Medicare Part C and D plans.

Below are a few of the 2013 highlights and the Part D benefit costs, as outlined in CMS’ recent press release:

• Controlling Beneficiary Costs and Premium Increases: CMS will again exercise its authority under the Affordable Care Act to deny Part C and D plan bids, if it determines that the bid proposes too significant an increase in cost sharing for beneficiaries or decrease in benefits from one year to the next.
• Lower drug costs: CMS will address improvements in the Medicare prescription drug benefit, specifically those provisions that close the Part D coverage gap, or “donut hole.”   As a result of the Affordable Care Act, in 2013, eligible drug plan enrollees with liability in the donut hole will only pay 47.5% of the costs of covered brand-name drugs.  For generic drugs in the gap, cost sharing shrinks to 79%, from 86% in 2012. People enrolled in Medicare Part D who do not receive the low income subsidy (also known as Extra Help) and enter the coverage gap will pay less each year until 2020, when they will pay only 25% for covered brand-name and generic drugs, closing the donut hole.
• Stronger Part D & MA plan quality: In 2013, CMS will alert plan members if their drug or health plan has failed for 3 straight years to achieve at least a 3 (out of 5) star quality rating and offer a special enrollment period that will allow the member to move to a higher quality plan. For MA plans, the 3-year Quality Bonus Payment demonstration will continue to provide financial incentives to improve quality of care for Medicare beneficiaries.
• Reducing inappropriate overuse of prescription drugs: For Part D plans, CMS describes drug utilization management improvements to address overprescribing and overutilization of opiates and other medications to ensure beneficiary safety and prevent fraud.
• Supplemental Benefits: CMS is clarifying its definition of certain supplemental benefits in an effort to ensure transparency and consistency across all MA plans that choose to offer such benefits.  CMS is also extending additional supplemental benefit options to qualifying dual eligible special needs plans (D-SNPs).
• Part D Benefit Parameters: Statutory updates to the annual benefit parameters for the defined standard Part D prescription drug benefit in Calendar Year (CY) 2013. They include:

Part D Benefit ParameterDefined Standard Benefit	CY 2012	CY 2013
Deductible	$320	$325
Initial Coverage Limit (Total drug costs after deductible before hitting coverage gap)	$2,930	$2,970
Out-of-Pocket Threshold (Total amount beneficiary pays before hitting catastrophic phase)	$4,700	$4,750
Minimum Cost-sharing for Generic/Preferred Multi-Source Drugs in the Catastrophic Phase	$2.60	$2.65
Minimum Cost-sharing for Other Drugs in the Catastrophic Phase	$6.50	$6.60

The national Part D base beneficiary premium for next year has also been announced. It will be $31.17 in 2013. This premium amount is used when calculating a Part D late enrollment penalty (for someone who delayed enrolling into Part D when first eligible and who didn’t have other equivalent coverage). And the California Part D low-income premium subsidy amount (benchmark plan amount) will be $29.88 in 2013.

Also, as of last year, people with higher incomes (individuals with annual incomes over $85,000 and couples with incomes over $170,000) pay a higher Part D monthly premium. Below is a chart of the higher Part D premiums for such people in 2013.

Note: The formula used to determine a person’s premium amount is the same one used for Part B premiums, known as the Income Related Monthly Adjustment Amount (IRMAA). A person’s income level is be based on income reported to the IRS. These IRMAA-related premiums are either deducted from a beneficiary’s Social Security check or the beneficiary is billed. This premium is in addition to and separate from the premium paid to one’s Part D plan.