What's the Medicare Retiree Drug Subsidy?

The Retiree Drug Subsidy Program is an option available through Medicare that enables employers and unions to continue providing their Medicare-eligible retirees and Medicare-eligible dependents with employer-sponsored drug coverage.

Select a topic below to learn more:

How the Retiree Drug Subsidy Program works
Four steps to RDS
Step one: To apply or not to apply?
Step two: Application process
Step three: Initial set-up and ongoing process
Step four: Annual administrative tasks
Forms
Questions?

How the Retiree Drug Subsidy Program works

It is designed to encourage employers and unions to continue providing high-quality prescription drug coverage to their Medicare-eligible retirees while retaining their current plan designs.

BCBSM's RDS team can help employer groups with a Medicare-eligible retiree population to take full advantage of this subsidy.

The RDS team consists of subject matter experts that will assist you with the following tasks:

Understanding the RDS requirements *
Understanding the RDS application process *
Understanding the RDS application maintenance requirements *
Understanding annual updates and changes to the application process, the RDS requirements and application maintenance *
Managing eligible membership *

BCBSM is an accredited RDS cost-reporting vendor that reports eligible drug costs to the CMS on your group's behalf through electronic mainframe transactions.

*All information about the subsidy process, the application process and ongoing activity required to continue receiving the subsidy is located on The Centers for Medicare and Medicaid Services Retiree Drug Subsidy program website. Groups should familiarize themselves thoroughly with its content.

Click on links below to review key elements of the RDS experience:

Application process
Forms
About RDS:
- CMS RDS reference materials
- Frequently asked questions (FAQ)

Top of page

Four steps to RDS

Think of the Retiree Drug Subsidy experience as a four-step process:

Step one: To apply or not to apply? Determine whether you qualify for the subsidy and if it's in your best financial interest to apply.
Step two: Application process. Groups that choose to proceed must submit an application directly to the CMS website. BCBSM will support the process by offering a variety of tools.
Step three: Initial set-up and ongoing process. BCBSM will handle the initial set-up for groups that are accepted by CMS in order to begin the ongoing prescription drug costs file transfers.
Step four: Annual administrative tasks. Each year, groups must reapply for the Retiree Drug Subsidy.

Top of page

Step one: To apply or not to apply?

Groups that offer a retiree drug plan should ask themselves the following question when considering whether or not to apply for the subsidy:

What are the projected administrative costs to obtain the subsidy? These include:

The costs to hire an actuary to verify if the group's drug plan is as good or better than the Medicare Part D plan
Ongoing staff costs associated with maintaining and sending monthly membership files to CMS and BCBSM

Top of page

Step two: Application process

To begin the application process, the group must file an application on the CMS website. As part of this process, CMS will require the group to hire an actuary to attest that its current Rx plan is as good as Medicare Part D.

To assist groups in this effort, BCBSM has created a standard membership and claims data report that has all the information the actuary needs to complete this requirement. To obtain the report, provide your BCBSM account representative with a contact person's name, phone number and e-mail address where the report is to be sent.

Before BCBSM can share the Protected Health Information contained in the report with the group, BCBSM must have a Data Sharing Agreement (PDF) with all plan sponsors (employers).

The group can contact the BCBSM Retiree Drug Subsidy Team with questions at any time during this process.

Key application tools

CMS Application Schedule
Sample Retiree File Spreadsheet Recommended RDS
Applications Dates Example (PDF)

Top of page

Step three: Initial set-up and ongoing process

Once approved, the group will work with BCBSM to begin sending and receiving files. This is a two-part process:

Initial reporting and set-up
- When a group's application is approved by CMS, the group should notify BCBSM at rdsdesignee@bcbsm.com that it wants to participate in the subsidy process. The group should include a contact person's name, phone number and e-mail address.
BCBSM will electronically send instructions and a subsidy package to the contact person, including:
- Cover letter
- Questionnaire
- Data Sharing Agreement, if not completed in Step 2

Ongoing reporting requirements

The group transfers all monthly and weekly membership files received from CMS to BCBSM as explained in the file transfer instructions.
BCBSM uses these membership files to update the group's subsidy membership database.
BCBSM generates claims utilization files to CMS and the group according to the schedule on the group's application. CMS refers to these files as cost reports.

Top of page

Step four: Annual administrative tasks

Each year, the group must reapply for the Retiree Drug Subsidy. Here's how that process works:

Ninety days prior to the group's plan year, the group must have completed its annual reapplication for the subsidy with CMS
When the group receives the new application ID from CMS, the group completes the online BCBSM questionnaire

Top of page