Reform Alert - News from the Blues' Office of National Health Reform

How Medicare Advantage will change due to national health reform

Sept. 10, 2010

The Patient Protection and Affordable Care Act will require several changes for Medicare Advantage plans over the next couple of years. Below is a summary of these changes.



Changes to Open Enrollment Periods and Annual Election Periods

Restrictions on higher cost sharing 

  • Cost sharing for Medicare Advantage plans cannot be greater than cost sharing for Original Medicare plans for certain services as required by the Centers for Medicare and Medicaid Services (CMS) 

Maximum out-of-pocket limit* 

  • Medicare Advantage plans will have maximum out-of-pocket limit for designated Medicare Part A and B services of $6,700. 
  • The mandatory maximum out-of-pocket limit for PPOs would apply to in-network services only, and a higher catastrophic maximum would apply to both in and out-of-network services. 
  • The maximum out-of-pocket limit applies to Medicare Advantage for both group health plans and individual health plans. 

Changes to benefits 

  • CMS “highly encouraged” Medicare Advantage plans to provide certain preventive services with no cost sharing. 
  • Annual wellness visits, including health risk assessment and personalized prevention plan, will be a new required benefit. CMS “highly encouraged” Medicare Advantage plans to provide the new benefit with no additional cost sharing. 

Closing Part D coverage gap (“donut hole”) 

  • Phased-in closing of the donut hole begins with new drug discounts in the coverage gap. 

Part D donut hole drug discounts 

  • Pharmaceutical manufacturers will give 50 percent discount assistance for brand-name drugs in the donut hole for Part D and Medicare Advantage/Part D beneficiaries. Discounts must be provided at the point of service at the pharmacy. 
  • The costs paid by manufacturers are considered incurred costs for beneficiaries and applied toward their out-of-pocket threshold. 
  • Part D beneficiaries will also receive a 7 percent discount for covered generic drugs in the donut hole. The discount is provided as a reduction in Medicare’s required beneficiary coinsurance rate in the donut hole from 100 percent to 93 percent. Discounts must be provided at the point of service at the pharmacy. 

Part D income-related premiums 

  • Medicare will set income thresholds for Part D beneficiaries, similar to those set for Part B. 
  • These income thresholds will determine the dollar amount of the premium paid by enrollees, with higher-income beneficiaries paying higher premiums. 
  • Part B and Part D subsidies will begin to be reduced for individuals with income greater than $85,000 and couples filing a joint tax return with income greater than $170,000.

* This change is required by CMS and is not a PPACA requirement; however, it is often grouped with and discussed in the context of changes to Medicare Advantage required by PPACA.


No cost sharing for preventive services 

  • Medicare Advantage plans will be required to provide specific preventive services with no cost sharing.

You can visit the Medicare website.

The information on this website is based on BCBSM's review of the national health care reform legislation and is not intended to impart legal advice. Interpretations of the reform legislation vary, and efforts will be made to present and update accurate information. This overview is intended as an educational tool only and does not replace a more rigorous review of the law's applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. Analysis is ongoing and additional guidance is also anticipated from the Department of Health and Human Services. Additionally, some reform regulations may differ for particular members enrolled in certain programs such as the Federal Employee Program, and those members are encouraged to consult with their benefit administrators for specific details.