United States: Is This Prescription Part B or Part D? Sorting Out One of the Drug Benefit’s Most Complicated Issues

Determining whether a drug is covered by Medicare Part B or Part D is one of the most complicated issues that has arisen with the implementation of the new outpatient prescription drug benefit. Medicare Part D coverage is excluded for drugs where coverage is available under Medicare Part B. In most cases a drug will be covered under Part D because it is dispensed in the retail setting as an outpatient prescription drug. However, in some cases, it is possible that a drug may be covered under Part B or D, and making such determinations is not always intuitive. Part of the reason for the confusing standards is the fact that drug coverage under Medicare Part B was implemented in a patchwork fashion to address specifically identified patient needs at a time when there was no widespread drug coverage. Now, with the advent of Part D, the new benefit must fit outpatient prescription drug coverage within this existing framework. The intersection of Parts B and D is most apparent in the long term care setting, where institutional pharmacies regularly dispense drugs that are covered under the different parts of Medicare.

CMS recently issued guidance, including explanatory charts and FAQs, to help in making drug coverage determinations.¹ The guidance is far from clear in that it directs Part D plans and pharmacies to consider the characteristics of the beneficiary, medical use of the drug, form of the drug, and whether Part B coverage is being furnished in the context of another service. Id. This article discusses the factors that are determinative of Part B or D coverage and categories of drugs where coverage may vary.

The Part D benefit covers those FDA approved drugs (or drugs under 1927(K)(2)(A)(ii) or (iii) of the SSA) available by prescription that are used and sold in the United States and used for a medically accepted indication under 1927(K)(6). 42 U.S.C. § 1395w-102(e). Excluded from coverage are those drugs where coverage would be available under Part A or B for the individual (regardless of whether the individual is in fact covered under Part A, enrolled in Part B, or a deductible would apply). 70 Fed. Reg. 4194, 4228, and 4233 (Jan. 28, 2006). Also excluded are drugs or classes of drugs excluded or restricted from coverage under the Medicaid program. 42 U.S.C. § 1395w-102(e).

In the case of Medicaid excluded drugs, a Part D plan may, at its option, provide for their coverage as part of any supplemental benefits it offers. Non-prescription drugs also are excluded from most Part D plans unless they are included as part of a utilization management program and provided at no cost to enrollees.

Parts A and B generally do not cover most outpatient prescription drugs. Drugs covered under Part A typically are provided as part of a covered inpatient hospital or skilled nursing facility (SNF) stay and bundled into the Part A payment to the facility (clotting factor is paid separately). See 42 C.F.R. § 409.25(a). Outpatient drugs are covered under Part B, only if the drugs are: (a) not usually self-administered and furnished "incident to" a physician’s service, (b) separately billable ESRD drugs, (c) separately billable drugs provided in a hospital outpatient department, (d) covered as supplies or "integral to a procedure," (e) blood and blood products, or (f) furnished in certain provider settings. See 42 U.S.C. §§ 1395k and 1395x(s). Drugs also are covered under Part B if they fall into one of several statutorily defined categories discussed in greater detail below.

There are seven categories of separately billable Part B drugs that may be covered under Part D based upon what CMS refers to as the "characteristics of the beneficiary or medical use of the drug."²

• First, drugs used in immunosuppressive therapy are covered under Part B only if they are used in connection with a transplant covered under Medicare. 42 U.S.C. § 1395x(s)(2)(J). Otherwise, they are covered under Part D.

• Second, parenteral nutrition is covered under Part B only for individuals with non-functioning digestive tracts. 42 C.F.R. § 414.104.

• Third, Part B covers intravenous immune globulin (IVIG) provided in the home only for individuals with diagnoses of primary immune deficiency disease. Id. Other diagnoses requiring the provision of IVIG are covered under the Part D benefit.

• Fourth, oral chemotherapy agents used in cancer treatment where there is an infusible version of the drug are covered under Part B. 42 U.S.C. §§ 1395x(s)(Q) and 1395x(t)(2). If the oral chemotherapy agent is not related to cancer treatment or if there is no infusible version, the drug will be covered under Part D.

• Fifth, Part B covers oral antiemetics that are used in cancer treatment as a full replacement for intravenous treatment and are administered within forty-eight hours of the treatment. 42 U.S.C. § 1395x(s)(2)(T).

• Sixth, hepatitis B vaccine is covered under Part B only if it is administered to an individual at "high or intermediate risk" for contracting the disease.³ 42 U.S.C. § 1395x(s)(10)(B).

• Seventh, infusible DME supply drugs, such as dopamine, comprise the final category of separately billable Part B drugs that may be covered under Part D based upon the "characteristics of the beneficiary or medical use of the drug." In this case, a determination of coverage requires consideration of the method used to administer the drug, the local coverage policy of the applicable Medicare durable medical equipment regional carrier (DMERC), and specific coverage applicable to the beneficiary. With regard to the first factor, a DMERC supplier will bill Medicare Part B if the drug is administered using an implantable infusion pump. 42 U.S.C. § 1395x(n). Drugs administered using external infusion pumps are covered under Part B only if the local coverage policy of the Medicare DMERC allows. Id. Part B coverage of infusible DME drugs is excluded for individuals who are in a hospital or a SNF and do not have Part A coverage, whose Part A coverage for the stay has been exhausted, or whose stay is non-covered. These coverage limitations apply because the Part B DME benefit applies only to items furnished for use in a patient’s "home" and excludes hospitals or SNFs from being considered a "home" for this purpose. ⁴ Accordingly, the drugs may be covered under Part D for SNF residents, whereas beneficiaries still living in their original residence or in an assisted living facility will be covered under Part B. Finally, services and supplies used in the administration of the drug are not payable under Part D but may be covered, to a limited degree, under the Part A or B home health benefit, Medicaid, or by secondary third party insurance. 42 U.S.C. § 1395x(m).

Inhalation DME supply drugs such as albuterol sulfate are covered under Part B if they are used with a nebulizer in a patient’s home. 42 U.S.C. § 1395x(n). In cases where the drugs are delivered with a metered dose inhaler or other route of administration that does not involve a nebulizer, they are covered under Part D. These drugs also are covered under Part D if they are not furnished in a beneficiary’s "home," even if they are administered using a nebulizer. The limitations on "home" described above in the SNF and hospital settings apply in making such determinations.

There are several categories of separately billable drugs that are covered under Part B because they are furnished as part of another service, in an identifiable setting. Drugs administered in the physician office setting as "incident to" a physician’s service are the most common type of Part B drug that fall within this category. 42 U.S.C. § 1395x(s). It should be noted, however, that subject to some limitations, such drugs would be covered under Part D if a patient presented a prescription for it at a pharmacy because, in those cases, a physician would not be furnishing the drug.

CMS permits Part D plans to require that a pharmacy obtain prior authorization before dispensing injectables and infusables that would be covered under Part B as "incident to" a physician’s service.⁵ The Part D plan would be authorized to deny coverage if, based on medical literature, there are serious safety concerns that would go against medical practice if the drug is dispensed directly to a patient.⁶ CMS cautions, however, that there are few situations when a Part D plan may deny coverage on this basis.⁷

Other drugs that are covered under Part B and not Part D include the following:

• Separately billable ESRD drugs;

• Separately billable drugs furnished in hospital outpatient departments;

• Separately billable drugs furnished in comprehensive outpatient rehabilitation facilities;

• Drugs packaged under the Hospital Outpatient Prospective Payment System;

• Drugs furnished by ESRD facilities and included in Medicare’s ESRD composite rate;

• Osteoporosis drugs provided by home health agencies in certain cases;

• Drugs furnished by critical access hospitals’ outpatient departments;

• Drugs furnished by rural health clinics;

• Drugs furnished by federally qualified health centers;

• Drugs furnished by community mental health centers; and

• Drugs furnished by ambulances. 42 U.S.C. § 1395x(s).

In its guidance documents, CMS has issued instructions concerning the manner in which Part D plans should determine which, if any, type of Medicare coverage applies and how pharmacies should bill for those drugs. CMS states that it "would not be appropriate" for Part D plans to require rejection of a claim under Part B as a condition precedent to processing a Part D claim.⁸ CMS believes that such a policy would be disruptive to patients and pharmacies and would increase Part B contractor costs. However, CMS will permit a Part D plan to require a Part B rejection before processing a claim if the plan has a "reasonable basis" for assuming that a particular claim would be covered under Part B. CMS recommends that where coverage may be questionable the Part D plan implement prior authorization requirements to assist pharmacies in making coverage determinations for those drugs where Part B or D coverage may vary. To further complicate matters, CMS instructs Part D plans that they will have to modify their coverage based on variations in Part B coverage across carrier areas within its region.⁹ Therefore, if one carrier in its region covers a particular drug and another does not, the Part D plan will have to provide coverage accordingly. Medicare Advantage Plans may seek approval from CMS to uniformly apply local coverage policies that they determine are "most beneficial to enrollees." In cases where a Part D plan mistakenly makes payment for a drug it later determines should have been covered under Part B, CMS instructs the Part D plan to "seek recovery from the billing entity" (in most cases, a physician’s office or a provider) and instruct it to bill Medicare Part B instead.

Part B versus D coverage likely will continue to be an issue over the next few years as Part D plans and pharmacies adjust to the Part D benefit and become familiar with its nuances. We recommend that Part D plans continue to pay close attention to coverage requirements and, where feasible, implement robust prior authorization programs to reduce confusion on the part of pharmacies and patients.

This table provides a quick reference guide for the most frequent Medicare Part B drug and Part D drug coverage determination scenarios facing Part D plans and Part D pharmacy providers. It does not address all possible situations. For a more extensive discussion, please refer to "Medicare Part B vs. Part D Coverage Issues" at www.cms.hhs.gov/PrescriptionDrugCovGenln/Downloads/PartBandPartDdoc_07.27.05.pdf.

This article is presented for informational purposes only and is not intended to constitute legal advice.