A Medicare Prescription Drug Plan D Miscalculation

My mother's uses Medicare Prescription Drug Plan D, and I'm handling transactions for it this year. I'm not going to explain much about Medicare's prescription plan. I'm not trying to impart knowledge - I'm just hoping someone out there understands this.When transitioning from Stage 2 (just a copay) to Stage 3 (45% of full cost for non-generics, also known as the Coverage Gap or the Donut Hole), I believe that the amount that a pharmacy should charge is being miscalculated by the insurance companies that manage the plan. When I explained how the calculation they were applying led to obviously wrong results in that a person who had used up most of Stage 2 and was pushed into Stage 3 could be charged more than even Stage 3 instead of an amount greater than Stage 2 but less than Stage 3, I was told that this is just something that happens sometimes depending on how much is left in Stage 2.I told them that it only happens because they're calculating the amount to charge incorrectly, and that there was never any intent that people transitioning from Stage 2 to Stage 3 should be overcharged. I now know the details of how they calculate it and can explain how it is wrong (they're making more than one mistake), and in what way it must be fixed, but they don't think they're doing anything wrong.For inexpensive prescriptions the amount of overcharge is small and not worth caring about, but my mother has a $1000 prescription and the amount of overcharge for the particular amount she still has left in Stage 2 is a little over $100.Any helpful advice or information appreciated.--Percy

Is the error with Medicare's standards or is it a mistake by the contractor?

It's very difficult to tell. I'm still researching the problem. Medicare law is defined in a way that encourages insurance companies to participate. For Stage 2 they can take the basic approach and just charge 25% of prescription costs, or they can set up an actuarial (Medicare's term, not mine) approach and submit the plan to MCS (Centers for Medicare & Medicaid Services) for approval. Most actuarial approaches translate into drugs being assigned to tiers with each tier having a different copay, but as I understand it the net result must be that the entire client base as a whole pays no more than 25% of prescription costs. There are also a couple requirements about making sure the plan doesn't treat some clients unfairly. Approval by MCS means they're satisfied that an insurance company's plan fulfills these requirements.So while the text of Medicare law and regulations and policies are available online, the insurance company plans that were approved by MCS are not. This is a severe handicap for me, because without it I can't tell if the insurance company is following the plan they submitted to MCS, or if they've made a simplification during implementation that violates that plan. I suspect the latter but as yet have no evidence besides what looks to me to be an obviously wrong answer since it is larger than both the Stage 2 and Stage 3 amounts, rather than somewhere between them.The transition from Stage 2 to Stage 3 only happens to around 30% of Medicare prescription plan clients, and it only happens at most once per year when a client exhausts Stage 2, so this isn't a situation that arises very often for insurance company call center personnel, and they struggle making the calculation (or possibly they're struggling with the software they've been provided). Something that takes me about 10 seconds with a calculator takes them about 10 minutes on average. I've been on the phone with them maybe 4 hours total with maybe 6 different call center persons, and from this experience I'd estimate that they do the calculation (the one their employer wants them to perform) correctly somewhere between 60% and 90% of the time. After identifying the correct figures (drug prescription cost, copay, and amount remaining in Stage 2) the calculation involves a subtraction followed by taking a percentage of the result followed by adding the Stage 2 copay. I received answers for my mother's prescription ranging from $360 to $413, and there were a lot of answers they obtained that they never told me because there was a lot of (paraphrasing a composite), "Wait, that can't be right, let me try again."The approach they're using has other nonsensical side effects besides overcharging. For example, if instead of submitting a 90-day prescription today I instead submit 3 consecutive 30-day prescriptions over the next 3 months, my mother would be charged $85 less. Their approach isn't even additive. If they prorated the Stage 2 copay according to the amount left, which is what I believe they should do, then the approach is precisely additive, but the calculation then involves a bit of algebra, and I don't think the call center personnel could handle it.This particular side effect does present me a solution that will save at least most of the overcharge. Tomorrow I will call my mother's doctor, explain the problem, and request a 30-day prescription. You want to approach that Stage 2 limit carefully, making sure it has an advantageous balance before crossing the threshold. Which is absurd but necessary.It is probably apparent that I believe the call center personnel are doing the calculations manually rather than having a computer program spit out the answer (where all the time spent is maneuvering to or through the correct program window or windows and getting the right data into it or them). I know this makes little sense today, but that's what it seems like, because although they were maddeningly vague most of the time, I was eventually able to piece together the steps of the calculation and could duplicate their results. Sometimes when they got the wrong answer I could tell them the mistake they made.--Percy

I actually thought I understood this stuff until I read your two posts on the subject. As I understand the standard plan, you start out paying 25% copay but once you exceed 2900 dollars out of pocket (roughly) you would be paying 45% co-pay for brand name drugs until your out of pocket costs total a bit over 4700 dollars.But this actuarial stuff throws all of that stuff out, because the insurance company only has to make sure that their client base averages those numbers. Individual clients might pay more than 25% in phase 2.

Yes, exactly. And I'm fine with that.It's the calculation they're performing when they have to figure how much copay to apply for Stage 2 when the remaining Stage 2 balance is about to be used up. Say the copay is $100. If the Stage 2 balance is sufficient to pay 80% of the full prescription cost, the copay is $100. But if the Stage 2 balance is only sufficient to pay 30% of the full prescription cost, the copay is still $100. They don't prorate it.--Percy

From your other posts, it sounds like they sometimes do the prorate 'correctly' and sometimes not (I don't know if they are supposed to be prorating or not).Unless there is a cutoff at which point they no longer prorate (such as the 30% you gave for an example possibly being below that cutoff), then if they are doing it two different ways, it would seem clear to me that in at least one instance they are not following the standards set up by/with CMS.Have you talked directly to anyone at CMS? You might have to; and/or you might have to start asking to speak to supervisors.

The series of calculations they do (a subtraction followed by a multiplication followed by an addition) involves no prorating. There may be more explanations for the different answers, but I can think of only two: a) They're doing the calculations manually and sometimes make errors; or b) They're using a computer and sometimes enter the data incorrectly.My bet is that they're doing the calculation manually, otherwise they wouldn't have been able to describe how the number is arrived at. They never arrive at what I believe is the correct answer. That's a good idea. I've talked to the insurance company for many hours, and I was thinking of calling Medicare, but maybe contacting CMS would work better. I'll check they're website. In the last call I did spend about 45 minutes on the phone with a supervisor. She was very nice, she was better at math then the other call center personnel, but only marginally. She couldn't really follow my explanations. There was no "Aha!" moment for her where the glaring wrongness of what they were doing became apparent. I told her that I would like to go up the chain of command and asked if she had a supervisor or someone above her that I could talk to, and she said no. I poked away at this answer for a little while, and she kept saying that there was no one above her that I could talk to, so finally I said that there must be a person who does her annual review, and could I talk to that person. I did get a name, but he wasn't in that day (it was Saturday), and while he has a phone it's not part of the call center network of phones and so she couldn't switch clients to his phone even if he was in, and she didn't know the direct line to his number. Transparency is not their fort.--Percy

I can agree with you on what would be a reasonable thing to do, and on what a reasonable plan ought to look like. You've convinced me that the current treatment you are receiving is not reasonable. But quite obviously I cannot verify that the actual, government reviewed plan is reasonable without seeing it. Surely there is some way to find the actual approved plan. Maybe one of those advocate folks who specializes in helping people sign up for plans can help with that.I hope my messages don't suggest anything authoritative on my part. I know diddly squat. I'm basing my opinion on what you tell me.Edited by NoNukes, : No reason given.

That's near the bottom of my list to explore, because I don't think it will be easy to obtain, and even if I get if I'm afraid that it will be phrased in industry jargon and I won't understand it. I have an email inquiry in to someone like that, haven't heard back yet. I feel like I'm getting some pretty helpful suggestions, so thanks should go out to you and Jon.When I figured out how to properly calculate things I found that getting the prorate right was complex. I think I mentioned at one point that the insurance company is using a calculation that involves a subtraction, a multiplication, and an addition. My calculation requires, in this order:

1. A division.
2. A subtraction.
3. A division.
4. A subtraction
5. A multiplication.
6. An addition.
7. Another addition.
8. A multiplication.
9. A subtraction.
10. Another subtraction.
11. A multiplication.
12. An addition.

Call center personnel would be unlikely to be able to handle my calculation, and even if they correctly followed the list of instructions, they'd never be able to explain it. Here's a graph showing the difference between their calculation and mine for all values of Stage 2 balance (x-axis) up to the cost of my mother's prescription, which is $946.57. The y-axis is how much the client is ultimately charged. The blue line is the insurance company's calculation, the red line is mine: The flat and horizontal part of the red line representing my calculation is the $135 copay. It's constant for the highest values of the Stage 2 balance because above a certain amount the Stage 2 balance is sufficient when combined with the copay, something else their calculation doesn't take into account. In more detail, if the prescription cost is $947.56 and the Stage 2 balance is just $10 less at $937.56, they still charge the full $135 copay and throw you into Stage 3, even though the Stage 2 balance very nearly covers the full drug cost. There's still $10 leftover after applying Stage 2, so the total charge to the customer is $135 + $4.50 = $139.50. Correct charge: $135.Keep in mind that that's just an example of something else that's wrong with the way they calculate things. My mother's actual situation is that her Stage 2 balance is $328.03, so if you find 328 on the x-axis of the graph you'll read off the y-axis that she should pay around $308. If you look at the corresponding blue line you'll that it's about $413. She's being charged about $105 too much.The graph also shows that when the Stage 2 balance is 0, and when it is equal to (or greater than, though this isn't on the graph) the total prescription cost, both our approaches deliver the same answer. I guess it's reassuring that at least they get the right answer at the margins.Also notice the incongruity of the left end of the blue line where the client's cost increases with increasing Stage 2 balance. The greater the Stage 2 balance (up to a certain point), in a way reflecting how carefully you've managed your prescriptions, the more they charge you.I did a very rough estimate in my head of how much the insurance company makes using their flawed calculation per million customers (about 30% of customers use up their Stage 2 balance, and the average prescription actual cost is around $85) and came up with around $10 million per year (again, this was just in my head, and naturally I made assumptions that I don't recall now). Not bad.--PercyEdited by Percy, : Correct the paragraph describing how the calculations are performed. It originally contained incorrect information about calculating total drugs costs.

I filed a complaint with Medicare and received a telephone answer a few days later from the United Healthcare department that deals with Medicare complaints. It was explained that the copay is always applied first, then the balance in Stage 2, if any, is applied second. Given that rule, their calculation is correct.Stating that had I received that answer up front that it would have saved a lot of time, I asked how I would have reached her department by dialing in from the outside. I was informed that wasn't possible.So I went back to the manual to find where I had missed the explanation that the copay is always applied first. I found that I hadn't missed it, because it isn't there.So I filed another complaint with Medicare inquiring about the origin of the rule that the copay is always applied first, and I assume that within a few days I'll get another phone call.I'm predicting the answer will be that that is part of the plan approved by MCS, in which case I'll ask for a copy of the plan. If they will not make it available then I'll file another complaint with Medicare.If they do make the plan available then I predict that the rule that the copay is always applied first will not be in there, that it was part of implementation, in which case I'll file another complaint with Medicare.I further predict that at some point I will reach someone who will tell me that that's just the way it is, and that there is no one else I can talk to. At that point I'll write my senators and congressman.--Percy