The new application deadline is October 31, 2005. This extension is automatic. Plan sponsors do not have to submit anything to request an extension.

Starting the Process Immediately Is Advisable

Despite the extended filing deadline, CMS urges plan sponsors to submit their applications and retiree lists as early as possible to ensure that they will be processed quickly. The Segal Company also encourages plan sponsors to begin the online-only RDS process immediately. Because identities must be verified by the online system at various stages in the process, there are built-in delays in the system. In addition, plan sponsors must file a list of retirees in a CMS-approved format, which may take time to compile. To avoid both technical and administrative complications, it is important to begin the process right away.

The RDS application is available at http://www.rds.cms.hhs.gov. For a full discussion of the RDS application process, see Segal's August 2005 Bulletin, "Retiree Drug Subsidy Application Process Begins."

Decision-Making Associated with the RDS Process

Plan sponsors applying for the RDS should coordinate their application with their plan administrator, pharmacy benefit manager (PBM) and information technology specialists. Among the issues that need to be coordinated are the following:

• Who will be the Account Manager² and Authorized Representative³ for purposes of filing the RDS application?
• What benefit options will be listed on the RDS application and has testing of the options been done separately or on an aggregate basis by the plan's actuary?
• What services will the plan's PBM or health insurer provide and how much are the extra charges?
• Who will file the eligibility list (due by October 31, 2005) and monthly updates (ongoing)?
• Who will file the claims for payment (either monthly, quarterly or annually)?
• Who will monitor whether payment is appropriate (i.e., perform claims audits related to the RDS)?
• Who will handle appeals when the names submitted to CMS do not match Medicare's list of beneficiaries who have not enrolled for Part D coverage?
• Who will keep subsidy-related records for six years?

Definition of a Qualifying Covered Retiree

In response to questions from plan sponsors, CMS has published guidance on who is a Qualifying Covered Retiree for purposes of determining when the plan can claim a payment under the Retiree Drug Subsidy program: A qualifying covered retiree is a Part D-eligible individual who is not enrolled in a Medicare Part D plan but who is covered (as a participant, or as the participant's spouse or dependent) by employment-based retiree health coverage. The retiree coverage must be actuarially equivalent to the Medicare standard benefit.

The Medicare subsidy is only available for retirees (and certain of their spouses/dependents), and not for individuals who are actively working and receiving coverage due to current employment status (e.g., for the first six months of disability benefits from an employer). The FAQs clarify the following issues:

• A Medicare-eligible spouse of a retired employee can qualify for RDS payments, even if he or she is actively employed. This is true even if the retiree is not yet Medicare-eligible himself or herself.
• A participant can qualify for RDS payments if he or she is entitled to Medicare because of a disability, even if the individual is covered under the employer's active plan.
• Participants who are entitled to Medicare due to end-stage renal disease (ESRD) can qualify for RDS payments in the first 30 months of eligibility, even though the employer's coverage is primary and Medicare is secondary.

The CMS guidance on Qualifying Covered Retirees is available here.

As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for authoritative advice on the interpretation and application of the Medicare Modernization Act (MMA) and relevant regulations.

1	For information about the RDS, see Segal's June 2005 Bulletin, "Medicare Part D Guidance Addresses Employer-Paid Rx Coverage for Retirees." (To return to the Capital Checkup, click here.)
2	The Account Manager is responsible for initiating the application process, assigning roles to individuals who will be working on parts of the application, and monitoring the application process to assure that it is completed. (To return to the Capital Checkup, click here.)
3	The Authorized Representative is a trustee, Chief Financial Officer, or similar individual who must register on the RDS system and must give final approval to the plan's subsidy application. (To return to the Capital Checkup, click here.)

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