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Medicare Retiree Drug Subsidy Process

The Retiree Drug Subsidy option is designed to financially encourage employers and unions to continue providing high quality prescription drug coverage to their Medicare-eligible retirees while retaining their current plan designs.

All information about the subsidy process, the application process, and ongoing activity to continue receiving the subsidy takes place on The Centers for Medicare and Medicaid Services (CMS) Retiree Drug Subsidy program Web site. Groups should familiarize themselves thoroughly with its content.

The Four Steps to RDS

To help you better understand the RDS process, think of it in four steps:

  1. Step One: Retiree Drug Subsidy Checklist
    The checklist will help a group determine if it qualifies and if it's in its best financial interest to apply for the subsidy.
  2. Step Two: Application Process
    Groups that choose to proceed must submit an application directly to CMS Web site. BCBSM will support that process.
  3. Step Three: Initial set-up and the ongoing process
    BCBSM` will set up groups that are accepted by CMS so we can begin the ongoing file transfers.
  4. Step Four: Annual administrative tasks
    Each year groups must re-apply for the retiree drug subsidy.

Questions?

Send an e-mail to rdsdesignee@bcbsm.com or contact your Blues sales representative or Blues-contracted agent.

Step One: Retiree Drug Subsidy Checklist

If a group offers a retiree drug program, here are some questions that will help the group decide whether or not to apply for the subsidy.

  • What is the group's contribution to the retiree's drug program?
    In general, a group should consider applying for the subsidy if they are paying at least 70 percent of the drug premium.


  • Are there enough Medicare eligible members to make it worth pursuing the retiree drug subsidy?
    To estimate the refund, multiply the number of Medicare eligible members by $891.00, which is the government projected average refund per member for a business in the 25 percent tax bracket.


  • What are the projected administrative costs to obtain the subsidy?
    The group should consider the following administrative costs::
    • 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 administrative staff costs associated with maintaining and sending monthly membership files to CMS and BCBSM.

  • What is the break even point between costs and the subsidy?
    Subtract the administrative costs from the estimated refund amount to get a projected profit or loss. The group can then make a decision whether or not to pursue the subsidy.


Step Two: Application Process

To begin the application process, the group must file an application on the CMS Web site. During 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 help in this effort, BCBSM has created a standard membership and claims data report that has all the information the actuary needs to complete this step. Here's how to obtain the report:

  • Provide your BCBSM representative with a contact person's name, phone number and e-mail address where the report is to be sent.

    Note: Before BCBSM can share the PHI 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 BCBSM at rdsdesignee@bcbsm.com with questions any time during the retiree drug subsidy process.


Step Three: Initial Set-Up Process and Ongoing Process

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

Initial reporting and set-up

  • When the group 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 that includes:
    • Cover Letter
    • Questionnaire
    • Data Sharing Agreement, if not completed in Step 2
    • Plan Sponsor's Certification, if not already on file
    • Registration form
    • File transfer instructions

    The group should e-mail the completed questionnaire to rdsdesignee@bcbsm.com. and return the signed Data Sharing Agreement and HIPAA PHI documents to BCBSM.

Ongoing reporting requirements

As part of ongoing reporting, here's what can occur on a monthly or daily basis:

  • 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."


Step Four: Annual Administrative Tasks

Each year, the group must re-apply for the retiree drug subsidy. Here's how that process works.

  • Within 150 days of the group's plan year, BCBSM will automatically send the group the data needed to re-apply for the retiree drug subsidy.


  • Then 90 days prior to the group's plan year, the group must have completed it's annual re-application with CMS for the subsidy.


  • When the group receives the new application ID from CMS, the group completes the online BCBSM questionnaire and sends it to rdsdesignee@bcbsm.com.

Note: CMS is finalizing a required annual reconciliation process. When CMS completes this process, BCBSM will notify the group and provide support.