By way of background, the state and municipalities now provide prescription drug coverage to their retirees, which is superior to Medicare Part D. Since they are offering a drug benefit substitute, that is at least equivalent to Part D, they are eligible for RSD.

According to calculations by the Group Insurance Commission (GIC), the state should be receiving $492 for each retiree and spouse covered by OME (Optional Medicare Extension) or certain other Medi-gap plans (i.e., Tufts Medicare Complement). With some 49,000 enrollees in these plans, the feds will be paying approximately $24-$25 million in subsidies to the state.

Members may note that in our other reports on the RDS, we have been quoting an estimate of $668 per enrollee. This estimate was calculated by the Centers for Medicare and Medicaid Services (CMS), the federal agency in charge of the RDS Program.

In addition to the RDS, the Part D law allows other approaches to offering prescription drug coverage to Medicare eligible retirees and spouses. One of these alternatives appears to have caught the attention of local officials who are weighing its use as part of the municipal health insurance program.

"We've seen a growing interest by municipal officials and their consultants in what is called wrap-around coverage," reports Insurance Coordinator Cheryl Stillman. "As the term so precisely depicts, under this coverage, a plan sponsor, in this case a city or town, offers a separate plan of drug benefits that wraps around the Medicare Part D plan."

On its face, the approach appears straightforward since it mirrors what a retiree's Medicare supplement plan does now, namely fill in the gaps and cover benefits not paid by Medicare Parts A and B. In this case, the wrap-around would pay the drug benefits not covered by Part D.

However, experts in this field are quick to point out that, unless properly addressed, problems could arise for a retiree who is picking up a prescription at the pharmacy since there are two sources of payment - Medicare Part D as the primary and then the wrap-around plan. Other more serious problems could arise for the retiree who is struggling to understand just how their Part D and wrap-around somehow work together.

"More important to our local members is whether a municipality can design a drug benefit plan for their Medicare-eligible retirees that forces them to enroll in Part D," comments Stillman. "In our opinion, state law simply does not allow a city or town to transfer these retirees into Part D, requiring them to pay that extra monthly premium out of their Social Security check.

"Please let me know if you are told that you must enroll in Part D and pay for it. And, we'll follow up for you."