The process for filing ongoing and/or reopening Retiree Drug Subsidy applications is incredibly complex with language that may be unfamiliar. Below is a glossary of RDS terms commonly seen or used in the RDS program to assist our clients.

Actual Cost Adjustment ▼

The cost adjustment amount in dollars based on the percentage of the paid rebates from the PBM to the Plan Sponsor. The amount must be removed from the Gross Eligible Costs reported to the CMS for subsidy payment requests.
Actuarial Attestation ▼

To be eligible for the Retiree Drug Subsidy, plan sponsors have to apply for the subsidy each year, a process which includes an attestation by a qualified actuary that the plan is actuarially equivalent to the Part D benefit. MMA requires that the qualified actuary be a member of the American Academy of Actuaries.

Center for Medicare & Medicaid Services. CMS is responsible for the
administration of all Medicare services including the Retiree Drug Subsidy
(RDS) program.
CMS Audit ▼

All RDS payment requests and subsidy payments are subject to
the federal False Claims Act, just like payments to hospitals and doctors. This
means that any erroneous payments must be returned immediately plus
interest. If Medicare believes that the Plan Sponsor “knew or should have
known” that the payment request was overstated, Medicare can demand triple
Cost Limit ▼

The Cost Limit is a federally defined amount of gross covered
retiree plan-related prescription drug costs paid by a qualified retiree
prescription drug plan and/or by Qualifying Covered Retirees. The amount
exceeding the Cost Limit is not eligible for subsidy. Cost Limits may be adjusted
each year.
Cost Report ▼

Cost reports are documents prepared by a Plan Sponsor (or its
representatives, like PDA) and submitted to the RDS to report the costs of all
eligible claims expended during a Plan Year, or portion thereof. These are not
an actual request for payment, but a reporting to the RDS so the amount of
payment can be determined.
Cost Threshold ▼

The Cost Threshold is a federally defined amount of gross
covered retiree plan-related prescription drug costs paid by a qualified retiree
prescription drug plan and/or by Qualifying Covered Retirees. The amount up to
the Cost Threshold is not eligible for subsidy. Cost Thresholds may be adjusted
each year.
Credible Coverage Notices ▼

The Medicare Modernization Act (MMA) requires entities (whose policies include prescription drug coverage) to notify Medicare eligible policyholders whether their prescription drug coverage is creditable coverage, which means that the coverage is expected to pay on average as much as the standard Medicare prescription drug coverage. For these entities, there are two disclosure requirements :

  • The first disclosure requirement is to provide a written disclosure notice to all Medicare eligible individuals annually who are covered under its prescription drug plan, prior to October 15th each year and at various times as stated in the regulations, including to a Medicare eligible individual when he/she joins the plan
  • The second disclosure requirement is for entities to complete the Online Disclosure to CMS Form to report the creditable coverage status of their prescription drug plan. This requirement does not pertain to the Medicare beneficiaries for whom entities are receiving the Retiree Drug Subsidy (RDS).
Employee Group Waiver Plan (EGWP) ▼

An Employer Group Waiver Plan is a Center for Medicare Service (CMS) approved program for both employers and unions.  An employer may contract directly with CMS or go through an approved TPA to establish the plan.  They are usually Self Funded, are integrated with Medicare Part D, and sometimes include a fully insured “wrapper” around the plan to cover non-Medicare Part D prescription drugs.  By designing the program this way, the employer may be able to lower their out of pocket cash flow on a yearly basis, increase the federally subsidy, reduce the present value of the liability, and also provide a “stop loss”.
False Claims Act ▼

The False Claims Act (31 U.S.C. §3729) is a federal
law in the United States that allows people, whether or not they are affiliated
with the government, to file actions against federal contractors claiming fraud
against the government. In the event that a Plan Sponsor is found filing
fraudulent claims to the RDS and receives payment, an auditor from CMS or
the OIG, or anyone with insider information, can file an action against the Plan
Sponsor under the False Claims Act.
Final Reconciliation ▼

The 12 step process that every Plan Sponsor seeking subsidy is required to complete annually (the specific date depends on the plan year start and end dates) as required by the CMS. In the case of a reopening, a “redo” of these 12 steps is required if the Plan Sponsor wishes to seek out any additional missed subsidy.
Medicare Advantage Prescription Drug Plan (MA-PD) ▼

Medicare Advantage Prescription Drug Plans are plans that offer medicare part D prescription drug coverage, which provides subsidies for prescription drugs, along with the part A and B benefits in a single plan.
Office of the Inspector General (OIG) ▼

Office of the Inspector General. The OIG is an agency of the United
States Department of Justice responsible for conducting audits, independent
investigations and reviews of government programs to deter waste, fraud
abuse, misconduct and promote integrity, economy and efficiency.
Payment Request ▼

A payment request occurs after the filing of a cost report
with the RDS. When a cost report is filed, the RDS will calculate the amount of
subsidy that should be paid. The payment request is when the Payment
Requestor affirms the accuracy of the payments under the risk of punishment
under the False Claims Act and requests that the RDS submit an electronic
payment to the Plan Sponsor for the specified amount.
Pharmacy Benefits Manager (PBM) ▼

A Pharmacy Benefit Manager or PBM is a third party administrator of
prescription drug programs. They are contracted by the Plan and handle the
Plan’s eligibility, claim processing and claims payment services. They are also
responsible for developing and maintaining the formulary, contracting with
pharmacies and negotiating discounts with drug manufacturers.
Prescription Drug Plan (PDP) ▼

Prescription Drug Plans are drug plans that stand-alone from private companies that have contracts with Medicare to provide prescription drug plans. Each plan provides coverage for a specific drug list, called a formulary.
Plan Sponsor ▼

A Plan Sponsor is a health plan, employer/union group or
other organization that participates in the RDS Program.
Plan Year ▼

The RDS Plan Year may be calendar or non-calendar year.
Qualifying Covered Retirees : A Part D eligible individual who is not
enrolled in a Medicare Part D plan but who is covered by employment-based
retiree health coverage.
Retiree Drug Subsidy (RDS) ▼

The Retiree Drug Subsidy Program is a method enacted by Congress
in 2003 that encourages employers and unions to continue to provide
high-quality prescription drug coverage their Medicare eligible retirees.
The program is administered by the Centers for Medicare & Medicaid Services’
(CMS’) RDS Center.
Reopening ▼

The CMS allows for Plan Sponsors to “go back” and review filings for additional subsidy and compliance issues up to four years after the original final reconciliation.  Plan Sponsors can appeal to reopen previously reconciled plan years provided they meet the requirements for reconsideration. The reopening process requires the Plan Sponsor to repeat the entire 12-step Final Reconciliation process.

A Retired Medicare Eligible Individual is a person who is retired and
eligible for Medicare Part A and / or Medicare Part B benefits.