Stand-alone Medicare Part D prescription drug plans (PDPs) can be categorized according to how they conform to the standard defined Medicare Part D definition
(for example, standard deductible, fixed 25% cost-sharing, standard Initial Coverage Limit). So, Part D plans are divided into group as defined standard (DS), actuarially equivalent (AE) standard, or basic alternative (BA) - and benefits for these plans are actuarially equivalent to the CMS defined standard Part D benefit. However, Enhanced alternative (EA) Medicare Part D plans exceed or deviate from the defined standard coverage.
We show the annual number of Medicare Part D plans broken into Medicare Part D Benefit Types and this information is shown in PDP-Facts.com
, our online annual summary of stand-alone Part D Plan statistics (National and State) are defined by the Center for Medicare and Medicaid Services (CMS) as follows:
- defined standard (DS) Medicare Part D plan benefits,
- actuarially equivalent (AE) standard benefits,
- basic alternative (BA) benefits, and
- enhanced alternative (EA) coverage
"These terms were intended to provide explicit guidance on permissible benefit design parameters for [Medicare Part D prescription drug plan] sponsors and actuaries. The first three benefit types are considered basic prescription drug coverage, and are actuarially equivalent to the defined standard benefit established in statute. These basic benefit designs vary only in terms of whether cost sharing tiers are applied versus one level of coinsurance, the deductible is lowered or eliminated, and the initial coverage limit is increased."
The information paraphrased below is from Chapter 5 of CMS Publication 100-18 Medicare Prescription Drug Benefit Manual which gives more details regarding the Medicare Part D benefit types:
- Defined standard (DS) benefits
A Medicare Part D plan that has an annual deductible, has 25% coinsurance in the initial coverage phase, receives only the 75% donut hole discount in the coverage gap. The features of the standard defined plan are updated and released annually by CMS: https://q1medicare.com/PartD-The-MedicarePartDOutlookAllYears.php
- Actuarially equivalent (AE) standard benefits
A Medicare Part D plan that has an annual deductible, the plan may substitute certain cost-sharing requirements in defined standard coverage including tiered structures tied to plan formularies or preferred pharmacies in a plan's network.
- Basic alternative (BA) benefits
A Medicare Part D plan that may have a reduced or $0 deductible, can use tiered co-payments or coinsurance, may have a modification to the initial coverage limit. Remains actuarially equivalent to the standard benefit.
- Enhanced alternative (EA) coverage
A Medicare Part D plan whose value exceeds that of the defined standard coverage. The plan design includes the basic prescription drug coverage and has supplemental benefits which may include: a reduction in cost-sharing in the "coverage gap" in addition to the donut discount, a reduction in or elimination of the initial deductible, a reduction in the coinsurance or co-payments applicable during the initial coverage phase, an increase in the initial coverage limit, and/or supplemental drugs.
See: (https://www.cms.gov/Medicare/ Prescription-Drug-Coverage/ PrescriptionDrugCovContra/ Downloads/ MemoPDBManualChapter5_093011.pdf)