Supplemental Payers Overview

A payer that is supplemental to Part D offers benefits or coverage after Part D benefits have been determined. These benefits are usually in the form of copay/coinsurance reduction.

When a Medicare Part D enrollee has other prescription drug coverage, coordination of benefits allows the plans that provide coverage for this same beneficiary to determine each of their payment responsibilities. This process is necessary to avoid duplication of payment and to prevent Medicare from paying primary when it is the secondary payer. While this is the principal purpose of COB within the contexts of Medicare Parts A and B, COB also serves an additional function within the Part D context: it provides the mechanism for support of the tracking and calculating of beneficiaries’ “true out-of-pocket” (TrOOP) expenditures, or “incurred costs” as defined in the MMA and CMS’ implementing regulations.

Costs for covered Part D drugs are treated as “incurred” only if they were paid by the individual (or by another person, such as a family member, on behalf of the individual), paid by CMS on behalf of a low-income subsidy-eligible individual, or paid under a qualified SPAP as defined in CMS regulations.

Costs do not count as “incurred” when:

  1. no benefits are provided because of the application of either a formulary or the Medicare Secondary Payer (MSP) laws, or
  2. when costs are reimbursed through insurance or otherwise, a group health plan, or similar third-party arrangement. Therefore, only certain costs not paid for by the Part D sponsor count toward TrOOP.

The left-hand navigation in the section on this page contains pertinent information to provide Payers who are supplemental to Part D the industry defined electronic process necessary to insure that a record of their payment is provided to the Part D Plan for purposes of coordinating benefits.