Account-Based Plans No Good for Medicare Drug Determination

July 21, 2005 ( - In newly released guidance, the Centers for Medicare & Medicaid Services (CMS) has reiterated that most account-based plans will not be eligible for the Part D retiree drug subsidy.

Specifically, according to the agency , flexible spending arrangements (FSAs), health savings accounts (HSAs), and Archer medical savings accounts (MSAs) cannot be counted toward creditable coverage for beneficiaries. To qualify for the retiree drug subsidy, employer and union-sponsored plans must show they provided creditable coverage for prescription drugs that is actuarially equivalent to the Part D benefit.

The guidance provides details about figuring out creditable coverage for health reimbursement arrangements (HRAs), the only type of account-based plan that could be eligible for the Part D retiree drug subsidy.

However, CMS said in the guidance that beneficiaries may withdraw funds from FSAs, HSAs, and MSAs to cover Part D cost-sharing amounts, and those funds would count toward an individual’s $3,600 true out-of-pocket limit.

More information about the drug subsidy is here .