Section 1: Federal Programs: Medicare, Medicaid, and Tricare

Introduction: Why Federal Programs Are the Bedrock of PA Expertise

In the complex world of healthcare reimbursement, commercial insurance plans often garner the most attention with their ever-shifting formularies and networks. However, the true center of gravity—the force that shapes the entire landscape of drug coverage in the United States—is the federal government. Collectively, the programs of Medicare, Medicaid, and Tricare provide health coverage to over 150 million Americans, representing nearly half of the nation’s population. They are the single largest purchasers of healthcare and prescription drugs on the planet. For a prior authorization pharmacist, achieving fluency in the intricate rules of these federal programs is not just an ancillary skill; it is the absolute foundation of professional mastery.

Failing to understand the nuances between Medicare Part B and Part D, or the critical differences between a state’s fee-for-service Medicaid plan and a Medicaid Managed Care Organization, is not a minor knowledge gap—it is a barrier to effective patient care and a significant compliance risk. These are not merely different insurance plans; they operate under entirely different statutory authorities, funding mechanisms, and regulatory frameworks. To navigate them effectively, it is helpful to think of each federal program not as a different company, but as a different country.

Part 1: The Republic of Medicare – A Deep Dive

Established in 1965 under Title XVIII of the Social Security Act, Medicare is the cornerstone of health security for older Americans and individuals with long-term disabilities. It is a federally administered program, meaning its core rules and eligibility standards are consistent across all 50 states. This uniformity is a key differentiator from Medicaid. The program is managed by the Centers for Medicare & Medicaid Services (CMS), a division of the U.S. Department of Health and Human Services (HHS). For a PA pharmacist, understanding Medicare requires deconstructing it into its constituent “Parts,” as a patient’s drug coverage—and thus the PA process—depends entirely on which Part is responsible for payment.

3.1.1 The Foundation: Medicare Eligibility and The Four Parts

Before dissecting the program, we must first understand its citizens. Eligibility for Medicare is not based on income, but rather on age, disability status, and work history. An individual is typically eligible if they meet one of the following criteria:

• Age 65 or Older: The most common path to eligibility. The individual or their spouse must have worked and paid Medicare taxes for at least 10 years (equivalent to 40 quarters).
• Disability: Individuals under 65 who have been entitled to Social Security Disability Insurance (SSDI) benefits for at least 24 months. This waiting period is waived for individuals with specific, severe conditions.
• Specific Medical Conditions: Individuals of any age with End-Stage Renal Disease (ESRD) requiring dialysis or a kidney transplant, or those with Amyotrophic Lateral Sclerosis (ALS), also known as Lou Gehrig’s disease.

Once eligible, a beneficiary must navigate the program’s structure, which is famously divided into four distinct parts, each covering different services. This structure is a historical artifact, a result of the program being built and expanded piece by piece over decades. For medication access, the distinction between these parts is paramount.

3.1.2 Medicare Part A: The Hospital Benefit and Its PA Implications

Medicare Part A is often called “hospital insurance” for good reason. Its primary function is to cover the costs associated with inpatient care. For the purposes of prior authorization, Part A is less of a direct focus for a typical PA pharmacist, but understanding its structure is crucial for comprehending the financial pressures that drive medication management within a hospital.

Part A primarily covers:

• Inpatient Hospital Stays: Semi-private rooms, meals, nursing services, and drugs administered as part of the inpatient treatment.
• Skilled Nursing Facility (SNF) Care: Covers a limited stay in a SNF for rehabilitation after a qualifying hospital stay. It does not cover long-term custodial care.
• Hospice Care: For beneficiaries with a terminal illness.
• Home Health Care: Medically necessary skilled nursing or therapy services in the home.

The most important concept to understand about Part A reimbursement is the Inpatient Prospective Payment System (IPPS). Under IPPS, hospitals are not paid for each individual service, drug, or day of a patient’s stay. Instead, each admission is categorized into a Diagnosis-Related Group (DRG) based on the patient’s primary diagnosis, procedures performed, and comorbidities. The hospital receives a single, pre-determined lump sum payment for that DRG, regardless of the actual cost to treat the patient.

This has profound implications for medication use. If a hospital can treat a “pneumonia” DRG patient for less than the DRG payment, it makes a profit. If the patient requires exceptionally expensive IV antibiotics and a longer stay, the hospital may lose money. This financial model is the primary driver behind hospital formularies, therapeutic interchange protocols, and the work of inpatient clinical pharmacists. The “prior authorization” in this setting is not a call to an external payer, but an internal process of ensuring that medication use aligns with the hospital’s evidence-based (and cost-conscious) guidelines. A PA pharmacist working for a health system or hospital will be deeply involved in these internal controls, which mirror the logic of external PAs.

3.1.3 Medicare Part B: Masterclass on Physician-Administered Drug PAs

While Part D handles the bulk of prescription drugs, Medicare Part B covers a critical and high-cost category of medications that a PA pharmacist must master: physician-administered drugs. These are medications that cannot be self-administered and are typically given in a physician’s office, a hospital outpatient department, or a freestanding infusion center. Think of Part B as the “buy and bill” benefit; the provider purchases the drug, administers it to the patient, and then bills Medicare for both the drug and the administration service.

Common categories of drugs covered under Part B include:

• Injectable and Infused Drugs: Chemotherapy, immunotherapy (e.g., biologics for rheumatoid arthritis or Crohn’s disease), IV iron, IV antibiotics.
• Certain Oral Drugs: A very limited list, primarily oral chemotherapy and anti-emetics, as well as immunosuppressants post-transplant.
• Drugs requiring professional administration: Ophthalmic injections for macular degeneration, certain vaccines.
• Drugs used with Durable Medical Equipment (DME): Such as medications used in a nebulizer or infusion pump.

The PA process for Part B drugs is fundamentally different from Part D. It is not managed by a PBM. Instead, it is governed by a system of Coverage Determinations established by CMS and its regional contractors, known as Medicare Administrative Contractors (MACs). These determinations function as the binding clinical criteria.

Masterclass Table: Deconstructing a Sample LCD for IV Iron Sucrose

LCD Component	Example Policy Language	PA Pharmacist’s Interpretation and Action Plan
Covered ICD-10 Codes	“This policy covers iron sucrose for the treatment of iron deficiency anemia (D50.9) in patients with chronic kidney disease (N18.5, N18.6) who are undergoing hemodialysis.”	Interpretation: Coverage is extremely specific. The patient must have BOTH the diagnosis of iron deficiency anemia AND late-stage CKD on dialysis. A claim for a patient with anemia from another cause (e.g., gastrointestinal bleed) would be denied under this policy. Action: Verify the claim or PA request includes both a D50.9 code and an N18.5/N18.6 code.
Documentation Requirements	“The medical record must contain documentation of the patient’s most recent serum ferritin and transferrin saturation (TSAT) levels prior to initiation of therapy.”	Interpretation: The provider cannot simply state the patient is anemic; they must provide objective laboratory evidence. Action: When submitting the PA, ensure that the lab results are attached or entered into the appropriate fields. The PA reviewer is looking for these specific numbers.
Criteria for Continued Use	“For continued therapy, serum ferritin should be maintained below 500 ng/mL and TSAT should be maintained below 50%.”	Interpretation: This is a safety parameter. The policy prevents continued administration of IV iron to a patient who is iron-replete, which can lead to iron toxicity. Action: For re-authorization requests, the most recent ferritin and TSAT levels must be submitted to prove the patient still requires treatment and is not at risk of overload.
Exclusions from Coverage	“Iron sucrose is not considered medically reasonable and necessary for the treatment of anemias other than iron deficiency anemia, such as pernicious anemia or hemolytic anemia.”	Interpretation: This explicitly states what is NOT covered. It prevents off-label use or use in situations where iron is not the appropriate treatment. Action: This is a final check. If the patient’s chart indicates a different primary cause of anemia, using this drug is inappropriate and the PA will be denied. Recommend the appropriate therapy to the provider.

3.1.4 Medicare Part D: The Epicenter of Pharmacy Prior Authorization

Created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Part D represents the single largest and most complex area of prior authorization work for pharmacists. Unlike Parts A and B, which are directly managed by the government, the Part D benefit is delivered exclusively through private insurance companies that are approved by Medicare. Beneficiaries have two main ways to get Part D coverage:

1. Standalone Prescription Drug Plans (PDPs): For those enrolled in Original Medicare (Parts A and B), they can purchase a separate, standalone Part D plan from a private insurer like SilverScript, Wellcare, or Aetna.
2. Medicare Advantage Prescription Drug (MA-PD) Plans: Most Medicare Advantage (Part C) plans include Part D coverage as part of their bundled package.

Regardless of whether it’s a PDP or an MA-PD, the PA process is managed by the private plan’s Pharmacy Benefit Manager (PBM). This means that for Part D, you are dealing with the same PBMs that manage commercial plans (e.g., CVS Caremark, Express Scripts, OptumRx). However, these PBMs must operate under a strict set of rules and standards set forth by CMS.

The Part D Standard Benefit Design: Navigating the “Donut Hole”

CMS defines a “standard benefit” structure that all Part D plans must offer, or its actuarial equivalent. This structure is infamous for its complexity and its multiple phases of coverage, including the much-misunderstood “Coverage Gap” or “Donut Hole.” A PA pharmacist must be able to explain this structure to patients and providers, as a drug’s cost can change dramatically as a patient moves through the phases during the calendar year. The dollar amounts for these thresholds change annually.

Part D Formulary Rules and Utilization Management

While Part D plans have flexibility in designing their formularies, CMS imposes several key requirements to ensure beneficiaries have adequate access to necessary medications. The most significant of these is the requirement to cover “all or substantially all” drugs in six therapeutic categories, known as the CMS Protected Classes:

• Anticonvulsants
• Antidepressants
• Antineoplastics (Cancer drugs)
• Antipsychotics
• Antiretrovirals (HIV drugs)
• Immunosuppressants (for transplant rejection)

Even for these classes, plans can—and do—use utilization management tools to encourage the use of preferred agents. The PA pharmacist’s role is to navigate these tools, which are the same as those used in commercial plans but are applied under the watchful eye of CMS regulations.

UM Tool	Description in the Part D Context	PA Pharmacist’s Role
Prior Authorization	The plan requires clinical justification before covering a drug, especially for high-cost specialty medications or drugs with a significant risk of misuse or error. The PA criteria must be based on medical evidence and cannot be used solely to control costs.	Your core function: Assemble the patient’s clinical information (diagnosis, lab results, failed therapies) to demonstrate that the PA criteria established by the plan have been met.
Step Therapy	The plan requires a patient to first try and fail one or more preferred, less-expensive drugs before “stepping up” to a non-preferred, more-expensive alternative. CMS regulations provide for a clear exceptions process if the preferred drug is contraindicated or has been ineffective.	Investigate the patient’s medication history to document the trial and failure of the required step agents. If no trial exists, you must provide a clinical rationale for why the step agent is inappropriate (e.g., allergy, drug interaction, contraindication).
Quantity Limits	The plan limits the amount of a drug that can be dispensed per prescription or over a certain time frame (e.g., 30 tablets per 30 days). These limits are based on FDA-approved dosing and safety concerns.	If a provider prescribes a dose higher than the plan’s limit, you must submit a coverage determination request (the formal term for a PA in Part D) justifying the medical necessity of the higher dose (e.g., the patient has a specific condition requiring a higher dose, or has shown tolerance but incomplete response to the standard dose).

Finally, it is essential to be aware of the Low-Income Subsidy (LIS) program, also known as “Extra Help.” This federal program provides financial assistance to Part D beneficiaries with limited income and resources. Patients who qualify for LIS have significantly reduced (or eliminated) premiums, deductibles, and co-payments, which can make even high-cost specialty drugs affordable. As a PA pharmacist, identifying a patient who may be eligible for LIS and referring them to the Social Security Administration for application is a powerful act of patient advocacy that goes beyond the PA form itself.

Part 2: The Federation of Medicaid – A Masterclass

If Medicare is a highly centralized federal republic, Medicaid is a sprawling, complex federation. Established in 1965 under Title XIX of the Social Security Act, Medicaid is a joint venture between the federal government and individual states. The federal government, through CMS, establishes broad national standards and provides a significant portion of the funding. However, each state is responsible for administering its own program, resulting in 50+ unique Medicaid systems, each with its own eligibility rules, benefit designs, and, critically, its own approach to prior authorization. This state-level autonomy is the single most important concept to grasp about Medicaid. Expertise in one state’s Medicaid program does not automatically translate to another.

3.1.5 The Dual Nature: Federal Funding and State Control

The federal government’s financial contribution to each state’s Medicaid program is determined by a formula known as the Federal Medical Assistance Percentage (FMAP). The FMAP varies by state based on its per-capita income, with poorer states receiving a higher federal match rate than wealthier states. This shared funding model is the foundation of the federal-state partnership.

In exchange for this funding, states must cover certain mandatory populations (like low-income children and pregnant women) and a core set of mandatory benefits. However, they have significant flexibility in covering optional populations and benefits, which leads to wide variation in program generosity from one state to the next.

Benefit Category	Mandatory Benefits (Must Be Covered by All States)	Optional Benefits (Covered at State’s Discretion)
Core Services	Physician services, inpatient/outpatient hospital services, lab and X-ray services, family planning services, and transportation to medical care.	Prescription Drugs (outpatient), physical therapy, dental services, vision care, home and community-based services.

The final layer of complexity is the delivery model. Historically, Medicaid operated on a fee-for-service (FFS) basis, where the state paid providers directly for each service rendered. Today, the vast majority of Medicaid beneficiaries are enrolled in private Managed Care Organizations (MCOs). These MCOs receive a fixed monthly payment per member (a capitation payment) from the state and are responsible for managing the patient’s care. For a PA pharmacist, this means you are typically not dealing with the state Medicaid agency directly, but with the specific MCO that is covering the patient (e.g., Centene, Molina, a local Blue Cross Blue Shield Medicaid plan). Each MCO may have its own formulary, PA criteria, and submission process, all of which must operate within the framework of the state’s Medicaid rules.

3.1.6 The Financial Engine: The Medicaid Drug Rebate Program (MDRP)

The entire structure of Medicaid pharmacy benefits rests on a powerful federal law known as the Medicaid Drug Rebate Program (MDRP). The law is simple but has massive consequences: for a manufacturer’s drug to be eligible for reimbursement by ANY state Medicaid program, the manufacturer MUST enter into a national rebate agreement with the Secretary of Health and Human Services. This agreement obligates them to pay a rebate to every state that pays for their drug.

The rebate amount is calculated to ensure that Medicaid receives the best price available in the market. The basic rebate for a brand-name drug is the greater of two calculations:

1. 23.1% of the Average Manufacturer Price (AMP): A baseline, fixed percentage of the average price paid by wholesalers.
2. AMP minus “Best Price”: The difference between the AMP and the lowest (“best”) price the manufacturer offers to any private-sector purchaser (with some exceptions).

This has huge implications for PA. Because the net cost of drugs after rebates is so much lower for Medicaid, the financial incentive to use a preferred agent over a non-preferred one can be different than in the commercial space. The PA process in Medicaid is often less about absolute cost and more about ensuring clinical appropriateness according to the state’s guidelines.

3.1.7 PA and Utilization Management in the Medicaid Federation

With the MDRP as the financial backdrop, states and their MCOs implement utilization management strategies to control spending and ensure appropriate care. The cornerstone of these strategies is the Preferred Drug List (PDL). Each state’s Drug Utilization Review (DUR) Board and P&T Committee reviews drugs by therapeutic class and designates certain products as “preferred.” Preferred drugs are typically available without a PA, while “non-preferred” drugs require one. The PA criteria are designed to justify why a patient cannot use the state’s preferred agent(s).

As a PA pharmacist, you must remember several unique features of the Medicaid environment:

• State-by-State Variability: The PDL and PA criteria for Florida Medicaid can be, and often are, completely different from Georgia Medicaid. There is no national standard.
• MCO Variability: Within a single state, different Medicaid MCOs may have slightly different PA forms or submission portals, although they must generally adhere to the state’s PDL.
• Special Population Protections: Federal law provides special protections for children under the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit. Under EPSDT, states must cover all medically necessary services for children, even if that service is not covered for the adult Medicaid population. This can be a powerful tool in appealing a PA denial for a pediatric patient.

Perhaps the most complex patient population you will encounter is the “dual eligible” beneficiary—an individual with income and/or assets low enough to qualify for Medicaid, who is also eligible for Medicare due to age or disability. These patients have both types of coverage, and coordinating their benefits is a master-level skill.

Masterclass Case Study: The Dual Eligible Patient’s PA Journey

Patient Profile	Event	Payer Responsibility & PA Process
Mrs. Gable, a 72-year-old female with Original Medicare and full state Medicaid benefits (“dual eligible”). She is diagnosed with severe osteoporosis. Her physician prescribes Tymlos (abaloparatide), a high-cost specialty drug.	1. Drug Benefit Determination	Tymlos is a self-administered subcutaneous injection. Therefore, it falls under the outpatient prescription drug benefit. Medicare Part D is the primary payer. The PA must be submitted to Mrs. Gable’s Part D PDP.
	2. PA Submission and Approval	You submit a PA to the Part D plan, demonstrating that Mrs. Gable meets their criteria (e.g., she has a history of fragility fractures and has failed bisphosphonate therapy). The Part D plan approves the PA.
	3. Point of Sale Adjudication	The pharmacy submits the claim. Primary Payer (Medicare Part D): The claim is processed and Part D pays its share, leaving a large co-pay (e.g., $1,200) because Mrs. Gable is in the coverage gap. Secondary Payer (Medicaid): The remaining claim amount is then automatically crossed over to the state Medicaid program. Because Mrs. Gable is a full dual eligible, Medicaid pays the remaining co-pay. The patient’s final out-of-pocket cost is typically $0 or a very small co-payment ($1-$4).

Part 3: The Citadel of Tricare – A Masterclass

The third great nation of federal healthcare is Tricare, the healthcare program for the U.S. Uniformed Services. It covers active-duty service members, National Guard and Reserve members, military retirees, and their families worldwide. It is administered by the Defense Health Agency (DHA), a branch of the Department of Defense (DoD). It is crucial to distinguish Tricare from the Veterans Health Administration (VA). Tricare serves the active military and retiree community, while the VA serves veterans who have been honorably discharged.

Tricare operates as a civilian-style health insurance program, contracting with regional private companies to manage its provider networks and claims processing. However, all of its policies, including its pharmacy benefit and PA rules, are set at the national level by the DHA. This makes it more centralized than Medicaid but with a completely different set of rules from Medicare.

3.1.8 The Tricare Ecosystem: Plans and Pharmacy Options

Beneficiaries choose from several different plans based on their status (active duty, retiree, etc.) and location. The main plan types a PA pharmacist will encounter are:

• Tricare Prime: A Health Maintenance Organization (HMO)-style plan where beneficiaries are assigned a Primary Care Manager (PCM) at a Military Treatment Facility (MTF) or in the civilian network. Referrals are required for specialty care. This plan has the lowest out-of-pocket costs.
• Tricare Select: A Preferred Provider Organization (PPO)-style plan that offers more freedom of choice. Beneficiaries can see any Tricare-authorized provider without a referral, but they have higher cost-shares and deductibles.
• Tricare for Life (TFL): This is not a primary insurance plan, but a form of secondary, “wraparound” coverage for Tricare beneficiaries who are also entitled to Medicare. For these dual-eligible individuals, Medicare acts as the primary payer, and TFL covers most of the remaining out-of-pocket costs. The coordination of benefits is similar to that for Medicare/Medicaid duals.

The Tricare pharmacy benefit is also unique, offering several options for filling prescriptions, each with its own formulary rules and costs:

1. Military Treatment Facility (MTF) Pharmacies: The lowest-cost option ($0 co-pay for all formulary drugs), but they generally only carry drugs on the Uniform Formulary.
2. Tricare Mail Order Pharmacy: The next most cost-effective option, ideal for maintenance medications.
3. Tricare Retail Network: A network of civilian pharmacies (like CVS, Walgreens, etc.). This is the most convenient but typically has the highest co-pays.

3.1.9 PA and Formulary Management in Tricare

Tricare uses a single, national formulary called the Uniform Formulary. This formulary is determined by the DoD’s P&T Committee and applies to all Tricare beneficiaries worldwide. Drugs on the Uniform Formulary are divided into three tiers:

• Tier 1: Generic Drugs – Lowest co-pay.
• Tier 2: Preferred Brand-Name Drugs – Medium co-pay.
• Tier 3: Non-Formulary Drugs – Highest co-pay. These drugs are only covered if the beneficiary obtains a PA establishing medical necessity.

The prior authorization process in Tricare is a formal review to determine medical necessity for non-formulary drugs. This process is managed by the Tricare pharmacy contractor, currently Express Scripts. The core principle of a Tricare PA is to demonstrate why the patient cannot be treated with the available generic (Tier 1) or preferred brand-name (Tier 2) agents on the Uniform Formulary.

Masterclass Table: The Tricare PA Process for a Non-Formulary Drug

Step	Action	PA Pharmacist’s Role and Key Considerations
1. The Trigger	A provider prescribes a Tier 3 (Non-Formulary) medication (e.g., a new brand-name antidepressant when several preferred options exist).	Identify that the drug is non-formulary using Tricare’s online formulary search tool. Inform the provider and patient that a PA for medical necessity is required to proceed.
2. Initiation	The provider’s office or PA pharmacist initiates the PA request. This is done by filling out the Tricare “Request for Medical Necessity/Prior Authorization” form.	Download the correct, most current form from the Tricare contractor’s website. Ensure all patient and provider demographic information is complete and accurate.
3. Clinical Justification	This is the heart of the request. The form requires a detailed clinical rationale explaining why the formulary alternatives are not appropriate for this specific patient.	This is where your clinical expertise shines. You must provide a patient-specific narrative. For example: “Patient has tried and failed a 90-day trial of the preferred agent, sertraline, with no clinical improvement in PHQ-9 score.” “Patient has a documented intolerable side effect (e.g., severe insomnia) to the preferred agent, fluoxetine.” “Patient has a concurrent medical condition (e.g., cardiac arrhythmia) that serves as a contraindication to the preferred agent, citalopram.”
4. Submission & Review	The completed form and any supporting documentation (e.g., chart notes, lab results) are submitted to the pharmacy contractor via their portal or by fax.	Ensure the submission is complete. A request that simply says “patient needs this drug” will be denied. The reviewer is looking for a clear, evidence-based reason why the formulary agents are not viable. Follow up to confirm receipt of the submission.
5. Determination	The contractor reviews the request against Tricare’s medical necessity criteria. A decision (approved or denied) is communicated to the provider and patient.	If approved, the drug will be covered at the Tier 3 co-pay. If denied, the denial letter will explain the reason and outline the steps for a formal appeal. You will be instrumental in analyzing the denial and formulating the clinical argument for the appeal.

Conclusion: The PA Pharmacist as a Federal Policy Expert

Navigating the distinct nations of Medicare, Medicaid, and Tricare requires more than administrative skill; it demands the nuanced understanding of a diplomat and the deep clinical knowledge of a pharmacist. You must be able to recognize a patient’s “citizenship” in one of these programs instantly and immediately pivot your strategy to align with that nation’s specific laws, language, and customs. You must know that the PA argument for a Medicare Part B drug is built on an LCD, while the argument for a Medicaid patient rests on the state’s PDL, and the argument for a Tricare beneficiary is a case for medical necessity against the Uniform Formulary.

By mastering the contents of this deep-dive module, you have acquired the foundational knowledge to operate effectively in the environments where the majority of high-cost, high-complexity PAs occur. You have moved beyond simply reacting to rejections and have become a proactive strategist, capable of anticipating the needs of each program and building a case for approval from the ground up. This expertise is what separates a technician from a true clinical advocate and is a hallmark of a Certified Prior Authorization Pharmacist.