Medicare Part D Prescription Drug Benefit

1
Medicare Part D Prescription Drug Benefit
Presentation to Health Human Resources
Subcommittee House Appropriations Committee
Patrick W. Finnerty Department of Medical
Assistance Services
September 18, 2005 Richmond, Virginia
2
Presentation Outline
Overview of Medicare Part D Extra Help for
Low-Income Persons Impact on Virginia Implementa
tion Activities
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Medicare is a Federal Health Insurance Program

• Eligibility for Medicare
• 65 years or older and eligible to receive Social
  Security
• Under 65 years, permanently disabled, and have
  received Social Security disability payments for
  at least two years
• Have permanent kidney failure or need a kidney
  transplant or Amyotrophic Lateral Sclerosis (or
  Lou Gehrigs disease)
• What Medicare Covers
• Part A Hospital Inpatient Care (also some
  skilled nursing facility care, home health, and
  hospice)
• Part B Medical Insurance (such as doctors
  services, labs, medical equipment, preventive
  services)
• Part D Prescription Drugs beginning on January
  1, 2006

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What Is Medicare Part D?

• Medicare Modernization Act (MMA) enacted in
  December 2003 adds a new Part D to provide
  prescription drug coverage
• Prescription drug benefit available to all
  Medicare beneficiaries on January 1, 2006
• Enrollment is optional, though a penalty may
  apply for late enrollment (enrollees must apply
  for coverage)
• Prescription drugs available through private
  prescription drug plans (PDPs)
• Most enrollees will have cost sharing
  obligations extra help (subsidy) is available
  for low-income individuals

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Who In Virginia Is Affected By Medicare Part D?

• There are roughly 947,000 Medicare beneficiaries
  in Virginia
• Approximately 136,000 Medicare beneficiaries are
  also Medicaid clients, called dual eligibles
• 93 of Medicaid elderly clients are duals
• 62 of Medicaid blind disabled clients are
  duals
• When Medicare Part D becomes effective, dual
  eligibles will receive their prescription drug
  coverage through Medicare, and not Medicaid

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What is the MedicarePart D Benefit?

• Prescription drug plans (PDPs) must offer a basic
  prescription drug benefit
• Medicare Advantage plans (managed care plans)
  must offer basic plan or broader coverage at no
  extra cost
• PDPs must provide coverage for drugs in each
  therapeutic class, but can establish preferred
  drug lists
• Will include drugs dispensed by prescription,
  insulin associated supplies, vaccines
• Will exclude drugs covered under Part A or B,
  over-the-counter drugs, weight gain/loss
  cosmetic purposes cough cold barbiturates
  benzodiazepines certain vitamins (Va. Medicaid
  will continue to cover excluded drugs for duals
  for which we receive FFP)

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How Are Prescription Drug Plans
Selected/Monitored?

• The Centers for Medicare and Medicaid Services
  (CMS) will contract with private health plans and
  other vendors to provide the Medicare Part D
  benefit
• Virginia will have at least 2 PDPs Medicare
  Advantage (MA) Plans (managed care) will also be
  available
• CMS will require PDPs and MA Plans to meet
  certain quality, access and administrative
  standards (e.g., at least 2 drugs must be
  available in each drug class 60-day notice for
  drug changes network pharmacy access standards
  PT Committee requirements and appeals process)

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What Are The Cost-Sharing Requirements?

• Under the standard prescription drug benefit,
  most beneficiaries in 2006
• Pay an average monthly premium of 34
• Pay the first 250 in drug costs (deductible)
• Pay 25 of total drug costs between 250 and
  2,250
• Pay 100 of the costs between 2,250 and 5,100
  in total drug costs (this 2,850 gap is known as
  the doughnut hole), equivalent to 3,600 out of
  pocket.
• Pay the greater of 2 for generics, 5 for brand
  drugs, or 5 coinsurance after reaching the
  3,600 out-of-pocket limit
• These deductibles, benefit limits, and
  catastrophic thresholds are indexed to rise with
  the growth in per capita Part D spending.

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Certain Beneficiaries Will Receive Extra Help
To Offset Cost of Prescription Drug Benefit

• Group 1 Full benefit Dual Eligibles with
  income (9,570/year) no resource limits
• Group 2 Persons with income (12,920/year), and limited resources
  (6,000/individual 9,000/couple)
• Group 3 Persons with income (14,355/year), and limited resources
  (10,000/individual 20,000/couple)

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What Extra Help Is Available?
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How Do Persons Enroll in Medicare Part D Drug
Coverage?

• Medicare beneficiaries will need to enroll with a
  PDP or MA plan
• Enrollment begins November 15, 2005
• Full-benefit dual eligibles who do not enroll in
  a plan by 12/31/05 will be auto-enrolled in a PDP
• Can change PDP at any time
• Information/assistance is available for
  beneficiaries
• Consult Medicare You 2006 Handbook
• Contact PDPs for information
• Call Medicare toll-free 1-800-MEDICARE
• Visit www.medicare.gov

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How Can Persons Find Out If They Qualify For
Extra Help?

• Medicare beneficiaries apply to the Social
  Security Administration (SSA) persons can apply
  multiple ways
• Scannable application (mail or in-person)
• Calling SSA toll-free (1-800-772-1213)
• Over the internet (www.ssa.gov)
• Qualifier Tool
• SSA is sending applications to those it believes
  may be eligible others must initiate application
  process
• States must determine eligibility for Extra
  Help if the applicant insists
• Virginia will use same SSA application

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Certain Low-Income Persons Are Deemed Eligible
for Extra Help

• Certain Medicare beneficiaries will automatically
  qualify for and receive extra help
• No application is required for
• Dual eligibles
• Supplemental Security Income (SSI) recipients
• Those deemed eligible for extra help are
  identified through data sharing between DMAS and
  CMS

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Important Dates forMedicare Part D Implementation

• January 28, 2005 Final federal regulations
  published
• February 2005 CMS Public Awareness Campaign
  begins
• May 2005 CMS Notifies Potential Low Income
  Eligibles
• June 2005 Prescription Drug Plans Bids Due
• States submit enrollment files
• July 2005 States/SSA accept low income
  applications
• Sept. 15, 2005 Prescription Drug Plan Contracts
  Awarded
• October 1, 2005 Marketing/enrollment of Part D
  benefits
• November 15, 2005 Enrollment Begins lasts until
  May 15, 2006
• January 1, 2006 Part D Begins Medicaid payment
  ends 12/31
• February 2006 States monthly payment (clawback)
  begins

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Presentation Outline
Overview of Medicare Part D Extra Help for
Low-Income Persons Impact on Virginia Implementa
tion Activities
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Administrative/Operational Implications

• Local Departments of Social Services (LDSSs) have
  significant new responsibilities related to
  Extra Help program
• (will be addressed in Commissioner Conyers
  presentation)
• There are also implications for DMAS
• Assist transition of dual eligibles to Part D
• Provide monthly data to federal government
• Handle increased telephone inquiries from duals
• Provide coordination of benefits information
• Conduct additional appeal hearings related to
  extra help determinations
• Final cost impact still being determined

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States Must Pay A Significant Portion of The Part
D Drug Benefit

• Phased-Down State Contribution Clawback
• States are required to help finance Medicare Part
  D by paying the federal government the state
  share of the cost of prescription drug coverage
  for dual eligibles
• State share is set at 90 of costs for 2006 and
  decreases to 75 by 2015
• Clawback amount based on
• Per capita costs for dual eligibles in 2003
• Per capita growth in drug spending nationwide
  since 2003
• Number of dual eligibles enrolled in Part D

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Virginias Clawback Amount Does Not Recognize
Recent Pharmacy Program Savings

• Since 2003, Virginia has implemented several
  pharmacy savings initiatives that are not
  reflected in the clawback amount
• Preferred drug list
• Mandatory generic substitution
• Threshold program
• Maximum allowable cost (MAC) pricing for generics
• Expanded drug utilization review (DUR) program
• While the net impact of the Clawback amount is
  not supposed to impose additional costs to
  states, because post-2003 cost savings are not
  recognized, it appears that paying the clawback
  will be more expensive than continuing the
  current program

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As A Result of Several Factors, It Appears
Medicare Part D Will Incur Additional Costs for
Virginia

• Initial estimates indicate the overall impact of
  Part D for Virginia could reach 22 million (GF)
  in calendar year 2006 (11 million for FY 2006)
• Largest factor contributing to the cost is the
  clawback payment
• Other factors include administrative costs and
  woodwork effect
• DMAS is working with CMS to reduce impact of
  clawback payments
• Final cost estimates are still being determined
  and will be considered carefully in developing
  the Executive Budget

20
Presentation Outline
Overview of Medicare Part D Extra Help for
Low-Income Persons Impact on Virginia Implementa
tion Activities
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HHR Agencies Are Working Together Closely To
Assist CMS/SSA Implement Part D

• DMAS has formed a Medicare Part D Task Force
• Over 75 individuals are participating, including
  federal and state agencies, LDSSs, provider
  associations, advocacy groups, and others
• HHR agencies are completing necessary computer
  system changes
• Information provided to General Assembly members
• Communicating with dual eligibles
• Providing training programs/materials

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Training Other Activities

• An all-day training program featuring CMS and SSA
  staff was provided via videoconference to 29
  sites across the Commonwealth yesterday
• Training on Part D and Extra Help
• More than 500 attendees
• Videoconference was recorded on DVD copies were
  made available for interested parties and
  information has been posted on agency internet
  sites
• HHR agencies will continue to help the federal
  government implement the Part D program