How Will the Medicare Rx Drug Bill Affect Medicaid

1
How Will the Medicare Rx Drug Bill Affect
Medicaid?

• Rachel Klein
• Senior Policy Analyst
• Families USA
• [phone]
• Health Action 2004
• Washington, DC
• January 23, 2003

2
The Role of Medicaid for Duals

• 16 of Medicare beneficiaries are enrolled in
  Medicaid (6.8 million)
• 5.8 million are full duals
• 1 million are enrolled in Medicare Savings
  Programs
• Most dual eligibles have income lt 6,650/year
• Dual eligibles are likely to be in poor health
• Provides wrap-around coverage to fill in gaps
  in Medicare
• Especially prescription drugs and long-term care
• Fills in Medicare cost-sharing

3
Spending on Dual Eligibles as a Share of Medicaid
Spending
Non-Rx Spending for Dual Eligibles (82.7 billion)
Spending on Other Groups (136.7 billion)
Total Spending on Benefits 232.8 Billion
Rx Spending for Dual Eligibles (13.4 billion)
Source Kaiser Commission on Medicaid and the
Uninsured
4
State Concerns

• Medicare drug coverage for dual eligibles is of
  particular importance to states
• Rising drug costs for duals is a key cost driver
  for Medicaid
• Cost increases for duals are related to the
  health care market and demographic changes, and
  thus will continue beyond the current fiscal
  crisis
• Symbolic in states movement to have federal
  takeover of responsibility for dual eligibles
  health care coverage

5
Features of the Medicare Drug Benefit

• Coverage provided through private drug plans
  (PDPs)
• Basic benefit
• Premiums estimated 35/month in 2006,
• deductible 250indexed to growth in Part D costs
  
• coinsurance 25 between 250 and 2,250 of
  expenditures (2250 is initial coverage limit)
• Gap in coverage between 2,250 and 5,100
  (catastrophic threshold) where beneficiaries
  pay 100
• Initial coverage limit and catastrophic limit
  also indexed to growth in Part D costs
• Low-income beneficiaries receive subsidy for
  premiums cost-sharing and have no gap in
  coverage

6
How Will the Drug Bill Change Coverage for Dual
Eligibles?

• As of January 2006, dual eligibles will no longer
  be allowed to get prescription drugs through
  Medicaid
• Instead they will have to sign up for the new
  Medicare prescription drug benefit to get Rx
  coverage
• Full duals qualify for low-income subsidy, no
  matter how much income or assets they have

7
Cost-Sharing for Dual Eligibles

• Dual eligibles currently pay between 0 and 3
  for each prescription they take
• In the new Medicare drug plan, they will not have
  a deductible or a premium
• Duals in institutions (nursing homes, ICF/MR,
  etc.) have no copays
• Duals with incomes under 100 of poverty will pay
  1/generic or 3/brandindexed to CPI
• Duals with income over 100 of poverty will pay
  2/generic or 5/brandindexed to growth in Part
  D costs

8
Cost-Sharing for Partial- and Non-Duals

• Individuals w/income lt 135 poverty
• No premiums or deductible
• Copays 2/generics or 5/brandindexed to growth
  in Part D costs
• No copays above catastrophic threshold
• Asset test 6,000/person, 9,000/coupleindexed
  to growth in CPI

9
Cost-Sharing for Partial- and Non-Duals

• Individuals w/income 135-150 poverty
• Sliding scale premium
• 50 deductibleindexed to growth in Part D costs
• 15 coinsurance
• 2/5 copays above catastrophic thresholdindexed
  to growth in Part D costs
• Asset test 10,000/person, 20,000/coupleindexed
  to growth in CPI

10
Benefit

• Medicaid guarantees access to medically necessary
  drugs. States may develop preferred drug lists,
  require prior authorization, or other utilization
  controls, but if a beneficiary jumps through the
  hoops they have to be able to get the drug they
  need.
• Medicare drug plans will be able to have closed
  formularies, with no guarantee of access to
  medically necessary drugs that are not on the
  formulary.

11
Benefit, contd

• States are prohibited from providing a
  wrap-around benefit to provide off-formulary
  drugs or copays through Medicaid.
• States will be able to supplement the Medicare
  benefit with state-only programs, but will not be
  able to get federal match for those costs.
• Medicaid can continue to provide drugs that are
  not covered by the Medicare drug benefit, such as
  over-the-counter drugs.

12
Will States Save Money?

• Not as much as they had hoped.
• States will have to pay the vast majority of
  their savings to the federal government.
• Amount of payment starts at 90 in 2006, and
  gradually goes down to 75 in 2015. Stays at 75
  in perpetuity.
• States expected to save some 18 billion between
  2006 and 2013.
• But, will have to spend more than 1 billion
  between 2004 and 2006.