Medicare Modernization Act and Its Impact on Medicaid

1
Medicare Modernization Act and Its Impact on
Medicaid

• Marc S. Ryan
• Secretary
• Office of Policy and Management

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Health Care Trends
3
CMS data on health costs

• In 2002, national health care expenditures
  increased 9.3 percent from 2001, to 1.6
  trillion.
• 5,440 per person
• 14.9 percent of GDP
• 2003 projection is 7.8 percent
• 15.3 percent of GDP

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CMS data on health costs

• NHCE expected to reach 3.4 trillion by 2013 an
  average rate of 7.3 percent from 2002 to 2013.
• By 2012, national health spending expected to
  reach 18.4 percent of GDP.
• BUT . Medicare Rx not in these numbers

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CMS data on health costs

• From 1974 to 1992, private share of national
  health costs was around 60 percent. That
  declined to 54 percent in 2002. Public spending
  increased correspondingly.
• In 2002, Medicare and Medicaid were 516 billion
  about a third of national health care
  expenditures and three-fourths of all public
  spending on health care. Up 11.7 percent for
  Medicaid 8.4 percent for Medicare.

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How does CT compare to nation?

• Analyzing data from the 1980s and 1990s shows CT
  health costs (as well as Northeast in general)
  among the highest in nation. CT has been
  consistently among the most expensive health cost
  states and our trends for increases have matched
  or exceeded national average.
• Reasons general high cost of living, but also
  state mandates

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How does CT compare to nation?

• Per capita spending in CT versus national average
• 1987 -- 2,144 in CT versus 1,847 for U.S.
• 1998 -- 4,649 in CT versus 3,760 for U.S.
• Higher growth over period on higher base.
• From 1987 to 1998, CT averaged 7.3 percent, while
  national average was 6.7 percent

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Connecticut spends more than most per enrollee
the vast majority of those expenditures are used
to care for the elderly in nursing homes.
Source Lewin Group analysis of CMS 64 reports.
Medicaid Expenditures per Enrollee, 2000
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Medicaid Facts Nationally
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Medicaid National Facts

• Provided health coverage for over 47 million
  Americans in 2002 (Medicare covers 40 million)
• Pays for over one-third of all U.S. births
• Health coverage for over 1 in 5 children
• Pays for over half of HIV/AIDS care
• Pays for over half of mental health and substance
  abuse treatment
• Pays for nearly half of all nursing home care
• Covers 7 million low-income elderly and disabled
  persons on Medicare

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Medicaid National Facts

• FFY 2002 dollar outlays
• Total Medicaid outlays were 258 billion federal
  and state combined
• 186 billion was reimbursement to providers
  directly
• 45 billion to prepaid health plans
• DSH payments of 15 billion
• Admin of 12 billion
• SCHIP was 5.4 billion
• Expenditures expected to hit 425 billion in
  Medicaid by FFY 2008

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Medicaid National Facts

• 2000 regular medical stats and breakdown
• Total of 42.8 million recipients, averaged 3,935
  per person
• 21.6 million children (50 percent) averaged
  1,290 per child
• 9.6 million adults (22 percent) averaged 1,930
  per person
• 4.1 million aged (10 percent) averaged 11,345.
• 7.5 million disabled (18 percent) averaged 10,040

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Medicaid National Facts

• Long-term care in Medicaid paid for 41 percent
  of total cost of care for those using nursing
  homes or home health in 2001.
• 1.7 million people have Medicaid nursing home
  costs with total cost of 34.4 billion -- 20,000
  or so per beneficiary.
• Home health of 3.1 billion for almost 1 million
  beneficiaries, or a little over 3000 per person.

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Medicaid National Facts

• Aged, blind and disabled are 27 percent of
  enrollees in Medicaid but account for about 72
  percent of total outlays.
• This will be real cost driver for states and
  national government as the aging boom continues
  to hit.
• Northeast, New England, and CT already older.
• CT is 11 percent older than the national average

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CT Medicaid Expenditures
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Department of Social ServicesMedicaid
Expenditures

• SFY 1994 1,637 m
• SFY 1995 1,756 m
• SFY 1996 1,903 m
• SFY 1997 1,949 m
• SFY 1998 2,040 m
• SFY 1999 1,998 m
• SFY 2000 2,232 m
• SFY 2001 2,372 m
• SFY 2002 2,603 m
• SFY 2003 2,713 m

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DSS Long-Term Care(includes SNF, ICF, ICF/MR and
Chronic Disease Hospitals)

• SFY 1994 843.8 m
• SFY 1995 890.1 m
• SFY 1996 927.9 m
• SFY 1997 925.5 m
• SFY 1998 956.5 m
• SFY 1999 990.0 m
• SFY 2000 1,078.0 m
• SFY 2001 1,126.5 m
• SFY 2002 1,118.9 m
• SFY 2003 1,139.1 m

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Medicare Modernization Act of 2003
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Medicare Drug Act

• Medicare Part D voluntary
• Drug discount card began mid calendar 2004
• Full program expected January of 2006
• Financial assistance for lower income individuals
• States will no longer receive Medicaid FFP on
  dual eligibles of drug coverage when full program
  is on line

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Medicare Drug Act

• Discount card
• 600 subsidy for those 135 percent and under for
  calendar 2004 and 2005
• Discounts off retail prices for everyone little
  or no value to ConnPACE and state as we already
  get deeper discounts
• ConnPACE will wrap around drug discount program
  to gain access to 600. Mandatory enrollment in
  free program for particiation in ConnPACE for
  those at 135 of poverty or less
• 16 to 17 million savings for CT in FY 2005

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Medicare Drug Act

• Full plan in 2006
• If stay in FFS program, sign up with
  free-standing plans by insurers and other
  entities
• Those in Medicare Risk get drugs from their
  insurer. If not offered can enroll in plans
  above.
• Formularies will be allowed
• Feds set aside 62.5 million for states to
  integrate their state drug plans with feds and
  educate beneficiaries. CT and other SPAP states
  share in funding based on enrollment

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Medicare Drug Act

• 2006 benefits outline
• Standard coverage
• 75 percent of drug cost up to 2,250 after 250
  deductible.
• No coverage between 2,250 and 3,600
• Catastrophic coverage of 95 percent beyond that
  with greater of 5 percent co-pay by beneficiary
  or 2/5.
• Annual changes in numbers for inflation allowable
  by CMS
• Monthly Part D premium of about 35.
• Dual eligibles in Medicaid move from Medicaid
  drug assistance to Medicare Part D coverage

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Medicare Drug Act

• Low-Income Assistance
• Those below 150 percent of FPL and assets below
  10,000/20,000 get varying levels of aid
• In 2001, CT had 516,000 approx. Medicare
  beneficiaries. (15 percent of population). Of
  these, 9 percent fall below 100 FPL 27 between
  100 and 199 of FPL.
• 114,000 fall below 135 of FPL and will get full
  subsidy aid half of these are in ConnPACE
• 23,000 will receive partial subsidy help because
  they are between 135 percent and 150 percent of
  FPL.
• Some may not get aid because they could exceed
  asset test

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Medicare Drug Act

• Low-Income Assistance
• Dual Eligibles with Full Medicaid Coverage
• No deductible, no premiums, no gap
• No cost-sharing for those institutionalized
• Duals at or below 100 percent pay 1/3 co-pay
  those above 100 percent pay 2/5. Above
  catastrophic, no co-pay for either
• Below 135 FPL assets below 6,000/9,000
• No premium, no deductible, and no gap in coverage
  (if in average or lower plan)
• 2/5 per prescription
• No co-pay after spending 3,600 out of pocket
• 135 to 150 of FPL assets below 10,000/20,000
• Sliding scale premium from 0 to 420
• 50 deductible and no gap in coverage
• Pay 15 percent of drug costs
• Pay 2/5 after spending 3,600 out of pocket

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Medicare Drug Act

• 40 percent of Medicare beneficiaries spend less
  than 1,000 annually. With 250 deductible for
  standard coverage, 420 premium, and 25 percent
  of costs for drugs, minimal savings to them -- if
  not cost.
• Will benefit those that spend more on drugs as
  well as those with modest incomes who gain
  assistance from federal government

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Medicare Drug Act

• Total spending on CTs 76,000 full dual eligibles
  for drugs is expected to be about 355 million in
  2006 time frame, with 177.5 million from feds as
  FFP
• Duals will get coverage from Medicare now and
  federal government will not reimburse for
  Medicaid drug coverage for them

• Big question law ambiguous on whether states can
  force duals to Part D and what exposure
  would be to states if they dont enroll

• If they dont enroll, would states be forced to
  either cut them off of drug assistance at state
  level or cover it at state expense solely, which
  could cost as much as 177.5 million more for CT
  plus the clawback charge described later
• State would have to deny drugs for anyone (Feds
  would have to allow this through waiver) who does
  not enroll if eligible for Medicare or be greatly
  at risk
• Proposed regulations clarify in favor of states,
  but still an open question
• Will feds allow us to wrap around for duals to
  mitigate their even minimal costs. In CT, duals
  have no drug costs at this time. Minimal co-pay
  was repealed

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Medicare Drug Act

• New law forces states to pay for part of fed drug
  coverage for duals since they are paying costs
  now (177.5 million state share in CT)
• Law has 90 percent clawback charge to state. 90
  percent of estimated state share -- 160 million
  (state estimate) to 166 million (FFIS). Thus we
  could save as much as 18 million. As long as
  duals do not end up back in our Medicaid system
  for drugs somehow
• Clawback drops down to 75 percent by 2015
• But, feds will set trend and tell states what
  their clawback charge is this over time,
  depending trend they use, the savings could erode
  and end up a net cost to states.
• CT savings from SPAP to grow from 16 to 17
  million on discount card wrap around to tens of
  millions with full Part D. Still to be
  determined.

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Medicare Drug Act

• Other changes
• Promoting Medicare Advantage Part C
• Part B premiums go up in 2005 to encourage moves
  to HMOs
• Higher premiums for higher incomes beginning in
  2007
• Higher reimbursements for Medicare HMO program
• Feds will now subsidize corporations and state
  and municipal entities for keeping drug coverage
  for retirees -- 28 percent of drug plan cost up
  to 5,000 after a 500 deductible state
  retirees and teachers costs potentially reduced.
  State of CT budget to save 30 million alone on
  retired state employees. Collectively, state,
  teachers retirement system and retired teachers
  would save an additional 5 million.
• Temporary DSH increase

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Medicaid Reform
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Medicaid Reform

• Medicaid is about three decades old and needs a
  change
• From health care for families on welfare, elderly
  and disabled to largest purchaser of health care
  nationwide
• Medicaid needs to evolve pressure from
  Governors cant sustain system without
  fundamental change. But .
• Consumers, advocates and providers fear Bush
  block grant proposal. State leaders fear
  accepting block grant although flexibility
  appealing -- as it may be due to fear of
  declining reimbursement over long term.
• States are considering alternatives to propose to
  Feds.
• Always have 1115 waiver process, but that will
  take years to impact policy and finances
  nationwide

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Medicaid Reform

• Issues with current system
• Complex and inflexible federal rules
• Reporting requirements
• All or nothing benefit concept
• No flexibility
• Irrational gap between public and private plans
  emerging
• Stigma and bias
• Still 40 plus million people uninsured there
  has to be a better way
• Promoting Long-term care with national policy
• Fully funding dual eligibles beyond Medicare Rx

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Medicaid Reform Considerations

• Any reform has to give flexibility on issue of
  mandatory populations versus optional populations
  and mandatory services versus optional services
• Only 33 percent (50B in June 2001) of Medicaid
  is mandatory services for mandatory clients.
• 20 percent is optional services for mandatory
  beneficiaries (30B in June 2001)
• About 50 percent is all services for optional
  beneficiaries

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Long-term Care Medicaid Issues
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Health Services ReinvestmentAlternatives to
Nursing Homes

• For the past 9 years, Connecticut has championed
  the enhancement of long-term care alternatives in
  the community .
• The Administration has annually proposed to fully
  fund Home Care expansion.
• The Administration has also added assisted living
  in congregate and HUD facilities, and is
  developing 219 freestanding assisted living
  units.
• About 7,000 home care clients in December 1994.
  Projected to be about 15,000 in 2005.

Continuum of Care
Jan. 1997
No Waiting List Policy Instituted for Home Care
Program
Jan. 1998
Home Care Program Waiting List Eliminated
July 1998
St. Jude Congregate Assisted Living Pilot
Oct. 2000
Home Care Program Eligibility Expanded
May 2001
Assisted Living in Congregate and HUDs Initiated
Jan. 2003
Private Pay Assisted Living Pilots Implemented
August 2004
First of 219 Assisted Living Demonstration Units
Come Online
Dec. 2004
Over 500 Individuals Covered Under Medicaid and
State-
Funded Assisted Living Programs
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Long-Term Care Alternatives

• Assisted Living Demonstration 219 free standing
  subsidized assisted living units will begin to
  come online in August 2004 in four towns and
  cities. Service and rental subsidies will be
  provided.
• Assisted Living within Congregate and HUD
  facilities 16 State-funded congregates and 3
  federal HUD communities participating.
• Private Pay Assisted Living Pilots up to 75
  residents will have their service costs
  subsidized to help them stay in their communities
  and avoid institutionalization.

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Medicaid Nursing Home ClientsIf the number of
nursing home clients were still at the 1996-97
levels, CT would be spending 82 million more per
year on nursing home care.
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Overarching Philosophy

• Continuum of Care CT needs to develop all
  aspects of the continuum of care to provide real
  choices and alternatives for long-term care.
• Transfer of Assets CT has proposed tightening
  Medicaid Transfer of Asset rules to reduce
  Medicaid Estate Planning activities and encourage
  private long-term care planning options, such as
  long-term care insurance.
• Long-Term Care Insurance Long-term care
  insurance wont reach its potential until
  Medicaid loopholes, such as transfer of asset
  provisions, are closed and a true continuum of
  care is developed.
• ALL ASPECTS GO HAND IN HAND IN ORDER TO MAKE THE
  LONG-TERM CARE SYSTEM WORK.

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Federal Issues

• CT has expanded the income requirements under the
  State-funded Home Care Program for Elders to
  allow individuals with incomes in excess of 300
  of SSI to access the program. CT uses a
  cost-sharing buy-in approach. CT has been
  pursuing a similar provision under the Medicaid
  Waiver home care program but, to date, the
  federal government has denied CTs proposal.
  Expanding the Medicaid waiver income levels would
  put eligibility for home care services on par
  with eligibility requirements for nursing home
  care.
• Federal law currently prohibits Medicaid home and
  community-based waiver programs from paying for
  room and board in an assisted living facility.

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Federal Issues (cont.)

• CT has proposed tightening the Medicaid penalty
  period for asset transfers. To date, we have not
  received approval from the federal government.
  Flexibility from the federal government on
  Medicaid asset limits is required in order to
  meet the growing demand of the aging baby
  boomers.
• Expansion of the Partnership for Long-Term Care
  programs is restricted by current federal law.
  S. 2077 H.R. 1406 would allow additional states
  to develop Partnership programs.
• A partnership between the federal and state
  governments needs to be initiated for the
  development of additional assisted living and
  independent living housing with states covering
  the service costs and the federal government
  providing the necessary capital costs.

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Reform Needed With Aging Boom Hitting

• National long-term care health policy to build
  continuum of care in every state
• Partnering drug benefit with push toward
  cost-effective Medicare managed care makes sense.
  Need to keep this momentum and not abandon as
  happened with BBA 97
• Need to more aggressively move AABD populations
  in states to managed care. Relative success on
  old AFDC/TANF population.