Medicare Update

Presented byTricia Neuman, Sc.D.

Vice President, Henry J. Kaiser Family Foundation

for 

Grantmakers in Health

November 4, 2004

The Medicare Population(selected characteristics)

22%

6%

14%

23%

24%

29%

38%

21%

Percent of total Medicare population:

SOURCE: Medicare Current Beneficiary Survey, 1997-2000; Income data based on CBO letter to Sen. Nickels, November 2003.

Exhibit 1

Lack Drug Coverage (full or part-year)

Low-Income (<150% FPL)

Fair/Poor Health

Rural

Cognitive Impairment

Under-65 Disabled

Nursing Home

43%

Full Year Part-Year

Medicare Prescription Drug Benefit Overview

• Beginning in 2006, beneficiaries have choice of:   – Fee-for-service Medicare, with access to private drug-only plans

(PDPs) – Medicare Advantage (MA) plans for Medicare benefits and Rx drugs

• New plans provide “standard” prescription drug benefit or its actuarial equivalent– Plans have flexibility to determine which drugs are covered and cost-

sharing requirements, subject to certain constraints

• Premium and cost-sharing subsidies for low-income beneficiaries with incomes up to 150% poverty ($13,965/single; $18,735/couple) and modest assets

• Medicaid prescription drug coverage terminates for Medicare beneficiaries December 31, 2005

Exhibit 2

Standard Medicare Part D Drug Benefit, 2006

+ ~$420 in annual premiums

$250 Deductible

$2,250 in total drug costs

$5,100 in total drug costs

25%

5%

$2850 Gap: Beneficiary Pays 100%

SOURCE: Kaiser Family Foundation analysis of Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

Medicare Pays 75%

Medicare Pays 95%

Exhibit 3

No Coverage

CatastrophicCoverage

PartialCoverage

up to Limit

Beneficiary Out-of-Pocket Spending

Many Questions

• Who will sponsor new private drug-only plans, where, and for how long?

• What will Medicare prescription drug benefit packages look like, which drugs will be covered, and how much will monthly premiums be?

• Will beneficiaries sign up for Part D? Low-income subsidies?

• Can the new benefit be implemented -- without major glitches?

Exhibit 4

October 15, 2005CMS disseminates information comparing Part D coverage to beneficiaries via mail and 1-800-MEDICARE

December 31, 2005•Medicare discount card program ends•Medicaid Rx coverage ends for “full benefit” dual eligibles

October 15, 2005 Secretary notifies states of per capita drug payments for 2006 (“clawback” for dual eligibles)

November 15, 2005-May 15, 2006Annual coordinated election period for 2006 Part D for all beneficiaries

November 15-December 31, 2004Annual coordinated election period for 2005 discount card program

January 1, 2005•CMS announces PDP & MA regions•CMS releases financing & solvency requirements for plans

February 18, 2005CMS publishes risk-adjustment methodology for 2006 payment rates

June 6, 2005PDP & MA-PD plan bids submitted

Early 2005CMS publishes final rules for Medicare drug benefit and MA program

June 31, 2005CMS “pre-qualifies” bidders for eligible fallback plans starting in 2006

July 1, 2005States begin accepting applications for low-income subsidies

September 2005CMS awards bids to PDP and MA-PD plans

July 1, 2005CMS establishes procedures for coordination between Part D plans and state pharmacy assistance programs and other insurers

January 1, 2006•Part D coverage begins for all beneficiaries enrolled in PDP or MA-PD•Low-income subsidies for Part D coverage begin•Retiree drug subsidy program begins•Secretary implements billing and benefit coordination for determining beneficiaries’ true out-of-pocket (TrOOP) costs•States begin making monthly “clawback” payments to federal government for dual eligibles

Implementation Challenges: Now – January 2006Exhibit 5

Challenges for Beneficiaries

• Deciding whether to enroll in Part D in 2006 (financial penalties for delayed enrollment)

- Or maintaining other coverage, such as retiree health benefits

• Enrolling in low-income subsidy program, if eligible- SSA or Medicaid office

- Must apply each year

• Comparing plans and deciding which to join

- Variations in premiums, cost-sharing and formularies

• Coordinating Part D with other sources of drug coverage

- State pharmacy assistance programs, employer coverage, etc.

• Tracking total and out-of-pocket Rx costs- Important due to benefit gap

Exhibit 6

Decisions for Medicare Beneficiaries, 2006

Traditional Medicare

No Part D coverage

Part D Prescription Drug Plan

Medicare Advantage

HMO (local)

PPO (regional)

Private Fee-for-Service

Enroll in Part D Plan

Apply for Low-Income Subsidy

Medicaid Office

Social Security Office

Meet Income and Asset Test?

If yes, qualify for:

Dual Eligibles

Below 100% FPL: No premium or

deductible, $1/generic Rx, $3/brand name Rx, pay nothing after $5,100 in

Rx costs

Below 135% FPL: Subsidy for premium, no

deductible, $2/generic Rx, $5/brand name Rx, pay nothing after $5,100 in

Rx costs

Below 150% FPL: Subsidy for premium on

sliding scale, $50 deductible, 15% coinsurance to $5,100 in Rx costs,

$2/generic Rx, $5/brand name Rx after $5,100

Exhibit 7

26%

47%

26%

Medicare Beneficiaries

Favorable

Don’t Know/Refused

Given what you know about it, in general, do you have a favorable or unfavorable impression of the new Medicare law?

Unfavorable

Medicare Beneficiaries’ Impressions of the Drug Law

Source: Kaiser Family Foundation/Harvard School of Public Health Views of the New Medicare Drug Law: A Survey of People on Medicare (conducted June 16-July 21, 2004)

Exhibit 8

Opportunities for Grantmakers

• Help low-income beneficiaries get financial assistance

• Develop easy-to-understand public education materials targeted to local area

• Support local organizations that provide beneficiary education

• Track implementation at local level

• Help educate pharmacists and physicians

Exhibit 9

Medicaid Update

Presented by

Andy Schneider Medicaid Policy, LLC 

for 

Grantmakers in Health

November 4, 2004

Context: State Fiscal Pressures

• Average Medicaid spending growth 9.5% in 2004

• Growth driven by increased enrollment, drug costs, and overall health care costs

• State revenue growth 3.4% in 2004

• HMA survey: All states plan at least one new cost containment strategy in 2005:

- Controlling prescription drug costs

- Reducing/freezing provider payments

- Reducing eligibility, including reversing eligibility simplifications

- Restricting benefits (acute and long-term care)

- Increasing copayments

- Implementing disease management programs

Exhibit 1

Outreach and Enrollment

• In 2002, 6.2 million low-income children were eligible for Medicaid (3.4 million) or SCHIP (2.8 million) but not enrolled

• Outreach efforts plus procedural simplifications demonstrably increase enrollment

• Center on Budget survey found that between April 2003 and July 2004 nearly half of states imposed enrollment barriers in Medicaid or SCHIP

- 16 increased premiums

- 8 reinstated procedural barriers (e.g., more frequent certification)

- 8 froze enrollment

• Some states have raised eligibility standards and streamlined enrollment (e.g., IL)

Exhibit 2

Section 1115 Waivers

• Section 1115 waivers allow federal matching funds when regular Medicaid rules are not followed (e.g., higher cost-sharing, no choice of MCOs) or when populations can’t otherwise be covered (e.g., childless adults)

• Waivers must be budget-neutral to federal government over 5-year term (e.g., federal government will spend no more than in absence of waiver)

• Some recent waivers finance eligibility expansions with shallow benefits through reductions in regular benefits for current eligibles (Utah)

• Some recent waivers contain no eligibility expansions, just reductions benefits for current eligibles (Washington)

Exhibit 3

MMA Implementation

• The implementation of Part D on January 1, 2006 will bring two fundamental changes to Medicaid and the 6 million dual eligibles

• On that day, the federal government will no longer match the cost of Medicaid prescription drug coverage for dual eligibles

• By that day, over 6 million dual eligibles will have to be enrolled in a Medicare Part D plan or they will lose prescription drug coverage

• That month, states will be required to begin making monthly “clawback” payments to the Medicare Trust Fund to help finance the new Part D

Exhibit 4

Block Grant • Medicaid is an entitlement to states and to low-income

individuals: The federal government will share in the costs of covered services for eligible individuals

• Continuing interest at the federal level in limiting the federal government’s financial exposure under Medicaid (e.g., long-term care, HIV epidemic)

• Interest on the part of some governors (e.g., FL, NH) in agreeing to limit federal government’s financial exposure in exchange for broad programmatic flexibility

• Implications of Medicaid block grant over time for:- Safety net providers

- State and local governments

- Quality of care for low-income populations

- Racial and ethnic health disparities

Exhibit 5

Role for State and Local Foundations

• Fund outreach and enrollment efforts- Brandywine Health and Wellness Foundation (Chester County enrollment)- Michael and Susan Dell Foundation (insure-a-kid school outreach)- Hartford Foundation (HUSKY outreach workers)

• Commission studies on proposed 1115 waivers and block grant implications

- Connecticut Health Foundation- New Hampshire Endowment - Winter Park Health Foundation

• Fund stakeholder meetings and website for development of section 1115 waiver

- California Endowment (www.medi-calredesign.org)

• Maintain independent analytic capacity of state Medicaid policy issues- Blue Cross Blue Shield Foundation of Massachusetts (Massachusetts

Medicaid Institute)- California Health Care Foundation

Exhibit 6