Medicare Part D Prescription Drug Benefit

1
Medicare Part D Prescription Drug Benefit
Presentation to Senate Finance Committee
Patrick W. Finnerty Department of Medical
Assistance Services
May 19, 2005 Richmond, Virginia
2
Presentation Outline
Overview of Medicare Part D Extra Help for
Low-Income Persons Impact on Virginia Implementa
tion Activities
3
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 900,000 Medicare beneficiaries
  in Virginia
• Approximately 120,000 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

6
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 37
• 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 lt100 Federal Poverty Level (FPL)
  (9,570/year) no resource limits
• Group 2 Persons with income lt135 FPL
  (12,919/year), and limited resources
  (6,000/individual 9,000/couple)
• Group 3 Persons with income lt150 FPL
  (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 will send 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

13
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
• September 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
• Assist clients applying for Extra Help
• Determine eligibility for low-income subsidy if
  state determination is demanded by a Medicare
  beneficiary
• Process Extra Help monthly data reporting
  requirements
• Determine eligibility for other assistance
  programs for Medicare beneficiaries seeking
  information on Part D (woodwork effect)
• DSS estimates a need for 71 new staff at LDSSs

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Administrative/Operational Implications (contd)

• 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
• DMAS estimates a need for 8 staff to handle
  administrative responsibilities

18
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
Estimated General Fund Impact (Millions)
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DMAS Is Working With CMS on Clawback
Administrative Costs Will Be Considered in Budget
Development

• CMS Administrator has stated CMS wants to make
  sure Part D does not impose additional costs on
  states
• DMAS is reviewing its preliminary estimates with
  CMS to determine if any adjustments can be made
• Administrative costs, including those for both
  DMAS and LDSSs, will be considered carefully in
  the development of Executive Budget (caboose bill
  and new biennial budget)

22
Presentation Outline
Overview of Medicare Part D Extra Help for
Low-Income Persons Impact on Virginia Implementa
tion Activities
23
DMAS and DSS Are Working Together Closely To
Assist CMS/SSA Implement Part D

• DMAS has formed a Medicare Part D Task Force
• Over 30 groups are participating, including
  federal and state agencies, LDSSs, provider
  associations, advocacy groups, and others
• DMAS/DSS 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 will
  be available for interested parties and will be
  posted on agency internet sites
• DMAS, DSS, and other Health Human Resources
  agencies will continue to help the federal
  government implement the Part D program