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The Impact on States of the Medicare Drug Benefit: Information for State Administrators

The Impact on States of the Medicare Drug Benefit: Information for State Administrators

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As administrators work to integrate Medicaid and state prescription assistance programs with the new drug benefit established by Part D of the Medicare Modernization Act, there will be significant savings opportunities as well as significant costs. The decisions states make must not only reflect budget considerations, but must also recognize the lead role that states have in providing a safety net to the poorest, frailest, and most vulnerable of our citizens. This issue brief identifies key decision points and factors that must be taken into consideration as states prepare for the January 1st, 2006 implementation of the new Medicare drug benefit.
As administrators work to integrate Medicaid and state prescription assistance programs with the new drug benefit established by Part D of the Medicare Modernization Act, there will be significant savings opportunities as well as significant costs. The decisions states make must not only reflect budget considerations, but must also recognize the lead role that states have in providing a safety net to the poorest, frailest, and most vulnerable of our citizens. This issue brief identifies key decision points and factors that must be taken into consideration as states prepare for the January 1st, 2006 implementation of the new Medicare drug benefit.

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Published by: National Pharmaceutical Council on Oct 28, 2008
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Information for State Administrators
The Impact onStates of theMedicare DrugBenefit
Prepared by Linda Schofield, BSN, MPH President, Schofield Consulting Mary Kay Owens, RPh, CPh President, Southeastern Consultants, Inc.  April 2005
 
Summary
 The MMA has established an important new benefit for senior and disabled Medicare beneficiaries, thereby assuring theiraccess to a full array of medical services. States have numerous policy decisions to make in implementing the Part D drugbenefit, including several options to enhance the Part D program. These decisions must be made quickly in order to be readyfor the January 1
st
, 2006 implementation date. As the safety net provider for many vulnerable individuals, the state’s choiceson these matters are important to the future well-being of the elderly and disabled. A brief summary of potential state actions and legislation includes:
 Medicaid 
• Cover non-Part D drugs, non-formulary drugs and/or copayments for dual eligibles.• Incentivize or mandate pharmacies to waive copayments for dual eligibles that cannot pay.• Establish a dedicated unit for education and assistance for dual eligibles related to plan selection, benefit use, and appeals.• Re-evaluate existing and planned cost containment policies.• Re-evaluate current DUR program structure and objectives.• Re-evaluate disease and case management program structure and vendor contracts.• Review current managed care program structure and benefit design.• Review current and proposed LTC programs and alternative structures.
State Pharmaceutical Assistance Plans
• Become a bona fide SPAP within CMS rules or forfeit federal SPAP status.• Mandate that SPAP enrollees apply for low-income subsidies and enroll in Part D plans, if eligible.• Provide a mechanism to enroll eligible individuals in a Part D plan if they fail to do so voluntarily.• Provide assistance to enrollees to apply for low-income subsidies.• Revise current benefit design to become a wraparound or premium assistance program, or continue as a full benefit program.• Use program savings to expand program benefits or eligibility.• Designate the SPAP as the authorized representative for purposes of appeals.• Amend program rules related to use of mail order drug services and out-of-network providers.
State Pharmacy Plus Demonstration Waiver Programs
• Review limitations of waiver’s current structure.• Consider restructuring waiver program into an SPAP.• Determine program design and consider offering wraparound benefits.• Determine how to use savings to expand benefits.
Other 
• Fund training and education for other affected agencies.• Fund contingency drug supplies for high risk patients.• Fund a program evaluation to inform future policy decisions.• Decide how to structure retiree drug benefits to produce savings.For more information, follow these links:Centers for Medicare and Medicaid Services (CMS) at www.cms.hhs.gov/pdps or www.cms.hhs.gov/medicarereformKaiser Family Foundation at www.kff.org Academy Health (for state coverage initiatives) at www.statecoverage.net/pdf/medicarepartd.pdf 
 
 The new drug benefit established by Part D of the MedicareModernization Act (MMA) assures that all older and disabledpersons have access to affordable prescription drug coverageand will subsidize many low-income persons who previouslyhad no access to drug benefits through Medicaid or statepharmaceutical assistance programs. It also will result insignificant changes in state programs that currently providedrug benefits to other populations. While the major decisionsabout the federal program’s design are now finalized andcodified, there are many important decisions that states willmake in the next few months regarding how state programswill adapt to the new MMA benefit.States will see both significant savings opportunities (especiallyin their state pharmaceutical assistance plans [SPAPs] andretiree benefits; possibly in Medicaid) as well as significant newcosts (especially in Medicaid) as a result of the Part Dprogram. The decisions states make can affect both. Therefore, state legislators and administrators will need infor-mation and analyses about all the options and decisionsbefore them.However, the decisions made by state policy makers must notonly reflect budget considerations, but also recognize the leadrole that states have and always will have in providing a safetynet to the poorest, frailest, and most vulnerable of our citizens.Related state policy decisions have the potential to influencethe perceived success of the Part D program implementation.If states act to supplement and coordinate effectively with thePart D program, they may prevent future demands upon safetynet services. Thus, the states have an essential role, comple-menting the federal role, to address the access andinformation needs of older and disabled persons who havePart D benefits, but who also rely, and may continue to rely, onvarious other state services.
Medicaid
 The MMA makes its most sweeping impact on the Medicaidprogram, carving out the coverage of drugs for dual eligiblesand transferring this responsibility to the Medicare program.Federal matching funds will no longer be available for Medicaiddrug benefits provided to dual eligibles, except for drugs thatare not included in the list of Part D drugs. However, thetransfer of program responsibility is not a complete hand-off. The states are still largely financially responsible for the cost of drugs for dual eligibles, in the form of the “clawback.”“Clawback” is the popular term for the mandatory paymenteach state must make to the federal government toward thecost of Medicare drug coverage for the dual eligibles. Thestates must also establish new processes and enhance theirinfrastructure to accept and process applications for Part Dlow-income subsidies. In the course of processing these appli-cations, they must screen for eligibility for Medicare savingsprograms available under Medicaid (QMB, SLMB, QDWI andQI), thereby potentially discovering and enrolling significant newnumbers of dual Medicaid/Medicare beneficiaries at newexpense to the state. Additionally, states are assessing theimpact of MMA on Medicaid cost containment initiatives andother programs such as disease management, drug utilizationreview, Medicare subsidies, and managed care benefitstructures. While these requirements are finalized and will notlikely be changed, states do have a number of opportunities toinfluence the effectiveness of the new Part D program and re-evaluate future Medicaid policy and program design decisions.
 Access:
 As safety net providers, states want to assure that dualeligibles enjoy appropriate access to necessary medicationsafter their transfer to a prescription drug plan (PDP). BecausePDPs will have different formularies and prior authorizationrequirements than the Medicaid programs, as well as highercopays in some cases, some beneficiaries will face new barriersin obtaining needed medications. Although Medicaid programscannot claim federal matching funds for coverage of copays orfor Part D drugs not available under a PDP’s formulary, thestates do have the option to use state funds to subsidize thisaccess. Indeed, some Medicaid programs are consideringenrolling their duals into their state pharmaceutical assistanceprogram (SPAP) as a vehicle for providing them such coverage.In addition, states may continue coverage of non-part D drugs(benzodiazepines, barbiturates, vitamins, over-the-counterdrugs, etc.) under Medicaid and may receive federal matchingfunds for those costs. The Centers for Medicare and Medicaid Services (CMS) hasalso indicated that pharmacies may waive copayments for dualeligibles at their own expense. Under federal Medicaid rules, instates that have Medicaid drug copayments, the pharmacistsmay not refuse to supply a prescription to a beneficiary whocannot afford the copayment. States may want to work withtheir state pharmacies to incentivize them to extend this sameprotection to dual eligibles enrolled in Part D plans. Alternatively, states may want to determine if they can extendtheir current mandates for pharmacists to serve those dualeligibles who cannot pay, even though the duals are coveredby Part D plans.
1
 April 2005

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