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Medicare Part D Prescription Drug Benefit Presentation to: Health & Human Resources Subcommittee House Appropriations Committee Patrick W. Finnerty Department of Medical Assistance Services September 18, 2005 Richmond, Virginia Presentation Outline

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medicare part d prescription drug benefit

Medicare Part D Prescription Drug Benefit

Presentation to:

Health & Human Resources Subcommittee

House Appropriations Committee

Patrick W. Finnerty

Department of Medical Assistance Services

September 18, 2005

Richmond, Virginia

presentation outline
Presentation Outline

Overview of Medicare Part D & “Extra Help” for Low-Income Persons

Impact on Virginia

Implementation Activities

medicare is a federal health insurance program
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 Gehrig’s 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
what is medicare part d
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
who in virginia is affected by medicare part d
Who In Virginia Is Affected By Medicare Part D?
  • There are roughly 947,000 Medicare beneficiaries in Virginia
  • Approximately 136,000 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
what is the medicare part d benefit
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)
how are prescription drug plans selected monitored
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; P&T Committee requirements; and appeals process)
what are the cost sharing requirements
What Are The Cost-Sharing Requirements?
  • Under the standard prescription drug benefit, most beneficiaries in 2006:
    • Pay an average monthly premium of $34
    • 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.
certain beneficiaries will receive extra help to offset cost of prescription drug benefit
Certain Beneficiaries Will Receive “Extra Help” To Offset Cost of Prescription Drug Benefit
  • Group 1: Full benefit “Dual Eligibles” with income <100% Federal Poverty Level (FPL) ($9,570/year); no resource limits
  • Group 2: Persons with income <135% FPL ($12,920/year), and limited resources ($6,000/individual; $9,000/couple)
  • Group 3: Persons with income <150% FPL ($14,355/year), and limited resources ($10,000/individual; $20,000/couple)
how do persons enroll in medicare part d drug coverage
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
how can persons find out if they qualify for extra help
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 is sending 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
certain low income persons are deemed eligible for extra help
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
important dates for medicare part d implementation
Important Dates forMedicare Part D Implementation
  • January 28, 2005 Final federal regulations published
  • February 2005 CMS Public Awareness Campaign begins
  • May 2005CMS Notifies Potential Low Income Eligibles
  • June 2005 Prescription Drug Plans Bids Due

States submit enrollment files

  • July 2005 States/SSA accept low income applications
  • Sept. 15, 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
slide15

Presentation Outline

Overview of Medicare Part D & “Extra Help” for Low-Income Persons

Impact on Virginia

Implementation Activities

administrative operational implications
Administrative/Operational Implications
  • Local Departments of Social Services (LDSSs) have significant new responsibilities related to “Extra Help” program
    • (will be addressed in Commissioner Conyers’ presentation)
  • 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
  • Final cost impact still being determined
states must pay a significant portion of the part d drug benefit
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
virginia s clawback amount does not recognize recent pharmacy program savings
Virginia’s “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
as a result of several factors it appears medicare part d will incur additional costs for virginia
As A Result of Several Factors, It Appears Medicare Part D Will Incur Additional Costs for Virginia
  • Initial estimates indicate the overall impact of Part D for Virginia could reach $22 million (GF) in calendar year 2006 ($11 million for FY 2006)
  • Largest factor contributing to the cost is the “clawback” payment
    • Other factors include administrative costs and “woodwork” effect
  • DMAS is working with CMS to reduce impact of “clawback” payments
  • Final cost estimates are still being determined and will be considered carefully in developing the Executive Budget
slide20

Presentation Outline

Overview of Medicare Part D & “Extra Help” for Low-Income Persons

Impact on Virginia

Implementation Activities

hhr agencies are working together closely to assist cms ssa implement part d
HHR Agencies Are Working Together Closely To Assist CMS/SSA Implement Part D
  • DMAS has formed a Medicare Part D Task Force
    • Over 75 individuals are participating, including federal and state agencies, LDSSs, provider associations, advocacy groups, and others
  • HHR agencies are completing necessary computer system changes
  • Information provided to General Assembly members
  • Communicating with “dual eligibles”
  • Providing training programs/materials
training other activities
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 were made available for interested parties and information has been posted on agency internet sites
  • HHR agencies will continue to help the federal government implement the Part D program
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