PRESCRIPTION DRUG BENEFITS FOR LOW INCOME MEDICARE BENEFICIARIES:
A COMPARISON OF CURRENT LAW, S. 1 AND H.R.

Both the Senate and House versions of Medicare prescription drug legislation include provisions for special subsidies for low-income beneficiaries.

Current law

Medicare does not currently cover prescription drugs, except in narrowly-defined circumstances. Most low income individuals with any drug coverage receive it through their state Medicaid program or through a state pharmacy assistance program. Medicaid is funded with federal and state money; state pharmacy programs are funded with state-only money. Prescription drug coverage is optional in Medicaid, but all states provide some coverage. With very limited exceptions, state Medicaid programs must cover older people and people with disabilities with incomes up to 74% of the federal poverty level. Twenty states cover people with incomes up to at least 100% of poverty and 35 states provide coverage for those with exceptionally high medical expenses. State pharmacy assistance programs, operated in 24 states, provide assistance for some low-income Medicare beneficiaries who are not eligible for Medicaid. Many of these programs, however, exclude people under age 65 with disabilities. Income eligibility ceilings for state pharmacy assistance programs vary from 80% to over 400% of the federal poverty level.

H.R. 1

Benefit. The House offers some low-income benefit to individuals with incomes up to 150% of federal poverty levels, divided into two categories.

Individuals with incomes not more than 135% of the federal poverty level and countable resources of not more than $6,000 ($9,000 for a couple) who elect coverage in a drug plan are entitled to full premium subsidy and co-pays of $2 per generic drug prescription and $5 per prescription for non-preferred drugs. There is no cost-sharing protection for the gap in coverage from $2,001 to $4,900 where beneficiaries are responsible for the full cost of their drugs.

Individuals with incomes between 135% and 150% of poverty who meet the same resource test and who elect coverage are entitled to premium subsidy on a sliding scale, from full subsidy at 135% of poverty to zero subsidy at 150% of poverty. Although there is no other cost-sharing assistance for this group, plans are explicitly not prevented from setting cost-sharing for generic drugs at $0.

Residents of U.S. Territories are not eligible for the low-income subsidy, but may be eligible for assistance under Medicaid.

Indexing. The resource level for eligibility as well as the ceilings on co-payments are indexed each year.

Eligibility determinations. These are made by State Medicaid agencies or by the Social Security Administration. Authority is given for appropriations for the Social Security Administration for costs associated with such activities. Eligibility determinations are made according to the rules used for the Medicare Savings Programs. State Medicaid agencies receive enhanced federal matching funds (normally matched at 50% for administrative activities) for activities related to eligibility determinations under Part D.

Role of Medicaid. For those dually-eligible for Medicare and Medicaid, Medicare is the primary payer for both the regular drug benefit and for the low-income subsidy. Medicaid will provide "wrap around" coverage, filling in the gaps not covered by Medicare. Medicaid must continue providing coverage for such individuals, but may require such individuals to pay the Medicare-prescribed co-payments even when they exceed Medicaid's standard of "nominal." States can require Medicare beneficiaries eligible for the Part D drug benefit to elect it as a condition of receiving Medicaid for prescription drug coverage.

States will have to "pay back" to the federal government a portion of the savings they achieve from Medicare's drug coverage of those dually-eligible, but that amount decreases gradually until it reaches zero in the year 2021.

Questions concerning the House provisions.

• Are states authorized, in assessing eligibility for the low-income subsidy according to the rules of the Medicare Savings Programs, to use their own more liberal rules, if any, for determining income and resources?
  
  

• Are states held to a maintenance of effort standard for their dual eligibles by the language "medical assistance shall continue to be provided.," or does this merely describe the current role of Medicaid as wrap around coverage for dual eligibles? If the former, how is the maintenance of effort to be monitored?
  
  

• Is Medicaid required or authorized to pay the beneficiary's cost-sharing under the Medicare drug plan? Does the answer to this question differ according to whether the beneficiary is a Qualified Medicare Beneficiary as that is defined under current law?
  
  

• If Medicaid is required to pay Medicare drug benefit cost-sharing for, at least, Qualified Medicare Beneficiaries, what is the relevance of the provision permitting states to waive the nominal co-insurance mandate of current Medicaid law? Would that provision apply only to Medicaid beneficiaries with incomes above 100% of the federal poverty level?
  
  

• What is the effect of the waiver of nominal co-payment provision with respect to dual eligibles on Medicaid's comparability requirements?
  
  

• What is the effect of the provision allowing states to require dual eligibles to enroll in the Medicare drug benefit as a condition of receiving prescription drug coverage under Medicaid on Medicaid's comparability requirements?

S.1

Benefit. The Senate bill creates four categories of individuals eligible for low-income benefits; the highest income level with some benefit is 160% of federal poverty levels. Each category requires individuals to be enrolled in Part D; all but the highest income category require individuals to meet an asset test of no more than $4,000 in countable assets ($6,000 for a couple) unless their state Medicaid program has eliminated the asset test for the relevant category of its Medicare Savings Program. Moreover, if the state uses other more liberal rules in determining eligibility for its MSPs, those rules will apply for this benefit. Each category is exclusive of the others; each defines someone who is not in any of the other categories.

• Qualified Medicare Beneficiaries are individuals with incomes not more than 100% of federal poverty levels. A Qualified Medicare Beneficiary is entitled to full premium subsidy; full subsidy of the annual deductible, cost-sharing at a rate of 2.5% instead of 50% for costs up to the initial coverage limit, at a rate of 5% instead of 100% for costs in the coverage gap and a rate of 2.5% instead of 10% after the annual out-of-pocket limit has been reached.
  
  

• Specified Low Income Medicare Beneficiaries are individuals with incomes between 100% and 120% of federal poverty levels who meet the resource test, if any. Qualified Individuals are individuals with incomes between 120% - 135% of federal poverty levels and who meet the asset test, if any. Both Specified Low Income Medicare Beneficiaries and Qualified Individuals are entitled to full premium and annual deductible support, cost-sharing of 5% instead of 50% up to the initial coverage limit, 10% instead of 100% for the gap in coverage, and 2.5% instead of 10% after the annual out-of-pocket limit has been reached.
  
  

• Subsidy-eligible Individuals are individuals with incomes under 160% of federal poverty levels. For these individuals, there is no asset test. If an individual does not qualify in another low-income category solely because of excess assets, that individual will be a subsidy-eligible individual.
  
  Subsidy-eligible individuals are entitled to a premium subsidy based on a linear sliding scale from full subsidy at 135% of poverty to no premium protection at 160% of poverty. Their annual deductible is $50 in 2006, indexed in future years. Their cost-sharing is at the rate of 10% instead of 50% up to the initial coverage limit, 20% instead of 100% for the gap in coverage, and the full 10% applicable to non-low income beneficiaries after the annual out-of-pocket limit is reached.

Plans are permitted to waive or reduce cost-sharing otherwise applicable under the law.

Exclusion of Dual Eligibles and Residents of the Territories. In addition to the four categories of individuals eligible for low-income protections, the bill defines dual eligible individuals as those enrolled for full benefits, including prescription drug coverage, in their state Medicaid program. These individuals are excluded from participating in the Medicare drug benefit. Instead, they receive their benefits exclusively through Medicaid. (See Role of Medicaid, below). Medicare beneficiaries who reside in the Territories are excluded from eligibility for the low-income subsidy. They may receive benefits through special but optional provisions in the Medicaid program.

Asset Adjustment and Indexing. Beginning in January 2009, the asset level for those categories having an asset test is raised to $10,000 ($20,000 for a couple) and is indexed in future years. Moreover, states are directed to permit individuals to simply declare and certify the value of their assets under penalty of perjury, avoiding the need to document them. States may use methods to determine eligibility that are more generous than those of the applicable federal law.

The Secretary of HHS is directed to develop a model form for self-declaration of assets and distribute it to the states for their use and to the Commissioner of the Social Security Administration for outreach purposes.

Eligibility Determinations. These are made by the state Medicaid agency. The state must have a plan for providing presumptive eligibility, that is, an immediate determination of eligibility pending completion of more formal enrollment processes. States must also enter into agreement with the commissioner of Social Security to use all local Social Security offices as enrollment sites. As part of their enrollment process for the low-income drug benefit, states must agree to screen applicants for eligibility in the Medicare Savings Programs and enroll them in those programs when they are eligible.

States are paid an enhanced federal matching rate, decreasing over time from 75% (instead of the normal 50%) in 2004 and 2005 to 60% in 2008 and thereafter for administrative costs of enrolling all low-income beneficiaries except Subsidy-eligible Individuals, for whom states receive 100% match.

Role of Medicaid. Dual eligibles - those Medicare beneficiaries with full Medicaid - receive their drug coverage solely through their state Medicaid program. To encourage states to provide at least as good a benefit as Medicare is providing, states whose drug coverage for dual eligibles meets federal standards will receive 100% federal match for the cost of Medicare Part B premiums for their dual eligibles with incomes between 74% and 100% of federal poverty levels. To receive the enhanced match, states must adhere to Medicaid requirements for nominal cost-sharing, must include beneficiary protections equivalent to those required for Medicare and cannot impose a limit on the number of prescriptions an individual may have filled.

• Additional enhancements related to Medicaid. States whose Medicaid programs, as of the date of enactment of the bill, provide full benefits to elderly and disabled individuals with incomes up to 100% of federal poverty levels can receive 100% federal match for Medicare cost-sharing related to Part A benefits, for as long as the state continues to provide coverage to that group.
  

• For fiscal years 2004, 2005 and 2006, States can receive enhanced matching rates for costs associated with improved eligibility determination systems to carry out their responsibilities to determine eligibility for the prescription drug low income subsidy.
  

• The Qualified Individual program, under which states pay the Medicare Part B premium for individuals with incomes between 120% and 135% of federal poverty levels, is extended through December 2008.

Role of Social Security Administration. The Commissioner of Social Security is directed to identify individual who may be eligible for the low income Medicare drug benefit and notify them of the availability of such assistance and to notify state Medicaid agencies of such individuals. The Commissioner is also directed to enter into agreements with state Medicaid agencies to establishment information and enrollment sites within all Social Security field offices located in the states for the purpose of enrolling individuals in the Medicare prescription drug low income benefit and the Medicare Savings Programs.

Report to Congress concerning enrolling Dual Eligibles in Part D. The Secretary is directed to report to Congress, by January 1, 2005 with recommendations for legislation to include dual eligibles in Medicare Part D.

Questions concerning the Senate provisions.

• What is the effect of having two different definitions of the terms Qualified Medicare Beneficiary, Specified Low Income Beneficiary and Qualified Individual, one in the Medicaid law and one in Medicare law?
  

• In determining eligibility for the low-income subsidy, are a state's eligibility rules for Medicare Savings Programs applicable, if they are more generous than required by federal law, as is suggested by the language "as determined under . . . [the state Medicaid] plan"?
  

• Does the definition of dual eligible exclude individuals with full Medicaid benefits who do not have Medicare Part A, as is suggested by the language of the bill?
  

• What is the significance of explicit inclusion of the medically needy in the definition of dual eligible, especially if states have a different benefit package for medically needy than they do for categorically needy?
  

• What has the Senate chosen a definition of federal poverty line that differs from the one usually relied on in Medicaid?
  

• Does the authority given to Medicare Advantage plans and prescription drug plans to waive cost-sharing apply for all beneficiaries or only for those eligible for the low income subsidy?
  

• What is the effect on Medicaid comparability requirements of the section directing states to include certain provisions in their prescription drug benefit for dual eligibles in order to be eligible for 100% federal matching payments for Part B premiums for certain Qualified Medicare Beneficiaries?
  

• With respect to the incentive for states to retain their coverage of individuals with incomes above 74% of poverty, would a state that reduced coverage from 100% of poverty to 80% of poverty be eligible for the enhanced federal match?
  

• How effective is the incentive for states to retain coverage above 74% of poverty, i.e., what are the states' costs for Medicare Part A cost-sharing compared with their costs of full Medicaid coverage for such individuals?

© Center for Medicare Advocacy, Inc. 05/05/2008