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CMS Panel Examines States' Challenges with Medicare Reform

Donna Young

A newly formed federal advisory panel, which includes five pharmacists, convened for the first time in Washington, D.C., on July 7 to discuss potential effects on state pharmaceutical assistance programs (SPAPs) and their participants when the Medicare Part D prescription drug benefit is implemented in 2006.

The State Pharmaceutical Assistance Transition Commission was mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 to ensure that low-income Medicare beneficiaries who now get their drugs through state-sponsored programs will not have their benefits reduced or their paperwork increased and that there is no increase of costs to states as a result of Medicare reform.

The 24-member commission is charged with providing recommendations by January 1, 2005, to Congress and the Bush administration, including legislative and administrative proposals, if appropriate, that detail how the Centers for Medicare and Medicaid Services (CMS), Medicare-approved prescription drug plans, and SPAPs can work together to protect states and beneficiaries from additional burdens.

All Medicare beneficiaries who do not receive prescription drug coverage through Medicaid are eligible for a Medicare-approved drug discount card.

Medicare beneficiaries whose incomes are below 135% of the federal poverty level (FPL) and do not have other certain types of prescription drug coverage are eligible for a $600 credit to pay for prescriptions this year and another $600 for 2005. Any money from the credit not spent in 2004 can be carried over to 2005.

The Medicare law requires that there be a single point of contact for enrollment and processing for participants in SPAPs and the Medicare prescription drug benefit.

"We believe that the coordination between SPAPs and Medicare drug plans must be as seamless as possible in every way," said Evelyn Gooden, Illinois AARP state president, during her testimony before the commission at the July 7 public hearing. "Coordination should include ensuring that SPAP enrollees get the best price available to them, either through the SPAP or the Part D plan. This will help ensure maximum savings to both beneficiaries and taxpayers."

Department of Health and Human Services Secretary Tommy G. Thompson announced at the hearing that the government has made $125 million available to states to help educate low-income Medicare beneficiaries who are enrolled in SPAPs about the transitional process of the Medicare drug benefit.

The amount that each state will receive is based on the number of Medicare beneficiaries enrolled in a state's drug assistance program as of October 1, 2003.

Jack Hoadley, research professor at Georgetown University's Health Policy Institute in Washington, D.C., told the commission that state programs and CMS have already gained valuable experience working together in the Medicare discount card program, which began on June 1.

Hoadley, using a grant from the Robert Wood Johnson Foundation, is studying SPAPs and how states may potentially modify their plans as a result of Medicare reform.

Several states are using automatic enrollment procedures for the Medicare drug discount card for SPAP enrollees, especially those who qualify for the $600 transitional assistance, he said.

Of the 191,000 New Jersey seniors enrolled in the state's two pharmaceutical assistance programs for seniors and persons with disabilities, 81,000 are eligible for the $600 transitional assistance, said Kathleen Mason, assistant commissioner of New Jersey's Department of Health and Senior Services.

However, she told the commission, it was "not worth it" for the remaining 110,000 New Jersey SPAP beneficiaries to enroll in the Medicare drug discount program because the state provides better drug coverage with only a $5 copayment.

But, Mason noted, because the Medicare law requires the transitional benefit to be billed before a state's pharmaceutical assistance program, states could potentially save millions of dollars by enrolling SPAP participants who are qualified for the $600 credit in a drug discount card program.

New Jersey expects to save $90 million in 2005 by automatically enrolling its SPAP beneficiaries who are eligible for the $600 credit into a Medicare drug discount card program, she declared.

Beneficiaries can choose to opt out of automatic enrollment into the discount card program, Mason noted.

As of June 4, 68,000 SPAP beneficiaries received Medicare drug discount cards, and only 350 of those eligible for the program chose not to participate, she said, adding that a New Jersey SPAP enrollee's benefits stay the same regardless of whether they participate in the discount card program.

The state has contracted with a single company, Medco Health Solutions, to administer the plan, she said.

But, Mason added, when Part D takes effect in 2006, coordination with various Medicare-approved drug plans that have different networks and different formularies than SPAPs could pose several problems for states.

Tracking states' experience with the Medicare prescription drug discount cards will be critical in assessing whether different approaches taken by states will yield the intended results of the Medicare Part D law, said Kimberley Fox, senior policy analyst at Rutgers University's Center for State Health Policy (CSHP) in New Brunswick, New Jersey.

As part of a study about SPAPs to identify "best practices and lessons that might be learned to inform the design and implementation of a Medicare prescription drug benefit," she told the commission, CSHP has conducted three annual surveys of SPAPs, case studies of eight state subsidy programs and six discount card programs, and telephone interviews with SPAP program directors about their plans to coordinate with the new Medicare drug benefit.

At least 22 states in 2003 offered prescription drugs subsidy programs, 17 of which were funded solely by state funds, Fox said.

The basic Part D benefit is typically less generous than SPAP benefits, she asserted.

For SPAP enrollees with incomes above 150% of the FPL, she explained, basic Part D coverage requires greater cost-sharing than the benefit in many SPAPsparticularly for those Medicare beneficiaries who spend less than $5100 per year on drugs.

However, for those beneficiaries who have incomes at or below 150% of the FPL, "low-income Part D subsidies generally provide cost-sharing equivalent to or better than that provided by SPAPs but may restrict access to some drugs through [prescription drug plans] formularies or preferred drug lists," Fox testified.

Because the Medicare drug benefit will be administered by multiple private companies, Fox contended, the benefit may cover fewer drugs than are currently available through SPAPs.

Prescription drug plans may have more limited pharmacy networks than SPAPs, she added.

When the drug benefit takes effect, Fox warned, claims processing could become quite burdensome for pharmacists who will be required to coordinate billing between the Medicare drug plan and the state's pharmaceutical assistance program.

"Whatever the form that SPAP programs end up taking, coordinating their benefits with Part D will not be easy," Fox testified. "It will require a significant amount of information exchange that is unlikely to go smoothly in even the best situation and even less likely to go smoothly with a large number of plans."

The commission plans to hold a second public hearing in October.