The Medicare Drug Benefit: Impact On States, And Cost Containment

The Medicare Drug Benefit: Impact on States, and Medicaid Cost Containment

Map for Today 

Key MMA Issues for:    



Medicaid State Pharmaceutical Assistance Programs (SPAPs) Other Agencies State Retiree Benefits

Medicaid Cost Containment Options    

  

Eligibility Benefits Unit Costs Utilization Managed Care Revenue enhancement & cost avoidance Administrative Efficiencies Schofield Consulting

2

State Concerns in General  Access and continuity of care for individuals dependent on state programs  States are safety net providers if Medicare fails

 Potential for impact on non-drug costs born by states if Rx access is inadequate  Burden on state resources to educate and assist beneficiaries and to adapt state programs to MMA  Impact on State Budgets:  Will costs outweigh savings? Hidden and known costs  Will predicted savings all materialize? Schofield Consulting

3

Medicaid Issues & Options  Clawback  Based on (2003 per capita payments) x (inflation) x (# of duals) x (90 to 75%)  Need to assure base year cost report reflects all audits, rebates, etc.  Annual inflation factor may erode built-in savings  Different states pay different amounts per capita for same Medicare benefit – Will formula change over time?

Schofield Consulting

4

Key Issues for Medicaid: Costs vs. Savings What is the “Clawback”? State Clawback Rate by Year 90.00%

2006

88.33%

2007

86.67%

2008

85.00%

2009

83.33%

2010

81.67%

2011

80.00%

2012

Schofield Consulting

78.33%

76.67%

75.00%

2013

2014

2015 and on

5

Key Issues for Medicaid: Costs vs. Savings Illustrative

PDL Initiation

Clawback Provision

• State enacts PDL in 2003 • Savings realized in ’04-’05

• 2006+ costs are per capita calculations based on 2003 spend • Savings realized in ’04-’05 are irrelevant • State has lost control of spending

• Projected reductions beyond ’05

$ Actual state Rx spend “Clawback” payments

2001

2002

2003

2004

2005

2006

Schofield Consulting

2007

Projected drug spend

6

Enrollment: Implications for Medicaid  Screening of LIS applicants for Medicare Savings Programs  May increase enrollment in these Medicaid programs

 Info and assistance to duals in selecting PDPs and others in applying for LIS  Some states supplementing CMS efforts  Info to duals about best formulary match to drug profile  Important to train related agency case managers to help clients with choices: MH, MR, Aging, AIDS programs, H&CB waiver programs, etc.  Training for NFs, ICF-MRs, pharmacists, MDs  Collaboration with SHIPs, AAAs, senior insurance advice programs, etc.

 LIS limited to average PDP premium – should Medicaid pay difference for higher cost plans?

Schofield Consulting

7

Take-Up Rates for Assistance Programs

Note: Medicare Part D includes employer coverage. Medicare Part D and low-income subsidies begin in January 2006. Part D rates are estimates from CBO. Numbers appearing as a range were averaged. Take-up rates for Medicare Parts A and B, Medicaid, and SSI are from 1975-1996. SOURCE: Medicare Part D, Part D Low-Income Subsidy, QMB, and SLMB rates from CBO, July, 2004; National Bureau of Economic Research, March 2001.

Note: Medicare Rx Card participation WITH auto-enrollment and including MA plan cards = ~20%

Schofield Consulting

8

Medicaid Coverage Options  Medicaid can cover drugs excluded from Part D with FFP  Benzodiazepines, barbiturates, OTCs, etc.

 No FFP for covering duals‟ copays or nonformulary drugs, but not prohibited from doing so  Not practical to process claims for copays - but Pharmacists can waive copays  Fear coverage of non-formulary drugs will encourage PDPs to be restrictive

Schofield Consulting

9

Consumer Protections for Duals Diminished    

No 3 day emergency supply Slower turn around on PA and exceptions No coverage during appeal Psych drugs exempt from most state PDLs and access limits  Potential for impact if therapy interrupted  Clinical and financial

 Copays can be higher under MMA  In Medicaid, bene served even if can‟t pay copay Schofield Consulting

10

Medicaid Program Aspects to Reconsider  Drugs in managed care contracts  Duals‟ drugs must be carved out

 Drug copays on non-dual population, pregnant women and EPSDT kids all exempt  PDLs  Not cost effective to start one now for duals  Existing PDLs will save less once duals, who use most chronic drugs, move to Medicare  May not be able to negotiate as big rebates with smaller drug budget  Reconsider which drugs to put on PDL – focus on drugs used by remaining population

 Do NF per diems or HH encounter rates include drug costs? Schofield Consulting

11

SPAP Issues  Few SPAP programs in Western States: TX, WY, WI, NV – small programs  TX only state here with an SPAP – So TX can talk to me later about changes they should consider in their program that will save money!

Schofield Consulting

12

Review AR laws     

Many duals not capable of navigating appeals process without help AR = “individual appointed by the enrollee or authorized under state law to act on behalf of…” Individuals, case managers, doctors, etc can become appointed representatives (AR) for purposes of appeal Check states laws re: conservators etc to assure compatability with Medicare rules on AR Educate AR‟s about MMA requirements: e.g. send in signed form annually

Schofield Consulting

13

Impact on Other State Agencies  An interagency task force is advisable

 Mental Health Agency    

Assist in PDP selection based on drug needs & formularies Assist in navigating the PDP rules to get benefits – PA, etc Impact on clinics to switch drugs Potential for impact on patients if therapy interrupted… Provide emergency supplies of meds? Assist with appeals?  Revise discharge planning procedures for inpatients  Become AR for clients  Provider training

 MR/DD Agency  Assist their dual clients to pick a good plan and navigate the system to get benefits  Become AR for clients

Schofield Consulting

14

Impact on Other State Agencies  Insurance Dept:  PDPs to have state insurance license  Questions and complaints: no real authority, but good to track and try to resolve anyway  Role of ombudsman  Consumer info on how to compare plans  Report cards on plan performance

 Dept on Aging, Dept of Health  Be prepared to offer info and advice, & receive many calls  Impact on Ryan White AIDS drug progams Schofield Consulting

15

State Retirees: Provisions & Options 

Retiree plans may qualify for a 28% subsidy of their drug payments for retirees  Retirees must be eligible for but not enrolled in Part D plans  Plan must be actuarially equivalent to Part D benefits  Subsidy only on actual costs (excluding rebates) between $250-5,000, so subsidy is capped at $1330 per person



Alternative to retain current benefit plans:  Become a waivered PDP and collect federal premium payment (74.5% of national average premium) plus risk corridors, reinsurance, & LIS payments  Need to evaluate if this will result in more state savings than the 28% subsidy  Had to file letter of intent by mid-March, „05 to do a waiver for „06, but can apply for „07



Other alternatives  Employer pays beneficiary portion of premiums to PDPs  Employer offers wrap around plan (note payments do not count towards TrOOP, no subsidy)  Employer offers non-qualifying plan, no 28% subsidy



States need actuarial analysis to determine savings and make choice Schofield Consulting

16

Other  States should establish an evaluation protocol to assess impact on:  DMH expenditures and utilization  Medicaid and SPAP costs, utilization and quality  Other agencies

 Need full analysis of savings and costs  (SPAP + Medicaid + Retiree savings eligibility) vs. (admin. costs + clawback costs + education costs)  If net savings: how should savings be used?

Schofield Consulting

17

Medicaid Cost Containment 

Medicaid Cost Containment Options       



Eligibility Benefits Unit Costs Utilization Managed Care Revenue enhancement & cost avoidance Administrative Efficiencies

The easy ideas are done, the rest may take waivers, legislation, political guts Schofield Consulting

18

Eligibility      

Cut back eligibility for optional groups Prevent transfer of assets for nursing home applicants LTC insurance partnerships Strengthen estate recovery HIFA waivers: expand (or preserve) eligibility but for limited benefits for higher income groups Reduce # of uninsureds / strengthen employer insurance Schofield Consulting

19

Benefits   

Eliminate optional services – many restrictions – EPSDT, pregnant women, etc Replace high cost services with low cost alternatives: H&CB waivers Reform partnership with Medicare to better manage continuum of care for elders & save state $

Schofield Consulting

20

Unit Costs     

Selective contracting MFN language in all provider contracts Multi-state Centers of Excellence contracts for tertiary hospital services Cut provider reimbursement rates Mandatory generic substitution

Schofield Consulting

21

Utilization 

Provider initiatives    





Profiling and network management Fraud and abuse detection & prevention Intensive Clinical case reviews when costs or utilization hit triggers Prior authorization of services, if cost benefit is documented – e.g. extensive home health, selected surgeries, extensive PT, certain drugs Drug recycling programs for unused drugs in nursing homes

Patient initiatives   

Disease management, self care education Co-payments for non-emergency use of ER Lock-in for inappropriate use of services

Schofield Consulting

22

Managed Care 

Capitated Managed care  Mostly



for families, not the sickest populations

Use managed care principles in FFS program  Selective

contracting & network management  Case mngmt, disease mngmt for high risk/cost folks  Performance based provider payment  Copayments for upper income groups  UM, where cost benefit is demonstrated

Schofield Consulting

23

Administrative Efficiencies  



Sometimes complicated by civil service & labor contracts Admin overhead very low in Medicaid, cuts in admin can result in higher cost of health care services Beware of stove pipes: evaluate impact of carve outs on full budget not just line item

Schofield Consulting

24

Revenue enhancement & cost avoidance    

Buy-in for employer sponsored insurance Enhance TPL activities Medicare recoveries IGTs, DSH, and provider taxes much more tightly scrutinized & controlled by CMS

Schofield Consulting

25

Final Pearl: 

Invest in solid evaluation of each initiative‟s impact on total costs & on quality:  beware

of line item savings that increase costs elsewhere in the program or in other agencies.  Beware of cost shifting….what can be shifted can be shifted back through utilization, state employee health costs, etc.

Schofield Consulting

26