Presentation to the Academy Health Kimberley Fox, Senior Policy Analyst Rutgers Center for State Health Policy June 28,

1. Wrapping Around the Part D Benefit: Implications for State Pharmacy Assistance Programs and Low-Income Enrollees • Presentation to the Academy Health • Kimberley Fox, Senior Policy Analyst • Rutgers Center for State Health Policy • June 28, 2005

2. Acknowledgement Presentation based on: • Study of state pharmacy assistance programs funded by The Commonwealth Fund • Longitudinal survey of SPAPs 2000-2004. • Telephone interviews in Spring/Fall 2004 with 17 states re: Medicare coordination of benefit issues and discount card experience. • Website with more detailed reports: http://www.cshp.rutgers.edu/ • Analysis of Part D regulations and operational guidance and SPAP eligibility data in one state. Collaborating Faculty: • Stephen Crystal, PhD • Jasmine Sia, MD/MPH • Dorothy Gaboda, PhD

3. Presentation Outline • Overview of SPAPs and how they compare with Medicare Part D • Options, Opportunities, and Challenges for SPAPs to Wrap around Part D • State Case Example

4. How Many States Have State Pharmacy Assistance Programs (SPAPs)? * No program enacted or operational Program enacted but not operational Program is operational * The District of Columbia’s direct benefit program is enacted but not operational. Source: National Conference of State Legislatures’ web site: State Pharmaceutical Assistance Programs, 2004 Edition, http://www.ncsl.org/programs/health/drugaid.htm. November 11, 2004.

5. How SPAP Income Eligibility Compares with Medicare Part D and Low-Income Subsidies? Percent of FPL MMA Low-Income Subsidy Level 150% * * Source: Trail, T., Fox, K., Cantor, J, Silberberg, M., Crystal, S. State Pharmacy Assistance Programs: A Chartbook. The Commonwealth Fund, New York, NY, August 2004. *MD and MN also require an asset test

6. How SPAP Benefits Compare with Part D and Low-Income Subsidies? Caveat: Cost-sharing and benefits vary by state* Generally… • Non-catastrophic Basic Part D cost-sharing > SPAP. • Medicare Full Low-Income Subsidies <= SPAPs. • Medicare Partial Low-Income Subsidies ?? Generally… • Part D drug formularies < SPAPs • Except states that limit coverage to drugs for certain conditions (6) or that have PDLs (9). Part D private pharmacy networks <= SPAPs. * For more details on current SPAP cost-sharing see: http://www.cmwf.org/programs/child/trail_spap_chtbk_758.pdf

7. Presentation Outline • Overview of SPAPs and how they compare with Medicare Part D • Options, Opportunities, and Challenges for SPAPs to Wrap around Part D

8. SPAP Options/Opportunities under Medicare Part D • If SPAP enrollees enroll in Part D, could offset current state costs • CMS estimates that SPAPs will save approximately $600 million/ year. • Special privileges for “qualifying” SPAPs • Expenses paid by SPAP count toward TrOOP • Part D plans required to coordinate benefits/share data • SPAP Transitional grants - $62.5 million/yr • SPAP Transition Commission. “Qualifying” SPAPs • State-only funded drug benefit/ not discount cards • Statutory language - “In determining eligibility and amount of assistance, provides such assistance to such individuals in all Part D plans and does not discriminate based on the Part D plan in which they are enrolled.” • Final rule interpretation – not only equal assistance, but cannot “steer.” • Supplemental coverage options for SPAPs • Pay full premium for basic benefit • Pay lump sum capped funds toward basic premium, supplemental premium, and/or out-of-pocket costs. • Provide wrap-around secondary claim payment coverage.

9. Key Concerns/Choices for SPAPs • Maintaining/starting state program or terminating/restructuring benefit? • Qualified vs. non-qualified SPAP? • What/How to Wrap? • Premiums, deductibles/cost-sharing in and out of donut hole, formularies, networks • Lump sum payment or secondary wrap • Getting SPAP Enrollees to Enroll in Part D/LIS • Mandate Part D/LIS enrollment • Authorized representative • Co-branding • Intelligent random assignment COB Challenges Once Enrolled

10. Methodological Challenges in Assessing Potential Cost-Savings to SPAPs Potential savings driven by enrollment rates in Part D and LIS and, once enrolled, proportion of expenses that will be charged/covered by primary source of payment - No benchmark experience • Medicare LIS means-testing totally new • Medicare Discount Card program had different rules (but when states left voluntary only 25-50% estimated enrolled in TA, even lower percentage used it) Current utilization/expenditures does not reflect future use/prices • Most SPAPs have used minimal cost containment tools • Much of Part D-specific information still unknown to states • Rebate levels – How much/how they will be passed on • Formularies • Cost-sharing across tiers

11. Rebates as a Percentage of Total SPAP Drug Expenditures, 2003 Rebates as Percentage of Drug Expenditures * * Source: Sia, J, Fox, K., Trail, T., Crystal, S. State Pharmacy Assistance Programs 2003: A Chartbook, The Commonwealth Fund, publication forthcoming. Notes: Florida, Maine, Michigan, Nevada, Rhode Island, South Carolina, and Wyoming did not provide data on rebate collection. Wisconsin only includes 10 months. Delaware does not include the privately funded Nemours program. Massachusetts includes ingredient cost and dispensing fee. * Indiana and Kansas reported 0% rebates collected. All States = Total rebates divided by total drug expenditures (N=15). 65

12. Trends in Annual SPAP Drug Expenditures Per End-of-Year Enrollee, 1999 to 2003 Old Programs 1999 N = 12 2000 N = 10 2001 N = 11 2002 N = 10 2003 N = 11 New Programs 1999 N = 1 2000 N = 2 2001 N = 6 2002 N = 7 2003 N = 10 Notes: Old programs are those established prior to 1999 (N = 12), and new programs are those established since 1999 (N = 10). Only programs operational for at least one full year were included in the analysis. Averages represent data from all states that reported for that year – see Legends. 71

13. Presentation Outline • Overview of SPAPs and how they compare with Medicare Part D • Options, Opportunities, and Challenges for SPAPs to Wrap around Part D • State Case Example

14. Methods for Estimating LIS Eligibility Analyzed 2003 eligibility data for SPAP enrollees with incomes below 350% FPL in two distinct programs within one state with different cost-sharing requirements. Assigned enrollees to Medicare benefit category – basic benefit, partial low-income subsidy, full low-income subsidy • Estimated assets using income/dividends – assumed 4% interest rate

15. Enrollee Characteristics

16. Majority of SPAP Enrollees Will Not Qualify for Low Income Subsidies Source: SPAP eligibility data. 2003. Includes all persons enrolled for any portion of the calendar year.

17. Disabled SPAP Enrollees More Likely to Qualify for Low-Income Subsidies Source: SPAP eligibility data, 2003. Persons enrolled for any portion of the calendar year.

18. LIS Asset Test Greater Barrier for >65 Income Eligible SPAP Enrollees <135% FPL 135%-150%FPL Source: SPAP eligibility data, 2003. Includes all persons enrolled for any portion of the calendar year.

19. Comparison of SPAP Enrollee* Characteristics by LIS Eligibility

20. Summary/Policy Implications • SPAPs have unique opportunities to wrap around the Medicare benefit but face administrative hurdles. • Many low to moderate income SPAP enrollees may not be eligible for Part D full low income subsidies and could benefit from additional assistance. • State savings (and ability to wrap or expand to other populations) reliant on getting eligible persons enrolled in LIS and Part D plans. • Transition period of enrolling existing beneficiaries into Part D and LIS likely to be difficult • State budget problems and Part D/SPAP administrative complexities could ‘crowd-out’ many existing programs.