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Deficit Reduction Act of 2005: Overview of Key Medicaid Provisions

This presentation provides a comprehensive overview of key Medicaid provisions in the Deficit Reduction Act of 2005, covering eligibility changes, long-term care considerations, payment regulations, fraud prevention strategies, and more. The act introduces significant changes effective from 1/1/06, with provisions on asset transfers, annuities, home equity, and proof of citizenship. It also outlines the undue hardship process for transfer penalties and annuity disclosures. The presentation emphasizes the importance of complying with the new regulations to ensure eligibility for Medicaid benefits.

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Deficit Reduction Act of 2005: Overview of Key Medicaid Provisions

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  1. Deficit Reduction Act of 2005:Overview ofKey Medicaid Provisions

  2. Overview andOrganization of Presentation • Eligibility • Acute Care • Long-Term Care • Payment • Fraud, Waste and Abuse • Other • Summary of Mandates

  3. Eligibility

  4. Eligibility Changes • Long-Term Care (“Medicaid estate planning) • All provisions became effective 1/1/06, except: • Transfers made prior to the date of enactment (2/8/06) are subject to the old asset-transfer rules • If a state needs enabling legislation, the effective date is the first day of the quarter following the close of the next legislative session (i.e., for Maryland, 7/1/07). • Proof of Citizenship • Effective for all initial determinations and re-determinations on or after 7/1/06

  5. Long-Term Care: Asset Transfers • Look-back period is changed to five years • Transfer penalty begins later of date of transfer or the date the person first would be eligible for Medicaid, but for the transfer • The purchase of an annuity where the state isn’t the primary or secondary beneficiary is a transfer • The purchase of an annuity where the term exceeds the person’s life expectancy, or with a large balloon payment, is a transfer

  6. Long-Term Care: Asset Transfers • A state “shall not” round down fractional penalties • A state “may” aggregate multiple transfers into one penalty period, beginning on the date of the first transfer

  7. Long-Term Care: Transfer Penalties and the Undue Hardship Process • The state must create a process to avoid imposing the transfer penalty where the state decides that an “undue hardship” would result: • The penalty would deprive the person of medical care putting him/her at risk of health or life, or • The penalty would deprive the person of the means for securing food, clothing, shelter, or necessities • The state must create a process to notify applicants of this process and their rights • The state must have a timely process to make determinations, and notify the person of his/her to appeal • An institution may pursue it on behalf of an applicant, with his/her consent • HHS must issue rules that would allow a state, if it wants, to pay for up to 30 days in a NF pending the process

  8. Long-Term Care: Annuities • Applicants must disclose all annuities in application • The state must be primary or secondary remainder beneficiary (after spouse or surviving minor/disabled child) • The state must notify issuer of the state’s remainder interest • The state may require the issue to notify the state of any changes in the income or principal withdrawal provisions

  9. Long-Term Care: Home Equity • If a person owns a home with equity of $500,000 or more, the person “shall not be eligible” for Medicaid (unless there is a spouse, or minor or dependent child) • The state may raise this level, at its discretion, to an amount no higher than $750,000 • The floor will increase, beginning in 2011, by CPI, rounded to nearest $1,000 • Applicants are permitted to use reverse annuity mortgages to reduce their home equity • The state must have an “undue hardship” process

  10. Long-Term Care: Other • CCRCs may require, in their admission contracts, that a person spend all of their declared assets before applying to Medicaid • CCRC “entrance fees” are countable as a Medicaid resource if (a) they are refundable and (b) they do not confer an ownership interest in the CCRC • States must use an “income-first” approach to spousal impoverishment

  11. Proof of Citizenship • All applicants (and re-applicants) must prove their citizenship status • Exceptions: People who already proved it on a federal application • Prior Medicare (for dual eligibles) • Prior SSI • Others as specified in rule by HHS • This appeared in fraud and abuse portion of DRA

  12. Acute Care

  13. Acute Care Changes • Benefit Flexibility • Effective 4/1/06 • Cost sharing • Effective 4/1/06, except ER provisions (hospitals charging for non-emergent services) become effective 1/1/07

  14. Benefit Flexibility • States may offer benchmark plan (SCHIP-like), instead of traditional Medicaid benefits • Applies to “full benefit” COEs as of February 8, 2006 • For children under 19, it must be supplemented with full EPSDT • Note: not up to age 21 • Benchmark plans must permit access of covered benefits at FQHCs/RHCs, at their special payment rates

  15. Benefit Flexibility: Exempt Populations • Certain populations are exempt from “benefit flexibility”, meaning they must receive traditional Medicaid • Exempt populations: • Individuals in TANF (children and adults) • SSI and SSI-related children • Mandatory pregnant woman • Dual eligibles • Individuals in an institution • Individuals meeting institutional level of care • Children in foster care • Eligibility groups in specialty benefits (breast and cervical cancer, and hospice) • Others with a “special needs status” as defined by HHS (see 3/31/06 State Medicaid Director letter)

  16. Benefit Flexibility: Major Groups Who May Be Subject to the Provisions • Children in poverty-level groups (who are not on TANF or disabled) • Most adults, including adults with disabilities (SSI adults must have an opt-out)

  17. Cost sharing: Family Incomes Between 101-150% FPL* • No premiums permitted • Coinsurance allowed, up to 10% of cost of service • Family cap of 5% of family income • Post eligibility income determinations need not be based on same rules as eligibility determinations, so states may count income differently post determination; e.g., application of disregards • (*Drafting error in DRA: Rules for households below 100% FPL not specified.)

  18. Cost sharing: Family Incomes at or above 151% FPL • Premiums permitted (amount not specified) • Coinsurance allowed, up to 20% of cost of service • Family cap of 5% of family income • Post eligibility income determinations may apply, so state may count income differently post determination (disregards, etc.)

  19. Cost sharing: Population Exemptions from Premiums • These groups are exempt from premiums: • Mandatory children age 18 or younger • Pregnant women • Institutionalized individuals • Terminally ill individuals receiving hospice • Women in breast or cervical cancer eligibility group

  20. Cost sharing: Service exemptions from Coinsurance • No cost sharing for: • Services used by mandatory children to age 18 • Preventive services • Family planning • Pregnancy-related services to pregnant women • Services to terminally ill or institutionalized persons • Emergent use of ER • Women in breast or cervical cancer eligibility group

  21. Cost sharing: Enforcement • Premiums: If required and payment not made for 60 days, state may terminate eligibility • State may waive for hardship • State may treat different populations differently • Providers may deny service for nonpayment of coinsurance

  22. Cost sharing: Special Rules for Rx • State may impose higher cost sharing on non-preferred drugs than preferred drugs • State must waive this rule where physician determines that patient needs non-preferred drug

  23. Cost sharing: Special Rules for ER • After conducting an EMTALA screening assessment, a hospital may charge coinsurance for the provision of non-emergent services if: • It notifies the patient of the name and location of an alternate non-emergency services provider • It notifies the patient that such alternative would not result in the same level of cost sharing • The hospital offers to coordinate the referral to the alternative provider • Other general cost sharing rules largely apply

  24. Long-Term Care

  25. Long-Term Care Changes • HCBS State Plan Option • Effective 1/1/07 • Money Follows the Person Demos • Effective 1/1/07 • Public/Private Insurance Partnerships • Effective 2/8/06 • Cash and Counseling Without a Waiver • Effective 1/1/07

  26. HCBS State Plan Option • States may provide HCBS services under a state plan amendment • Eligibility must be based on needs-based criteria that is less stringent than NF level of care • The state may cap the number of participants • If a state raises its NF level of care, it must grandfather into NF and 1915(c) services people meeting the old level of care, for a period of 12 months

  27. HCBS State Plan Option • Under the HCBS state plan option, states must conduct an independent face-to-face assessment by an independent entity to help develop the plan of care • Customary approach to the development of a plan of care (treatment team, etc.) • Self-direction permitted • Presumptive eligibility (with FFP) okay for up to 60 days

  28. HCBS State Plan Option • Drafting issues in the law: • The law says that the option only may cover people at or 150% FPL • This is a Catch 22 for the group of people above this level but below 300% SSI, who only would remain eligible for 1915(c) waiver service on basis of financial eligibility • The law says that the state plan option must require 2 ADLs (in one place) and may require 2 ADLs in another • It is unclear whether the necessary waiver of comparability exists under DRA

  29. Money Follows the Person Demos • States must apply • If approved, the demo design must include these requirements: • Eligible person: • At least 6 months (or, at state discretion, for an alternative period not to exceed 2 years), in an institution • On Medicaid at the time of community-placement • Is expected to continue meeting, and needing, institutional level of care

  30. Money Follows the Person: continued • Requirements, continued • Eligible placement: • The person’s home • The home of a family member • A congregate setting of no more than 4 residents • Customary approach to the development of a plan of care (treatment team, assessment, etc.) • The demo must last at least two years

  31. Money Follows the Person: continued • Requirements, continued • The state must maintain its effort: total $$ in HCBS must remain at level of year before MFP demo • The demo need not be “statewide” or “comparable” • Enhanced FFP will be provided for HCBS services during the first year per recipient: CMS will pay half the state’s usual share (i.e., in Maryland, if the regular FMAP is 50%, the enhanced FMAP is 75%)

  32. Money Follows the Person: continued • Application • Must be developed with public process • Give preference to states with models including consumer-directed benefit design • Must assure CMS that recipients will continue to receive HCBS services following completion of the year of enhanced FMAP • Must assure CMS that recipient participation in the demo is voluntary • Give preference to states targeting multiple populations (NF; ICF/MR; etc.) • Give preference to states offering transition assistance

  33. Public/Private Partnerships • States may initiate dollar-for-dollar public/private LTC insurance partnerships • Requirements: • Eligible person: • Must purchase policy after effective date of SPA • Must be a resident of the state when he/she first draws LTC insurance benefits

  34. Public/Private Partnerships • HHS to develop reciprocity rules (across states) by 1/1/07, for portability • Issuers must provide reports to HHS in accordance with TBD regs from HHS • Issuers may be required to provide certain information and data to states, according to state-defined requirements

  35. Public/Private Partnerships • Requirements: • Eligible policy: • Must meet numerous requirements found in the Model LTC Insurance Act (renewable, prohibition on exclusions and post-claims underwriting, etc.) • Must be certified by state Insurance Commissioner • Must have inflation protection • The Medicaid agency must provide technical assistance and information to insurance agency

  36. Cash & Counseling • Cash & Counseling models now authorized under 1915(c) may be approved without a waiver • State must provide counseling • Consumer would have the right to self-direct the selection, hiring, firing & scheduling of caregivers • Consumer would have the right to substitute services (e.g. microwave or ramp)

  37. Payment

  38. Payment Changes • Pharmacy -- Upper Payment Limit • Effective 1/1/07 • Pharmacy – Physician-administered drugs • Effective 1/1/06 • Managed Care Premium Tax as “Broad Based” • Effective 2/8/06 • Targeted Case Management • Effective 1/1/06

  39. Pharmacy – Upper Payment Limit • The UPL is 250% of the average manufacturer price (AMP) • The AMP is to be used where there is a multiple source drug, defined as a drug with at least one other similar drug product • HHS shall provide states, on monthly basis, with the AMP by manufacturer and drug (effective 7/1/06)

  40. Pharmacy: Other Related Issues • Manufacturers cannot use “prompt pay” rules to game AMP • Manufacturers cannot use “nominal” prices to game AMP. “Nominal prices” now defined to only exist where sold/given to: • 340B provider • ICF/MR • State owned or operated nursing facility • Any other provided defined as “safety-net” by HHS • HHS must conduct detailed rate study on retail prices

  41. Pharmacy: Physician-Administered Drugs • For single-source drugs, states must provide to HHS the J codes and NDC codes in a format as specified by HHS to enable recovery of rebates • Effective 1/1/06 • For multiple-source drugs, by 1/1/07 HHS must publish a list of the 20 highest dollar value drugs, and by 1/1/08, states must report the J codes and NDC codes for these drugs to HHS

  42. Pharmacy: Other • Children’s Hospitals are entitled to 340B pricing

  43. Managed Care Premium Tax • Law changed to require inclusion of non-Medicaid managed care premiums in order for the premium tax to be considered “broad based”

  44. Targeted Case Management • “Case management” services are comprehensively defined in DRA • The definition specifically excludes certain activities from being considered CM. E.g.: • Assessing adoption placements • Recruiting foster parents • Home investigations • Making placement arrangements • Administering foster care subsidies • Providing transportation • Serving legal papers

  45. Targeted Case Management (continued) • “Targeted case management” is defined as: • Case management services • Delivered to a targeted population • FFP only is available for TCM “if there are no other third parties liable for such services, including as reimbursement under a medical, social, educational, or other program.” • States therefore must extract from TCM rates any funds for services that overlap with IV.E. (foster care), IDEA (education), etc. • State Medicaid Directors letter expected 3/31/06

  46. Fraud, Waste & Abuse

  47. Fraud, Waste and Abuse Changes • Encourage states to enact False Claims Act • Effective 1/1/07 • Vendor/provider employee education about false claims recovery: policies and procedures • Effective 1/1/07 • Prohibition against Rx restocking and double-billing • Effective 4/1/06 • Expansion of Medi-Medi data match • Effective with FY 06 budget • TPL Laws • Effective 1/1/06

  48. Encourage States to Enact False Claims Act • A False Claims Act, or whistle-blower statute, would allow private citizens to bring lawsuits on behalf of the government (with permission) • The incentive to states: under funds recovered under such a law would receive enhanced match (the state would be able to retain 10% more of recovered funds than its normal match rate)

  49. Vendor/Provider employee education about false claims recovery • Any entity that receives or makes annual payments of $5 million or more from a Medicaid agency must, as a condition of receiving such payments: • Establish written policies to notify employees about the provisions of the federal false claims laws • Establish written policies and procedures on what the entity is doing to prevent and detect fraud, waste and abuse • Include all of this information in any employee handbook

  50. Prohibition on Restocking and Double Billing for Rx • States cannot seek FFP for expenditures made to a pharmacy where the pharmacy already has received payment for the same ingredient

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