Deficit Reduction Act of 2005: Overview of Key Medicaid Provisions

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