Rx Access: State Prescription Drug Initiatives for Seniors
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Improving Access to Pharmaceuticals for Senior Citizens and People with Disabilities: Action Agenda
Background
About three of 10 people enrolled in Medicare – or about 12 million people – have no coverage for pharmaceuticals. Nearly a quarter of this group who lacks coverage lives below the federal poverty level. Furthermore, millions more elderly and disabled Medicare enrollees are under-insured for drugs. Indeed, nine of 10 people with standard Medigap insurance – federally regulated private supplemental coverage – have no prescription drug coverage, and many of those who do receive very limited financial assistance. All in all, 45 percent of all prescription drug costs for Medicare recipients are paid out-of-pocket. States are looking for solutions to this problem at the same time as budgets are tight and costs are climbing. States should recognize, however, that a relatively small proportion of their residents account for a large amount of their total health care spending. One study found that the 1 percent of patients who spend the most money on health care account for 30 percent of the total health care bill, while the 50 percent of patients who spent the least on their health account for only 3 percent of total spending. Several chronic illnesses, such as diabetes, asthma, and congestive heart failure, account for a large share of resources, and improved disease management for such conditions can improve health and lower spending.
Statement of Principles
We are a bi-partisan group of state legislators who have assembled to address this serious problem. After careful deliberation and a review of emerging evidence, we have agreed upon the following key principles:
- All senior citizens and people with disabilities should have access to some kind of insurance for outpatient pharmaceuticals.
- This includes access to all medically necessary pharmaceuticals prescribed by health care providers.
- Prescription drug insurance coverage should not be managed in a way that discourages the research and development needed to search for new medicines.
- Cost control should feature disease management, case management, utilization review, and prudent negotiating techniques that leverage states’ purchasing power.
Action Steps for States
States can take a number of action steps to address this serious problem. Many of these steps build on and extend their current initiatives while other steps would be new. States need the flexibility to tailor programs and policies to their own circumstances – a one-size-fits-all approach should be avoided. We have developed four action steps that states can take:
1. “The Medicaid Outreach and Enrollment Program”
Improve Outreach to People Already Eligible for Public Programs States can identify Medicare enrollees who are already eligible for Medicaid and other programs but are not participating. Many of these people are unaware that they have access to the Medicaid program. States can begin by identifying people enrolled in Medicare who are currently also eligible for the Supplemental Security Income (SSI) program – a federal cash assistance program that provides eligibility for Medicaid. This would include both very low-income senior citizens and people with disabilities under the age of 65. Medicaid would provide extra benefits, including prescription drugs, to these people. States could expand outreach initiatives to find and enroll them in Medicaid. States can also educate their residents about potential eligibility for assistance with drug spending from the Veterans Administration and other programs.
2. “The Medicaid Rx Senior Eligibility Expansion Program”
Expand Eligibility for Public Programs States could expand eligibility for public programs that are funded with state and federal dollars by applying for a federal Medicaid or Medicare waiver. This could be done in a series of steps, as states cover different populations in stages. A reasonable starting point would be to extend drug coverage for the portion of the state’s dual eligible population (defined as those who are eligible for Medicare and Medicaid) who have incomes below the federal poverty level but are nevertheless not eligible for full Medicaid coverage. This gap occurs because SSI eligibility thresholds are set below the federal poverty level. These Medicare enrollees, known as Qualified Medicare Beneficiaries (QMBs), are currently eligible for Medicaid assistance for the Part A and Part B Medicare premiums, as well as deductibles and coinsurance for Medicare services. But they are not eligible for the extra benefits, such as prescription drugs, because, while they have incomes below the poverty line, they are not eligible for SSI. If states were to obtain a Medicaid waiver, they could use federal matching funds and their own funds to provide drug coverage to these people living in poverty but currently uninsured for drugs. A second step would be for states then to extend this Medicaid drug coverage to Specified Low-income Medicare Beneficiaries (SLMBs), who have incomes between 100 percent and 120 percent of the federal poverty line. These people currently are eligible only for Medicaid assistance to cover the Medicare Part B premium. Once states have covered these very needy populations, they could later choose to cover other populations, such as the near-poor, non-elderly disabled. Another approach is a Medicare waiver to conduct a demonstration project that could include drug coverage. This type of demonstration would be designed to determine the extent to which adding a prescription drug benefit to Medicare covered services would improve health status and generate offsetting savings from reduced hospital admissions or re-admissions and reduced emergency room care.
3. Develop/Expand State-Only Programs
States could develop their own prescription drug coverage programs or support various private insurance options featuring stand-alone coverage for prescription drugs. Public Program Options
+“The Rx Senior Patient Assistance Program”
States are encouraged to move ahead with their own programs to assist lower-income Medicare enrollees with the cost of pharmaceuticals. Twenty-six states have programs to assist the elderly with their prescription drug costs, and a number of other states are currently developing programs. According to the National Governors Association, people living in states with such programs are 60 percent more likely to have continuous drug coverage than those in states without such programs. Most of the state pharmaceutical assistance programs have the following components:
- Cost-sharing by recipients is required (some mix of deductibles, co-payments, and coinsurance, but the amount of cost-sharing varies greatly);
- Eligibility limits are tied to income;
- All programs cover people 65 years of age and older, and about half also cover people with disabilities under age 65; and
- Most if not all prescription drugs are covered. A variant of this approach involves the use of state “Circuit Breaker” programs that provide property tax relief and related pharmacy assistance programs for needy senior citizens and people with disabilities. This type of pharmacy assistance program helps Medicare beneficiaries below a certain income threshold with the cost of a specified list of drugs related to various serious chronic illnesses and diseases. Private Insurance Options
“The Public/Private Senior Rx Program”
States can also support the development of an array of private insurance options to improve access to pharmaceuticals.
- States could contribute some of their own funds to help make private coverage more affordable.
- As a condition of using state funds, states should encourage private insurers to open these programs to all Medicare enrollees, with those who can afford the coverage paying the full premiums. Lower-income people could receive premium assistance from the state on a sliding-scale basis.
- Private insurance programs should cover all medically necessary pharmaceuticals prescribed by health care providers.
- Catastrophic coverage should be included.
- Co-payments and coinsurance should be used to help control costs and encourage personal responsibility.
- There should be only limited use of deductibles for lower-income people.
- States should leverage their purchasing ability to negotiate prices and stretch their dollars to help as many people as possible.
- States should use their contracting process to encourage the use of disease management, case management, and utilization review programs to improve health and manage costs.
- States should set a positive example by assuring access to pharmaceutical coverage for their own retirees.
- Any approach to a private insurance option for prescription drugs should build in safeguards to reduce the potential for rapidly increasing costs that could occur if only the sickest people enroll.
- These safeguards could include reinsurance and a “defined contribution” approach to the states’ financial outlays.
4. “The Medicaid Best Practices for Managing Chronic Illness and Disabilities Program”
Use Disease Management and Case Management to Improve Health and Control Costs States should use case management, disease management, and utilization review programs to coordinate care, improve health status, and reduce inappropriate care. States should:
- Identify patients who require ongoing and expensive care and develop interventions to improve their health, functional status and independence.
- Promote adherence to best medical practices.
- Encourage health plans and care systems to:
- Conduct patient needs assessments upon enrollment;
- Develop individual, patient-centered care plans; and
- Use case management incorporating evidence-based practice guidelines.
Implementation and Funding Options
To be successful, pharmaceutical coverage initiatives must be actuarially sound. The following options can help guide states with implementation and program funding:
- New initiatives can be phased in, starting with assistance to the neediest residents.
- States can develop baseline data and gauge the progress of their initiatives against such benchmarks.
- As states evaluate their initiatives and gain experience with new strategies, they can redesign and re-calibrate their programs. As noted above, this developmental approach can be used to extend coverage in a series of stages.
- States will need adequate research support and data development to estimate and manage costs.
- Financing options could include both traditional and innovative revenue sources. States could consider the following list:
- General revenues;
- Broadening the tax base;
- Lottery and gaming revenues;
- Tobacco settlements funds;
- Cigarette taxes or other excise taxes;
- Registration and license fees;
- Insurance premium taxes or provider taxes;
- Philanthropic initiatives;
- Medicaid fraud recovery;
- Entertainment taxes; and
- Internet sales tax recovery.
