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Health Care reform and Low-Income Medicare Beneficiaries

As we have reported previously, President Obama signed into law Pub.L.111-148, the Patient Protection and Affordability Care Act of 2010 (PPACA), on March 23, 2010, and Pub. L. 111-152, the Health Care and Education Reconciliation Act of 2010 (HCERA), on March 30, 2010.  These two laws will change both the availability of health insurance and how health care is delivered in America.  The laws also include substantial changes for Medicare and Medicaid.


This is the second in a series of Alerts the Center will prepare on provisions of the two new laws.  This Alert focuses on provisions affecting low-income Medicare beneficiaries, including several provisions in the Medicaid portions of the law.  It does not address many new long-term care options available to State Medicaid programs, nor does it address the new federal benefit to pay for long-term care, the Community Living Assistance Services and Support (CLASS) provisions.  These provisions will be addressed in a future Alert.




PPACA 3302.  Improvement in Determination of Medicare Part D Low-Income Benchmark Premium.  This provision requires that the benchmark Part D premium - the amount paid by Medicare on behalf of individuals receiving the low-income subsidy -  be calculated without regard to reductions for rebates or bonus payments received by Medicare Advantage-Prescription Drug plans (MA-PDs) .  The provision addresses the circumstance where MA plans use their extra Medicare payments to reduce their Part D premium for enrollees, which then artifically lowers the overall average (benchmark) amount of all Part D plans.  This in turn results in fewer benchmark plans among free-standing Part D plans and more low-income beneficiaries having to be reassigned each year.  The new process for determining the benchmark should reduce the number of reassignments.  The provision will be effective beginning in plan year 2011.


PPACA 3303.  Voluntary De Minimis Policy for Subsidy Eligible Individuals under Prescription Drug Plans and MA-PDs.  This provision allows the Secretary of Health and Human Services (the Secretary), under procedures she establishes, to permit plans whose premium exceeds the benchmark amount by a de mimimis amount to waive payment of that portion of the Part D premium that is above the benchmark for low-income subsidy eligible individuals.  To the extent that plans choose to waive such increases, the individuals affected would not need to be reassigned to benchmark plans.  The provision also permits the Secretary to auto-enroll low-income individuals into such plans, to the extent that they waive the de minimis premium amount for the individual enrollee.  The provision will be effective beginning in plan year 2011.


PPACA 3304.  Special Rule for Widows and Widowers Regarding Eligibility for Low-Income AssistanceEffective January 1, 2011, an individual whose spouse dies in the middle of a low-income subsidy eligibility period is granted continued eligibility for a full year beyond the date when his/her eligibility would normally cease to be effective.


PPACA 3305.  Improved Information for Subsidy Eligible Individuals Reassigned to Prescription Drug Plans and MA-PD Plans.  Beginning not later than January 1, 2011, the Secretary is directed to provide certain information to individuals who are reassigned to a new drug plan.  The required information concerns formulary differences between the two plans with respect to the individual's drug regimen and a description of the individual's appeal and grievance rights under the law. Advocates believe that the effective date of January 1, 2011 means the provision will apply to the 2011 plan year.


PPACA 3309.  Elimination of Cost-sharing for Certain Dual Eligible Individuals.  This provision, effective no earlier than January 1, 2012, eliminates cost-sharing for Part D drugs for all full benefit dual eligibles – those who receive full Medicaid services and Medicare Part A or B or both – who are receiving home and community based services under several sections of the Medicaid Act.  The provision creates equity in Part D cost-sharing between those in institutions and those getting substantially the same services in the community.


PPACA 3314.  Including Costs Incurred by AIDS Drug Assistance Programs and Indian Health Service in Providing Prescription Drugs toward the Annual Out-of-Pocket Threshold under Part D.   Starting in 2011, prescription drug costs reimbursed by AIDS Drug Assistance Programs (ADAPs) and the Indian Health Service (IHS) will count toward true-out-of-pocket costs when calculating eligibility for catastrophic drug coverage under Part D.  While this provision affects a larger pool of Part D enrollees than those who receive the low-income subsidy, many of the recipients of ADAP and IHS services are individuals with the subsidy; at the point of catastrophic coverage, those receiving the full subsidy no longer have any co-payment.


PPACA 3306.  Funding Outreach and Assistance for Low-Income Programs.  This provision  extends and increases the amounts of additional funding for State Heath Insurance Counseling Programs (SHIPs), Area Agencies on Aging (AAAs) and Aging and Disability Resource Centers (ADRCs) that were included in the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA).  The amounts were $7.5 million each for SHIPs and AAAs and $5 million for ADRCs for fiscal year 2009.  They are increased to $15 million each for SHIPs and AAAs and $10 million for ADRCs for fiscal years 2010 through 2012.  Two-thirds of the money is allocated among the states according to each state's proportion of low-income beneficiaries eligible for but not enrolled in the Medicare Part D low-income subsidy program; the other one-third is allocated based on proportions of Part D-eligible Medicare beneficiaries residing in rural areas.  The amount allocated based on low-income population must be spent to improve enrollment in the Part D low-income subsidy and the Medicare Savings Programs.  In addition to these monies, the provision extends funding for the National Center for Benefits and Outreach Enrollment at the rate of $5 million for fiscal years 2010 and 2012.  The Secretary is given authority to ask grantees to conduct outreach aimed at preventing disease and promoting wellness.




PPACA 2601.  5 Year Period for Demonstrations.  This provision authorizes approval for five years of demonstration programs for individuals dually eligible for Medicare and Medicaid  (including programs that also serve non-dual eligibles) under which certain requirements of Medicaid are waived.  The Secretary can extend the demonstration for an additional five years unless she determines that provisions of the waiver have not been met or that the program is not cost-effective. The provision lengthens the three year approval period common to most demonstrations and waivers under current law.  The provision appears to apply both to demonstrations that provide Medicare and Medicaid services under a single unified system, such as occurs in Minnesota and Massachusetts, and to Medicaid-only waivers to provide home and community based services, such as occur in most if not all states.


PPACA 2602.  Providing Federal Coverage and Payment Coordination for Dual Eligible Beneficiaries.  The Secretary establishes a Federal Coordinated Health Care Office, the director of which reports to the Administrator of CMS.  The purposes are to integrate benefits under Medicare and Medicaid and to improve coordination between the Federal Government and the States on behalf of individuals dually eligible for Medicare and Medicaid.  The Office has eight statutory goals:  providing dual eligibles full access to all benefits of both programs; simplifying access  to services; improving quality; eliminating regulatory conflicts; improving continuity of care and safe transitions;  increasing duals' understanding of the programs; eliminating cost-shifting between the  two programs and among providers; and improving performance of providers.  Specific responsibilities are: providing States, Medicare Advantage Plans for Special Needs Individuals, and others with the tools to develop programs that align Medicare and Medicaid benefits; supporting State efforts to align acute and long-term care services for duals with Medicare service; supporting coordination of contracting and oversight with respect to Medicare and Medicaid to promote the statutory goals; consulting  and coordinating with the Medicare Payment Advisory Commission (MedPac); and  studying drug coverage for new full benefit dual eligibles.  The Secretary is directed to report annually to Congress on recommendations for legislation to improve care for dual eligibles.


PPACA 3205  Extension of Authority for Specialized MA Plans for Special Needs Individuals (SNPs).   While this provision does not apply exclusively to those dually eligible for Medicare and Medicaid, about 75% of all SNP enrollees are in SNPs for dual eligibles and it is believed that SNPs for people in institutions and SNPs for people with chronic diseases also enroll dual eligibles. This provision extends the authority of SNPs to restrict their enrollment to special needs individuals through December 31, 2013.  Beginning with plan year 2011, the Secretary has authority to pay frailty adjusters (increased payments based on health status) to SNPs for those dually eligible for Medicare and Medicaid (D-SNPs), if the plan has a fully capitated contract with a State Medicaid agency to provide all Medicaid services,  including  long-term care services, and if the plan has similar average levels of frailty as in the Program of All Inclusive Care for the Elderly (PACE) but only to the extent necessary to reflect the cost of treating high concentrations of frail individuals.  D-SNPs that do not have a contract with a State Medicaid agency are permitted to continue to operate through December 31, 2012, but cannot expand their service area.  By January 1, 2013, the Secretary must establish procedures for the transition of individuals who do not meet the definition of a special  needs individual for which the plan was created out of the SNPs and into Original Medicare or another Medicare Advantage plan .  These procedures will not apply to individuals in a D-SNP when they lose their Medicaid eligibility.  For plan year 2012 and subsequent years, SNPs must be approved by the National Committee for Quality Assurance (NCQA).  Individuals enrolling in a SNP for people with chronic conditions (C-SNP) beginning in 2011 will be given a risk score that reflects the known risk  profile of similar individuals,  rather than the risk  score given to new  enrollees of other Medicare Advantage  plans.


PPACA 3313.  Office of the Inspector General Studies and Reports.  The Inspector General is directed to undertake two studies, one related to the availability through Part D plans of drugs commonly used by dual eligibles, and the other related to the comparative costs of drugs under Part D and under Medicaid.  The first study is to be conducted annually with a report to Congress no later than July 1 of each year starting with 2011.  The second report is due to Congress not later than October 1, 2011.




PPACA 2001.  Medicaid Coverage for the Lowest Income PopulationsBeginning April 1, 2010, states have the option to expand coverage to childless adults, except for those with Medicare Part A and/or Part B, with incomes up to 133% of federal poverty limits.  Beginning January 1, 2014, States are required to cover such individuals by offering at least the minimum essential coverage required under the Medicaid Act.  While it is unfortunate that this provision does not apply to individuals with Medicare, it will, nonetheless, be very helpful to many people with disabilities who must still wait two years after their disability benefits begin before being entitled to Medicare coverage.  Federal funding for those newly eligible under this provision is 100% for the first three years of the mandatory program.  There is no increased funding for states that voluntarily extend coverage before 2014.

PPACA 2002.  Income Eligibility Determined Using Modified Gross Income.  Starting in 2014, states must make Medicaid income eligibility determinations using modified gross income without the disregards applied under current income determination methods.  Also beginning in 2014, no asset test will be applied to most Medicaid applicants.  These two changes will make Medicaid procedures conform more closely to those that are to be used for subsidies in the new health insurance Exchange.  The use of modified gross income and the elimination of the asset test does not apply to most people who are 65 or older or disabled, including those receiving Medical Assistance to pay for Medicare cost-sharing through the Medicare Savings Programs and those who receive nursing facility services or services in the community available to those who qualify for nursing facility services. The discrepancy in methodologies to determine eligibility between the Exchange, most Medicaid recipients and older people or people with disabilities entitled to or enrolled in Medicare, will create complexities for dual eligibles at the point they become dually eligible.  Recognizing this, the Congress included a provision that allows the Secretary to waive the provisions of this section, otherwise unwaivable, "to the extent necessary to permit a State to coordinate eligibility requirements for dual eligible individuals. . . ."  ( 2002(a)). Regulations will be important in addressing these matters.


PPACA 2502.  Elimination of Exclusion of Coverage of Certain Drugs.  Starting in 2014, Medicaid programs will no longer be able to exclude smoking cessation agents, barbiturates, and benzodiazepines from coverage under Medicaid.  Because Part D covered drugs are defined generally as those drugs that are covered under Medicaid, this new provision will result in a small expansion of Part D coverage.  Note that Part D has covered smoking cessation drugs since its enactment.  Starting in 2013, Part D will cover benzodiazepines and will cover barbiturates used in the treatment of epilepsy, cancer, or chronic mental disorders.




The provisions affecting low-income beneficiaries for the most part strengthen protections for them and reflect efforts by low-income Medicare beneficiary advocates over the past several years.  Advocates should continue to be actively engaged regarding these issues as regulations and other forms of guidance are developed.


For more information, contact attorney Patricia Nemore (pnemore @ medicare in the Center for Medicare Advocacy's Washington, DC office at (202) 293-5760.


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