IMPACT OF THE MEDICARE ACT OF 2003
ON STATE PHARMACEUTICAL PROGRAMS


While waiting for passage of a Medicare prescription drug benefit, over thirty states created their own programs for older people, people with disabilities, or both. In many instances existing state prescription drug plans are more generous and serve more people than the drug benefit scheduled to begin in 2006 under the Medicare Act signed into law on December 8, 2003. As result, there is concern that people in some states will have less drug coverage under the new Medicare program than under their current state plan.

The Medicare Act requires state plans to coordinate with each individual prescription drug plan (PDP) and each Medicare Advantage plan (HMO/PPO) offering drug benefits in the state. According to the new law, Medicare is primary, meaning Medicare pays for prescriptions first before other drug coverage. The state plan cannot do anything that interferes with a drug planís "tools for effective cost management." For example, if a PDP has a tiered co-payment to encourage people to use generic drugs, it appears the state plan could not pick up the full co-payment for brand name drugs as such payments (known as a "wrap around") would interfere with one of the PDPís cost management tools.

In a state with several PDPís, HMOs, and PPOs, it seems the state will to have develop a system, perhaps with many structures rather than one statewide plan, in order to coordinate appropriately with each Medicare plan offered in the state. This system may well need to change from year to year as the Medicare plans change. It is also unclear whether state plans will be able to cover drugs not on the Medicare PDPís formulary. Some states may choose to eliminate their drug plans once their residents have the new Medicare option, thereby further reducing assistance to people who donít qualify for low-income assistance under the Medicare program - and to all those who receive more under their state plan than will be available from Medicare.

In order to clarify the likely impact in a given state, one has to review the relevant state law as well as the Medicare statute. In Connecticut, for example, the stateís pharmaceutical program, ConnPACE, provides payment only if no other plan of insurance or assistance is available to an eligible person. Connecticut has not yet decided whether it will require eligible Medicare beneficiaries to sign-up for a Medicare drug plan if one is "available" to them, or to what extent ConnPACE coverage will then be allowed. The state also has yet to decide whether ConnPACE will pay any premiums, deductibles or co-payments applicable under the Medicare drug plan or if it will be able to cover the cost of drugs not on a Medicare prescription planís formulary. Following the precedent set with Medicare+Choice, it is likely that ConnPACE will assist with the cost of drugs during the "doughnut hole" in the Medicare drug benefit. It is still uncertain, however, if the new Medicare law allows those payments to count toward meeting the "doughnutís"out-of-pocket threshold, and for what drugs, if any, payment would count.


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