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OLR Research Report


February 10, 2009

 

2009-R-0097

MEDICARE SAVINGS PROGRAM AND MEDICARE PART D DRUG ASSISTANCE

By: Robin K. Cohen, Principal Analyst

Neil Ayers, Principal Budget Analyst

You asked for an explanation of the Medicare Savings Program (MSP) and its relationship with the ConnPACE and Medicare Part D programs. You also wanted an analysis, including the fiscal impact, of PHBs 6146 and 5056, which would make more residents eligible for the MSP.

SUMMARY

The MSP is a Medicaid-funded program that helps Medicare recipients pay their cost sharing obligations. It consists of three separate components, with applicants at the lowest income levels qualifying for the most benefits. The income limits range between 100% and 135% of the federal poverty level (FPL), and two of the three components include an asset test.

Because Medicare now provides prescription drug assistance for all Medicare Part A enrollees, the state's ConnPACE program essentially plays a “wrap-around” role for Medicare recipients who are eligible for it, covering things like the Part D plan premiums and deductibles. The ConnPACE income limit is about 240% of the FPL; it has no asset limit.

Besides ConnPACE, the federal Low-Income Subsidy (LIS) program offers Part D participants with very low incomes help paying their cost sharing. LIS participants pay lower cost sharing than those required under ConnPACE. People who are eligible for the MSP automatically qualify for the LIS.

PHBs 6146 and 5056 require the Department of Social Services (DSS) to equalize the financial eligibility rules for MSP and ConnPACE, thus enabling more individuals to receive MSP and, consequently, the LIS. They are similar to a 2008 bill whose fiscal impact was estimated to be about a $3 million cost annually. This is because the costs of allowing more people to qualify for MSP would not be fully offset by the savings the state would realize by eliminating the ConnPACE costs for the new MSP individuals, which would be paid by the LIS.

MEDICARE SAVINGS PROGRAM (MSP)

The federal MSP consists of three separate components: the Qualified Medicare Beneficiary (QMB), the Specified Low-Income Beneficiary (SLMB), and the Qualified Individual (QI). To qualify, individuals must be enrolled in Medicare Part A. Program participants get help from the state's Medicaid program with their Medicare cost sharing, including premiums and deductibles. The policy rationale for MSP is that if the state Medicaid program picks up these costs, the Medicare recipient will be less likely to require full Medicaid coverage for things that Medicare does not pay for.

Eligibility and Coverage

Table 1 lists each MSP component, its federally prescribed financial eligibility criteria, the coverage in Connecticut, and the value of that coverage.

Table 1: Medicare Savings Programs

Programs

Financial Eligibility in 2009 [1] (for single person)

Cost Sharing Paid by DSS

Value of Cost Sharing in 2009

Qualified Medicare Beneficiary (QMB)

Income: 100% of federal poverty level (FPL) ($10,830 per year); Assets: less than $4,000

Medicare Part A (hospital and limited skilled nursing facility) premiums, deductibles, and coinsurance;

Part B (physician and other outpatient services) premiums and deductibles

Part A premium: $443 per month

Part A deductible: various, including $1,068 for first 60 days of inpatient hospitalization)

Part B premium: Various, depending on income; $96.40 per month for income up to $85,000

Part B deductible: $135

Specified Low-Income Beneficiaries (SLMB)

Income: 100-120% of FPL ($10,830 to $12,996 yearly)

Assets: less than $4,000

Medicare Part B premiums

See above

Qualified Individual (QI)[2]

Income: 120-135% of FPL ($12,996 to $14,621 yearly)

Assets: No test

Medicare Part B premium

See above

[1] The FPL rises each year.

[2] States receive a limited amount of federal money from which they pay on a first-come, first-served basis.

Currently, when determining income eligibility for any of the MSP programs, DSS disregards the first $278 of unearned income (indexed annually, effective January 1). (It also disregards some earned income.) In addition, DSS disregards the Social Security cost-of-living adjustment for January through March. (This is to comply with a federal requirement since the federal poverty levels are not adjusted on January 1. It ensures that people whose income is at the limit do not lose their eligibility solely due to the COLA.)

Federal law allows states to recover benefits paid from the estates of QMB recipients, and Connecticut does this. States that do estate recovery may not require individuals who may be eligible for the QMB program to apply for it.

MEDICARE PART D, CONNPACE, AND LOW-INCOME SUBSIDY (LIS)

Since 2004, Medicare Part D has helped beneficiaries pay for their prescriptions. The state-funded ConnPACE program historically provided this assistance to elderly and disabled individuals with relatively low incomes. Now, that program provides “wrap-around” coverage for things like the Part D plan's premiums and the deductible and coverage gap (“donut hole”) periods, during which no federal assistance is available. Individuals with very low incomes can get even more help through the federally funded low-income subsidy (LIS) program.

ConnPACE Eligibility

For Medicare-eligible individuals, the ConnPACE program provides “wrap-around” coverage for Medicare Part D. Essentially, ConnPACE pays the Part D deductible ($295 in 2009) and for drugs not included on the Part D plan's formulary. ConnPACE beneficiaries pay a $16.25 co-pay per prescription during the deductible period, and then no more than $16.25 after that (many plans' co-pays are lower). They also pay a $30 annual registration fee.

To qualify for ConnPACE in 2009, income is limited to $25,100 for single individuals and $33,800 for married couples. When calculating an applicant's available income, DSS deducts Medicare Part B premiums; there is no asset test.

Low-Income Subsidy (LIS)

People who have incomes up to 150% of the FPL are also eligible for help paying their Part D premiums, co-payments, and drug costs during the “donut hole.” The federal government provides a full subsidy to people with income up to 135% of the FPL and a partial subsidy for those with incomes up to 150% of the FPL. People who qualify for any MSP component are automatically eligible for the LIS.

In 2009, LIS beneficiaries pay no Part D plan premiums or deductibles, and pay $1.10 or $2.40 for generic drugs and $3.20 or $6.00 for brand-name drugs, depending on their income. If they live in a nursing home, they pay no co-payments.

If individuals apply for the LIS through their state's Medicaid program, Medicaid must also screen for eligibility for the MSP. The Social Security Administration (SSA) actually administers the LIS, but it does not screen for MSP eligibility. The federal Medicaid agency shares the SSA information on who qualifies for LIS with state Medicaid agencies to help states screen individuals for full Medicaid or MSP benefits.

PHBs 6146 and 5056

PHBs 6146 and 5056 require DSS to increase the amount of income it disregards when determining an individual's eligibility for the MSP. The disregard amount must effectively move the MSP income limit up to the ConnPACE limits. By equalizing the income levels, the bill enables more people to qualify for the MSP which, consequently, automatically makes them eligible for the Medicare Part D LIS.

Currently, DSS disregards $278 from the MSP applicant's unearned income, the net of which is compared to the MSP income limit. If net income is less, the applicant qualifies. Under the bill, DSS would have to disregard a much higher amount of income.

Federal law requires states to treat income and assets consistently in each of the MSP components. This means that any new income disregard used to raise eligibility to the ConnPACE limits must be the same for all three components. To accomplish this, DSS would apply an “all income” disregard equivalent to roughly 107% of the FPL (for a single person), which would raise the MSP income eligibility limits as indicated in Table 2.

Table 2: New MSP Income Limits (Single Applicants)

Under PHBs 6146 and 5056

MSP Program

Current Income Limit

Limit Under PHB 6146

QMB

100% of FPL

207% of FPL

SLMB

100%-120% of FPL

207% to 227% of FPL

QI

120%-135% of FPL

227% to 242% of FPL

These new income limits would ensure that anyone who is eligible for ConnPACE (where the effective income limit is about 242% of the FPL for a single person, after factoring in Part B premiums) would qualify for MSP.

 

Fiscal Impact

The proposed bills are similar to sHB 5796 from the 2008 legislative session. Their fiscal impact would be similar to that reported on sHB 5796, subject to updated caseload information and the possible ramifications of the federal stimulus package. The following is the Office of Fiscal Analysis fiscal note on the 2008 bill.

The bill requires DSS to increase the income disregards for MSP to income limits in effect for the ConnPACE program. This change will allow certain people currently eligible for ConnPACE (a fully state-funded program) to access pharmaceuticals under the Low Income Subsidy portion of the federal Medicare Part D program.

DSS currently pays the monthly Medicare Part B premiums, co-pays and deductibles for most of the clients in the MSP. These costs are funded through a combination of Medicaid (50% federal/50% state) and a federal block grant under the Additional Low-Income Medicare Beneficiary (ALMB) program. It is anticipated that through an increase in the income disregard (and a related elimination of asset requirements under the MSP that is assumed to be mandated by the federal government), enrollment in the MSP may increase by 39,000 annually. Through a full utilization of the ALMB block grant and the federal share under Medicaid, adding these clients will result in net increased programmatic costs to the state of $76 million. However, the state currently funds these Part B costs through a federal revenue offset. As such, these costs would be reflected as a reduction in federal revenue of $38 million.

This revenue loss will be offset by the elimination of the ConnPACE costs for up to 20,700 clients who may choose to move to the MSP. The ConnPACE savings is estimated to be $35 million annually. Therefore, it is estimated that the eligibility changes in this bill, by shifting current state-only costs to a combination of federal and state funds, will have a net state cost of approximately $3 million annually.

DSS may incur additional administrative expenses related to the initial transfer of people from the ConnPACE program to the MSP. It is anticipated that the ongoing eligibility process after the initial transfer can be handled within the eligibility resources currently dedicated to the ConnPACE program.

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