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Filling the Holes in Part D: SPAPs to the Rescue?

Marc Steinberg, Families USAHealth Action 2005 * January 27, 2005

Msteinberg@familiesusa.org202-628-3030

www.familiesusa.org

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State Pharmaceutical Assistance Programs (SPAPs) 38 states: 22 benefit programs, 16

discount programs 1.3 million enrollees in benefit

programs: 54% in 3 states: NJ, NY, PA

Most cover seniors only; a few cover seniors & disabled or more

Some benefit caps Few have asset test for eligibility

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SPAP Income Eligibility, 2002source: Trail, Fox, Cantor, Silberberg, & Crystal, 2004

0

50

100

150

200

250

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500

MA RI NY NJ NV IL CT VT DE MI NC MO PA ME SC IN KS FL MN MD WY

State

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f P

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rty

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Why SPAPs Matter for Medicare Part D SPAP beneficiaries are major targets of

Part D Significant savings for SPAPs likely Can identify low-income beneficiaries, but

asset test is a problem SPAP help can fill the donut hole and

other gaps in coverage Counts towards a beneficiary’s “TROOP”

(true out-of-pocket cost)

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Gaps SPAPs could fill Premiums Deductible Co-insurance Co-payments Non-formulary drugs Non-network purchases

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Choices for States

Wrap around Part D with existing or new SPAP? Could be major help for beneficiaries Costs are uncertain (e.g. non-

formulary drugs) Covering additional drugs is

administratively complex

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Other Choices for States Continue existing SPAP with minimal

changes As secondary payer? Similar to a

wraparound As alternative plan? - not likely a long-term

solution Abolish SPAP

Politically “safe” in some states Lost opportunity

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Building a Wraparound SPAP: Coordination Problems Filling gaps means coordination of

benefits; harder with multiple plans States cannot:

discriminate among plans Auto-enroll SPAP members in preferred plan Steer SPAP members to preferred plan

States can: Act as an authorized representative (per

state law) and auto-enroll at random Compare plans for members

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Building a Wraparound SPAP: Additional Problems Who will be covered? Different federal

subsidy levels mean different benefits Appeals:

SPAP could have interest in appealing denial of coverage

SPAP can appeal if it is an authorized representative per state law

Multi-state regions add complexity

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Questions to Ask If state has an SPAP:

Will program continue in 2006? What savings are projected Is wraparound an option? If so, what

type? Who and what are covered? What role in low-income subsidy

determination?

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Questions to Ask If state does not have an SPAP:

Can state create one in coming years Who and what could be covered?

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Summary SPAPs have potential to ease burdens

on low-income Medicare beneficiaries Can make Part D a more complete

benefit Substantial administrative complexity

is likely Few states have made decisions yet

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Appendix: Benefit Levels

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Low-Income Subsidy, “Tier 1” Income: under

135% FPL Assets: below

$6,000/individual, $9,000/couple

Asset limits increase with consumer price index

Premium: full subsidy (average for region)

Copays: $2 generics/ $5 non-generics

No copayments when total costs exceed $5,100

Copays and catastrophic limit increase with Medicare drug inflation

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Low-Income Subsidy, “Tier 2” Income:

135%-150% FPL or Under 135% and

over assets Assets:

Under $10,000/individual or $20,000/couple

Assets increase w/ CPI

Premium: sliding scale of $0-$35/month (increases annually)

$50 annual deductible 15% co-insurance up to

$5,100 drug costs $2/$5 copays after

drug costs reach $5,100/year

Copays and catastrophic limit increase with Medicare drug inflation

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Low-Income Subsidy for Full Dual Eligibles (Part 1) Institutionalized

Premium: full subsidy (average for region) No copayments

Income up to 100% FPL Premium: full subsidy (average for region) Copays: $1/generic & $3/non-generic No Copays after total drug costs reach

$5,100/year Copays indexed to consumer price index Catastrophic limit increases with Medicare

drug inflation

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Low Income Subsidy for Full Dual Eligibles (Part 2) Income over 100% FPL

Premium: full subsidy (average for region)

Copays: $2/generic & $3/non-generic No Copays after total drug costs reach

$5,100/year Co-pays indexed to Medicare drug

spending Catastrophic limit increases with

Medicare drug inflation

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Medicare Part D Basic Benefit(all dollar amounts are indexed to Medicare drug costs)

Coverage Drug Costs

Part D Pays

You Pay

Tot. Costs (TROOP)

Deductible $0-250

0% 100% $250

Initial Benefit

$251-$2250

75% 25% $750

Donut Hole

$2251-$5100

0% 100% $3600

Catastrophic

Over $5100

95% 5% $3600 plus 5% of remainder