1 Maryland SPAP Premium Subsidies to MedicareRx Plans National Association of Comprehensive Health Insurance Plans October 16, 2008 Richard Popper Executive Director Maryland Health Insurance Plan

2 What is an SPAP? State Pharmaceutical Assistance Program Established in certain states, starting in 1970’s to provide drug coverage to limited income Medicare recipients or other non- Medicare uninsured lacking Rx coverage Serve populations similar to risk pools – self employed/small business retirees, widows and divorcees who lack employer-sponsored retiree Rx coverage Serve individuals with income/resources that exceed standards for dual Medicaid/Medicare eligibility (which provides low or no-cost comprehensive Rx coverage) Largely state general fund subsidized, and often managed by state Medicaid unit Some state enrollment large – PA, NY, NJ each have appx. 100,000 members

3 SPAPs & Implementation of Medicare Part D 24 state SPAPs were induced to enroll members into MedicareRx in 2006, to shift state costs to federal government SPAPs and Medicaid instrumental in MedicareRx early enrollment success due to auto-assigment SPAPs did not close after Part D due to disparities between State programs and Medicare: –Formulary limits (no Benzodiazephine & barbiturates) and varieties among plans –MedicareRx copays higher than expiring SPAP, especially for brand drugs ($20 vrs $94 copay) –MedicareRx monthly premiums often higher ($10 vrs. $104) –Part D coverage gap (“donut hole”) of up to $3,454 in 2009 once annual drug costs exceed $2,700 –Numerous, numerous Part D plan (PDP) options in states (97 in Maryland), vs. expiring single monopoly state plan –Federal low income subsidy (LIS-”Extra Help”) has low eligibility threshold:150% of poverty ($15,600 income) & $11,900 cash resources

4 Medicare Part D: Costs and Choices Rise with Income Above 150% of poverty Standard Medicare Drug Program (average costs) Below 150% of poverty + $11,990 in assets Costs with Full Federal Extra Help – Low Income Subsidy Costs with Maryland SPDAP Assistance Monthly Premium$33$0Average $8 per month ($33-25 = $8). Optional DeductibleUp to $275$0Up to $265 Co-Insurance for Drug Usage up to $2,510 Average of 25% of the drug costs up to $2,510 $025% of the drug costs up to $2,400 Direct out of pocket Costs for costs Between $2,510 - $5,726 Up to $3,216$1-$3Up to $2,116 ($1,200 subsidy) Direct Costs for Drug Usage Over $5,726 5% of the costs above $5,726 Plan Options9725

5 SPAPs Reconfigured Under MedicareRx SPAPs now provide: wrap-around subsidies/benefits to Part D Education & enrollment assistance in choosing option State copay/coinsurance subsidies is only funding (other than independent charities or family contrib.) that counts toward coverage gap “True out of pocket costs” (TrOOP) to help member reach “other shore” of coverage gap, into Part D catastrophic coverage –Employer subsidies don’t –Ryan White funding doesn’t –Pharmaceutical industry charities don’t

6 Federal Requirements of SPAPs Can’t be directly funded by MedicareRx plans Can’t discriminate in coordinating with preferred or subset of MedicareRx plan options in state Must coordinate state subsidies with all MedicareRx plans which SPAP members choose to enroll Some exceptions where state is individual’s authorized representative, or state issues an RFP solicitation to PDPs with “reasonable” and “legitimate” purpose for coordinating care of members with a subset of PDPs

7 SPAP Administrative Options CMS guidelines for SPAPs in Part D “Coordination of Benefits” guidance 1) Hire a PBM for point of sale 3 rd party payor of copays, coinsurance or non- covered drugs Advantage - SPAP has some control over subsidy - PBM can coordinate with all PDPs - Can subsidize all phases of MedicareRx ConLots of payment reconciliation and reimbursement with PDPs 2) Enter into lump sum funding arrangements directly with MedicareRx plans willing to negotiate AdvantagePDP responsible for administration of state subsidy ConNot all PDPs required to administer wrap around subsidies 3) Subsidize MedicareRx premiums Con Must coordinate with ALL MedicareRx plans Does not assist members with significant drug costs

8 Maryland Senior Prescription Drug Assistance Program (SPDAP) Currently Assists 26,000 Marylanders with income below 300% fpl, who are ineligible for 100% LIS, by reducing their Medicare Rx premium by up to $25 per month, under any Medicare Prescription Drug Plan or Medicare Advantage New $1,200 Coverage Gap (donut hole) subsidy in

9 Maryland SPDAP “Landscape” In Drug Plan sponsors, offering 47 options In 2007 – 24 Drug Plan sponsors, offering 54 options In Drug Plan sponsors, offering 97 options Approximately 388 different MedicareRx plan payment variations, including standard premiums, and 25%, 50%, 75% LIS variation Only 13% of Maryland SPAP participants are eligibe for partial federal subsidies ( % fpl)

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13 Approximately Half of those in Coverage Gap have costs under $1,200

MEDICARE PART D YEARLY COSTS FOR AN ACTUAL SPDAP MEMBER – Plan A (Less expensive than plan B $1,846) ATENOLOL TAB 50MG HYDROCHLOROTHIAZIDE TAB 25MG LORAZEPAM TAB 0.5MG Lotrel CAP 10-20mg Lotrel CAP 5-20mg LOVASTATIN TAB 40MG SPIRONOLACTONE TAB 50MG

15 Impact of $1,200 Coverage Gap Subsidy

16 Contract Administrators Key Maryland directly contracted with Affiliated Computer Services, Inc (ACS) to implement and run SPDAP, Oct 05 to Dec 07. Over 50,000 calls and 600,000 subsidy payments made Competitive solicitation awarded contract to Pool Administrators, Inc (PAI), effective Jan 08. PAI developed proprietary SQL payment application and is assisting in coverage gap subsidy implementation. Key to successful subsidy coordination of payments for 25,000 members among 97 MedicareRx options is CMS COB interface, where monthy file exchange thru CMS tells SPAP what PDP option each member is in, and also informs Rx plans of SPAP eligibility

17 SPDAP Outreach Efforts SPDAP has held 200 community enrollment & education events throughout Maryland since Sept. 2005, attended by 8,000 individuals (35% of program participants). Conducted by SPDAP outreach contractor gkv Reach, and MHIP staff. Approximately 68,000 calls have been answered or made by program between September 05 thru August coverage gap events throughout Maryland are planned for October-December 2008