1. Implications of Part D Medicare Drug Benefit on State Medicaid Programs for the Dual Eligibles Pennsylvania’s Perspective James Hardy Project Manager Pennsylvania Department of Public Welfare

2. Background The Pennsylvania Medical Assistance Program is divided into three parts –Capitated Managed Care Program 1.1 million members in 04-05 12% are dual eligibles –FFS Managed Care Program 500,000 members 17% are dual eligibles –LTC Managed Care Program 80,000 members in nursing homes 90% are dual eligibles

3. Managed Care Background Pennsylvania operates a mandatory managed care program (“HealthChoices”) and a smaller voluntary program –Dual Eligibles are mandated into the HealthChoices Program –Duals (and other others) are disenrolled from managed care after 30 days in a nursing home and moved to FFS In CY 03 dual eligibles represented 12% of the enrollment and 14% of total cost Dual eligible drug costs were 34% of the total drug spend Dual eligible drug costs were 78% of total medical costs

4. Fee For Service Overview (non nursing home, non waiver) In CY 03 Dual eligibles accounted for 17% of the member months and 20% of the medical costs Dual Eligible drugs costs were 44% of total drug spend Dual Eligible drug costs were 80% of total dual eligible medical costs

5. Part D Implications for Managed Care With drugs removed from the benefit, what are the MCOs really managing? –MA becomes a true secondary payer for almost all services –Access to data and ability to influence compliance dramatically reduced –Care Coordination was never easy – now much harder if not impossible The Department is seriously considering carving the duals out of managed care –We are evaluating several other options, especially as it related to the MR membership who have benefited from case management and special needs programs Eliminating the dual eligible drug benefit reduces the potential tax base for our proposed MCO assessment

6. Part D Implications for Fee-For-Service Had to make a decision about dual eligibles and our new EPCCM program – Access Plus –50% of potential targets for DM were duals Decided to carve out of Access Plus –Not clear financial incentives/penalties work because vendor has little control over cost or behavior –Not much direct financial exposure after drugs removed Some concern about potential impact on non drug costs if drug access to duals is restricted Concern about impact on negotiating power if we move to supplemental rebate strategy

7. Conclusions Dual Eligible consumers may be losers in Part D –Lose benefit of established managed care programs/DM –Lose potential benefit of Access Plus –No guarantee that CMS DM pilots will have any short term or long impact to offset loss States ability to control remaining costs further compromised after Part D Pennsylvania comments to CMS on Part D discussed –Need to require PDPs to have care coordination agreements with States –Allowing states to do auto assignment to PDPs of its choosing on a “random” basis