1. Medicare Update Presented by Tricia Neuman, Sc.D. Vice President, Henry J. Kaiser Family Foundation for Grantmakers in Health November 4, 2004

2. The Medicare Population (selected characteristics) Percent of total Medicare population: SOURCE: Medicare Current Beneficiary Survey, 1997-2000; Income data based on CBO letter to Sen. Nickels, November 2003. Exhibit 1 Lack Drug Coverage (full or part-year) Low-Income (<150% FPL) Fair/Poor Health Rural Cognitive Impairment Under-65 Disabled Nursing Home 43% Full Year Part-Year

3. Medicare Prescription Drug Benefit Overview Beginning in 2006, beneficiaries have choice of: –Fee-for-service Medicare, with access to private drug-only plans (PDPs) –Medicare Advantage (MA) plans for Medicare benefits and Rx drugs New plans provide “standard” prescription drug benefit or its actuarial equivalent –Plans have flexibility to determine which drugs are covered and cost- sharing requirements, subject to certain constraints Premium and cost-sharing subsidies for low-income beneficiaries with incomes up to 150% poverty ($13,965/single; $18,735/couple) and modest assets Medicaid prescription drug coverage terminates for Medicare beneficiaries December 31, 2005 Exhibit 2

4. Standard Medicare Part D Drug Benefit, 2006 + ~$420 in annual premiums $250 Deductible $2,250 in total drug costs $5,100 in total drug costs 25% 5% $2850 Gap: Beneficiary Pays 100% SOURCE: Kaiser Family Foundation analysis of Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Medicare Pays 75% Medicare Pays 95% Exhibit 3 No Coverage Catastrophic Coverage Partial Coverage up to Limit Beneficiary Out-of-Pocket Spending

5. Many Questions Who will sponsor new private drug-only plans, where, and for how long? What will Medicare prescription drug benefit packages look like, which drugs will be covered, and how much will monthly premiums be? Will beneficiaries sign up for Part D? Low-income subsidies? Can the new benefit be implemented -- without major glitches? Exhibit 4

6. October 15, 2005 CMS disseminates information comparing Part D coverage to beneficiaries via mail and 1-800- MEDICARE December 31, 2005 Medicare discount card program ends Medicaid Rx coverage ends for “full benefit” dual eligibles October 15, 2005 Secretary notifies states of per capita drug payments for 2006 (“clawback” for dual eligibles) November 15, 2005- May 15, 2006 Annual coordinated election period for 2006 Part D for all beneficiaries November 15-December 31, 2004 Annual coordinated election period for 2005 discount card program January 1, 2005 CMS announces PDP & MA regions CMS releases financing & solvency requirements for plans February 18, 2005 CMS publishes risk-adjustment methodology for 2006 payment rates June 6, 2005 PDP & MA-PD plan bids submitted Early 2005 CMS publishes final rules for Medicare drug benefit and MA program June 31, 2005 CMS “pre-qualifies” bidders for eligible fallback plans starting in 2006 July 1, 2005 States begin accepting applications for low- income subsidies September 2005 CMS awards bids to PDP and MA-PD plans July 1, 2005 CMS establishes procedures for coordination between Part D plans and state pharmacy assistance programs and other insurers January 1, 2006 Part D coverage begins for all beneficiaries enrolled in PDP or MA-PD Low-income subsidies for Part D coverage begin Retiree drug subsidy program begins Secretary implements billing and benefit coordination for determining beneficiaries’ true out- of-pocket (TrOOP) costs States begin making monthly “clawback” payments to federal government for dual eligibles Implementation Challenges: Now – January 2006 Exhibit 5

7. Challenges for Beneficiaries Deciding whether to enroll in Part D in 2006 (financial penalties for delayed enrollment) -Or maintaining other coverage, such as retiree health benefits Enrolling in low-income subsidy program, if eligible -SSA or Medicaid office -Must apply each year Comparing plans and deciding which to join -Variations in premiums, cost-sharing and formularies Coordinating Part D with other sources of drug coverage -State pharmacy assistance programs, employer coverage, etc. Tracking total and out-of-pocket Rx costs -Important due to benefit gap Exhibit 6

8. Decisions for Medicare Beneficiaries, 2006 Traditional Medicare No Part D coverage Part D Prescription Drug Plan Medicare Advantage HMO (local) PPO (regional) Private Fee- for-Service Enroll in Part D Plan Apply for Low-Income Subsidy Medicaid Office Social Security Office Meet Income and Asset Test? If yes, qualify for: Dual Eligibles Below 100% FPL: No premium or deductible, $1/generic Rx, $3/brand name Rx, pay nothing after $5,100 in Rx costs Below 135% FPL: Subsidy for premium, no deductible, $2/generic Rx, $5/brand name Rx, pay nothing after $5,100 in Rx costs Below 150% FPL: Subsidy for premium on sliding scale, $50 deductible, 15% coinsurance to $5,100 in Rx costs, $2/generic Rx, $5/brand name Rx after $5,100 Exhibit 7

9. Favorable Don’t Know/Refused Given what you know about it, in general, do you have a favorable or unfavorable impression of the new Medicare law? Unfavorable Medicare Beneficiaries’ Impressions of the Drug Law Source: Kaiser Family Foundation/Harvard School of Public Health Views of the New Medicare Drug Law: A Survey of People on Medicare (conducted June 16-July 21, 2004) Exhibit 8

10. Opportunities for Grantmakers Help low-income beneficiaries get financial assistance Develop easy-to-understand public education materials targeted to local area Support local organizations that provide beneficiary education Track implementation at local level Help educate pharmacists and physicians Exhibit 9

11. Medicaid Update Presented by Andy Schneider Medicaid Policy, LLC for Grantmakers in Health November 4, 2004

12. Context: State Fiscal Pressures Average Medicaid spending growth 9.5% in 2004 Growth driven by increased enrollment, drug costs, and overall health care costs State revenue growth 3.4% in 2004 HMA survey: All states plan at least one new cost containment strategy in 2005: -Controlling prescription drug costs -Reducing/freezing provider payments -Reducing eligibility, including reversing eligibility simplifications -Restricting benefits (acute and long-term care) -Increasing copayments -Implementing disease management programs Exhibit 1

13. Outreach and Enrollment In 2002, 6.2 million low-income children were eligible for Medicaid (3.4 million) or SCHIP (2.8 million) but not enrolled Outreach efforts plus procedural simplifications demonstrably increase enrollment Center on Budget survey found that between April 2003 and July 2004 nearly half of states imposed enrollment barriers in Medicaid or SCHIP -16 increased premiums -8 reinstated procedural barriers (e.g., more frequent certification) -8 froze enrollment Some states have raised eligibility standards and streamlined enrollment (e.g., IL) Exhibit 2

14. Section 1115 Waivers Section 1115 waivers allow federal matching funds when regular Medicaid rules are not followed (e.g., higher cost- sharing, no choice of MCOs) or when populations can’t otherwise be covered (e.g., childless adults) Waivers must be budget-neutral to federal government over 5- year term (e.g., federal government will spend no more than in absence of waiver) Some recent waivers finance eligibility expansions with shallow benefits through reductions in regular benefits for current eligibles (Utah) Some recent waivers contain no eligibility expansions, just reductions benefits for current eligibles (Washington) Exhibit 3

15. MMA Implementation The implementation of Part D on January 1, 2006 will bring two fundamental changes to Medicaid and the 6 million dual eligibles On that day, the federal government will no longer match the cost of Medicaid prescription drug coverage for dual eligibles By that day, over 6 million dual eligibles will have to be enrolled in a Medicare Part D plan or they will lose prescription drug coverage That month, states will be required to begin making monthly “clawback” payments to the Medicare Trust Fund to help finance the new Part D Exhibit 4

16. Block Grant Medicaid is an entitlement to states and to low-income individuals: The federal government will share in the costs of covered services for eligible individuals Continuing interest at the federal level in limiting the federal government’s financial exposure under Medicaid (e.g., long- term care, HIV epidemic) Interest on the part of some governors (e.g., FL, NH) in agreeing to limit federal government’s financial exposure in exchange for broad programmatic flexibility Implications of Medicaid block grant over time for: -Safety net providers -State and local governments -Quality of care for low-income populations -Racial and ethnic health disparities Exhibit 5

17. Role for State and Local Foundations Fund outreach and enrollment efforts -Brandywine Health and Wellness Foundation (Chester County enrollment) -Michael and Susan Dell Foundation (insure-a-kid school outreach) -Hartford Foundation (HUSKY outreach workers) Commission studies on proposed 1115 waivers and block grant implications -Connecticut Health Foundation -New Hampshire Endowment -Winter Park Health Foundation Fund stakeholder meetings and website for development of section 1115 waiver -California Endowment (www.medi-calredesign.org)www.medi-calredesign.org Maintain independent analytic capacity of state Medicaid policy issues -Blue Cross Blue Shield Foundation of Massachusetts (Massachusetts Medicaid Institute) -California Health Care Foundation Exhibit 6