1. 1 Filling the Holes in Part D: SPAPs to the Rescue? Marc Steinberg, Families USA Health Action 2005 * January 27, 2005 Msteinberg@familiesusa.org 202-628-3030 www.familiesusa.org

2. 2 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

3. 3 SPAP Income Eligibility, 2002 source: Trail, Fox, Cantor, Silberberg, & Crystal, 2004

4. 4 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 beneficiarys TROOP (true out- of-pocket cost)

5. 5 Gaps SPAPs could fill Premiums Deductible Co-insurance Co-payments Non-formulary drugs Non-network purchases

6. 6 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

7. 7 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

8. 8 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

9. 9 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

10. 10 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?

11. 11 Questions to Ask If state does not have an SPAP: Can state create one in coming years Who and what could be covered?

12. 12 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

13. 13 Appendix: Benefit Levels

14. 14 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

15. 15 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

16. 16 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

17. 17 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

18. 18 Medicare Part D Basic Benefit (all dollar amounts are indexed to Medicare drug costs) CoverageDrug Costs Part D Pays You Pay Tot. Costs (TROOP) Deductible$0-2500%100%$250 Initial Benefit $251- $2250 75%25%$750 Donut Hole$2251- $5100 0%100%$3600 CatastrophicOver $5100 95%5%$3600 plus 5% of remainder