MEDICARE’S 2006 TAKEOVER OF MEDICARE’S 2006 TAKEOVER OF PRESCRIPTION DRUG COVERAGE FOR PRESCRIPTION DRUG COVERAGE FOR

DUAL ELIGIBLES IN NURSING FACILTIES:DUAL ELIGIBLES IN NURSING FACILTIES:ISSUES AND CONCERNSISSUES AND CONCERNS

Jim VerdierJim VerdierMathematica Policy Research, Inc.Mathematica Policy Research, Inc.

Summit on Medicare Part D Summit on Medicare Part D Implementation IssuesImplementation Issues

Philadelphia, PAPhiladelphia, PAOctober 7, 2004October 7, 2004

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Introduction and Overview

Medicaid Rx drug costs for dual eligibles account for Medicaid Rx drug costs for dual eligibles account for over half of all Medicaid Rx drug costsover half of all Medicaid Rx drug costs

Duals in nursing facilities account for one-fourth of all Duals in nursing facilities account for one-fourth of all Rx drug costs for dualsRx drug costs for duals

Medicare takes over responsibility for drugs for duals Medicare takes over responsibility for drugs for duals in 2006 (with federal clawback of 90% of state savings)in 2006 (with federal clawback of 90% of state savings)

What entities will provide Rx drugs to Medicaid What entities will provide Rx drugs to Medicaid nursing facility residents?nursing facility residents?

What impact will this takeover have on residents, What impact will this takeover have on residents, nursing facilities, pharmacies, and Medicaid agencies?nursing facilities, pharmacies, and Medicaid agencies?

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State-by-State Data on Medicaid Rx Drug Use and Costs in 1999

Detailed state-by-state data on Medicaid Rx utilization Detailed state-by-state data on Medicaid Rx utilization and costs will be available shortly from CMSand costs will be available shortly from CMS

– Prepared by Mathematica, using 1999 Medicaid Prepared by Mathematica, using 1999 Medicaid Analytic Extract (MAX) files; CMS is now preparing Analytic Extract (MAX) files; CMS is now preparing 2000 and 2001 MAX files2000 and 2001 MAX files

– Fee-for-service only (managed care excluded)Fee-for-service only (managed care excluded)– Tables show use and costs by age, sex, race, Tables show use and costs by age, sex, race,

eligibility categoryeligibility category– Tables show costs and number of prescriptions Tables show costs and number of prescriptions

per benefit month, brand-name vs. generic, type of per benefit month, brand-name vs. generic, type of drug, top ten drugsdrug, top ten drugs

– Also includes national state-by-state comparison Also includes national state-by-state comparison tables; graphs showing highlights are in the workstables; graphs showing highlights are in the works

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State-by-State Data on Medicaid Rx Drug Use and Costs in 1999 (Cont.)

Dual eligiblesDual eligibles

– Fifteen tables for each state and U.S. focus just on Fifteen tables for each state and U.S. focus just on dualsduals

– Five tables show annual Rx expenditures for duals in Five tables show annual Rx expenditures for duals in $500 increments ($0, $1 to $500, $501 to $1,000)$500 increments ($0, $1 to $500, $501 to $1,000)

Show # and % of duals in each increment and amount and % of Show # and % of duals in each increment and amount and % of total Rx costs total Rx costs

Can be used by actuaries for Medicare Part D bidders to Can be used by actuaries for Medicare Part D bidders to calculate PMPM costs for dualscalculate PMPM costs for duals

– Several tables focus on nursing facility Rx drug use by Several tables focus on nursing facility Rx drug use by duals and non-dualsduals and non-duals

Antipsychotics and antidepressants are top two drug groups in Antipsychotics and antidepressants are top two drug groups in terms of overall coststerms of overall costs

Rx $s per benefit month for NF duals vary by state, but not Rx $s per benefit month for NF duals vary by state, but not dramatically (apart from states with data problems)dramatically (apart from states with data problems)

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Medicare Takeover of Rx Drugs for Duals in 2006

Starting in January, 2006, Medicaid will not be able Starting in January, 2006, Medicaid will not be able to fund any Rx drug coverage for duals with federal to fund any Rx drug coverage for duals with federal moneymoney

Rx drug coverage for duals will be provided by Rx drug coverage for duals will be provided by Medicare Advantage (MA) MCOs and yet-to-be Medicare Advantage (MA) MCOs and yet-to-be created private prescription drug plans (PDPs)created private prescription drug plans (PDPs)

What kinds of entities will form PDPs?What kinds of entities will form PDPs?– Medicare discount card sponsors provide early Medicare discount card sponsors provide early

indicationsindications– PBMs, insurance companies, pharmaciesPBMs, insurance companies, pharmacies

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How Will Medicaid Nursing Facility Dual Eligibles Be Served?

Medicaid dual-eligible nursing facility (NF) residents Medicaid dual-eligible nursing facility (NF) residents use an average of 4.9 drugs per month vs. 3.3 for all use an average of 4.9 drugs per month vs. 3.3 for all duals and 1.5 for all Medicaid beneficiariesduals and 1.5 for all Medicaid beneficiaries

In almost all states, Medicaid now pays pharmacies In almost all states, Medicaid now pays pharmacies directly for NF drugsdirectly for NF drugs– Not in NF per-diemNot in NF per-diem

How will this be handled in 2006?How will this be handled in 2006?– PDPs or Medicare MCOs will take over Medicaid PDPs or Medicare MCOs will take over Medicaid

agency roleagency role

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What Experience Do Medicare MCOs And PDPs Have With NFs?

A small number of Medicare MCOs (Evercare, for A small number of Medicare MCOs (Evercare, for example) now serve beneficiaries in NFsexample) now serve beneficiaries in NFs– MMA authorizes “specialized MA plans for special MMA authorizes “specialized MA plans for special

needs individuals,” including those in NFsneeds individuals,” including those in NFs P.L. 108-173, Sec. 1859(b)(6)P.L. 108-173, Sec. 1859(b)(6)

CMS has approved three “special endorsement” CMS has approved three “special endorsement” Medicare discount card sponsors to serve Medicare discount card sponsors to serve beneficiaries in NFsbeneficiaries in NFs– PBM Plus (Omnicare), Long Term Care Pharmacy PBM Plus (Omnicare), Long Term Care Pharmacy

Alliance (ACS State Healthcare), and Computer Alliance (ACS State Healthcare), and Computer Sciences CorporationSciences Corporation

– Incipient LTC PDPs?Incipient LTC PDPs?– Made up mainly of large specialized pharmacies that Made up mainly of large specialized pharmacies that

serve NFsserve NFs

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Impact on Medicaid NF Residents

Will they have to choose among Medicare drug plans?Will they have to choose among Medicare drug plans?– If they need help with the choice, where will they get If they need help with the choice, where will they get

it?it?

What if a drug they need is not included in the What if a drug they need is not included in the formulary of PDPs and MA MCOs that serve the NF?formulary of PDPs and MA MCOs that serve the NF?

Who will determine if the drugs they take are needed Who will determine if the drugs they take are needed and consistent with other parts of their NF care plan?and consistent with other parts of their NF care plan?

September 2004 Kaiser report summarizes LTC September 2004 Kaiser report summarizes LTC beneficiary access issuesbeneficiary access issues– http://www.kff.org/medicare/7161.cfmhttp://www.kff.org/medicare/7161.cfm

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Impact on Nursing Facilities

Rx drugs in NFs are currently provided mainly by Rx drugs in NFs are currently provided mainly by large specialized consultant pharmacieslarge specialized consultant pharmacies– May be owned by NFsMay be owned by NFs– Usually provide all drugs to a specific NFUsually provide all drugs to a specific NF

What will happen when new entities provide What will happen when new entities provide competition and choice?competition and choice?– Confusion? Lower prices? Greater Confusion? Lower prices? Greater

transparency?transparency?

How will NFs keep track of which drugs each How will NFs keep track of which drugs each resident is receiving?resident is receiving?– Will each PDP and MA MCO provide separate Will each PDP and MA MCO provide separate

reports to the NF? reports to the NF?

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Impact on Pharmacies

May face competition from other entitiesMay face competition from other entities– PDPs, “specialized” MA MCOs, PBMsPDPs, “specialized” MA MCOs, PBMs

Large multi-state consultant pharmacy chains may Large multi-state consultant pharmacy chains may form their own PDPsform their own PDPs– These chains form the core of the three “special These chains form the core of the three “special

endorsement” Medicare LTC discount card endorsement” Medicare LTC discount card sponsorssponsors

Competition may disrupt long-settled arrangements Competition may disrupt long-settled arrangements between NFs and consultant pharmaciesbetween NFs and consultant pharmacies– A plus or a minus? For whom?A plus or a minus? For whom?

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Impact on State Medicaid Agencies

Medicaid NF residents may look to agency for help in Medicaid NF residents may look to agency for help in choosing a Medicare drug planchoosing a Medicare drug plan

Agency will probably no longer have access to data Agency will probably no longer have access to data on Rx drugs used by Medicaid NF residentson Rx drugs used by Medicaid NF residents– Monitoring and coordinating care of residents Monitoring and coordinating care of residents

may be more difficultmay be more difficult

Medicaid NF residents and NFs may look to Medicaid Medicaid NF residents and NFs may look to Medicaid for help in covering drugs Medicare does not coverfor help in covering drugs Medicare does not cover

Managed LTC for duals will be harder, unless more Managed LTC for duals will be harder, unless more specialized Medicare LTC MCOs develop and partner specialized Medicare LTC MCOs develop and partner with Medicaid MCOs with Medicaid MCOs

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Conclusion

In the short term, Medicare takeover of Rx drugs for duals In the short term, Medicare takeover of Rx drugs for duals in NFs will create confusion and problems for states, with in NFs will create confusion and problems for states, with almost no fiscal relief because of the clawbackalmost no fiscal relief because of the clawback

In the longer term, the Medicare takeover may create In the longer term, the Medicare takeover may create opportunities for better management of the Rx drug opportunities for better management of the Rx drug benefit in NFs, more openness in the relationships benefit in NFs, more openness in the relationships between NFs and drug suppliers, and more opportunities between NFs and drug suppliers, and more opportunities for managed LTC for dualsfor managed LTC for duals

Many of these issues are covered in a May 2004 paper by Many of these issues are covered in a May 2004 paper by Scott Stewart, a student at Princeton’s Woodrow Wilson Scott Stewart, a student at Princeton’s Woodrow Wilson SchoolSchool– If you’d like a copy, send me an e-mail (jverdier@mathematica-If you’d like a copy, send me an e-mail (jverdier@mathematica-

mpr.com)mpr.com)