Summary of HB 1434 – Medicaid Reform Bill

Many Mississippians depend on Medicaid to provide for their health care needs. It is a critical program, where we have an obligation to provide quality health care to those who cannot afford it, in a sustainable way that is affordable to the taxpayers.

The Medicaid Reform Bill has savings of $106 million and policy reforms that focus on four key areas:

Shifting the cost of care to the most appropriate place – PLADS

With the advent of prescription drug benefits under the new Medicare law, there is a greater reason for beneficiaries eligible for both Medicaid and Medicare to be covered by the federal government under Medicare. This is the case for appropriately 60,000 Mississippians currently covered by Medicaid under the Poverty Level Aged and Disabled program. By shifting their health care coverage to Medicare, they will still have health insurance, but the federal government will pay for it starting July 1, 2004.

For those beneficiaries under 100% of the poverty level, they will have NO premiums, NO deductibles, and NO co-pays. They will have an unlimited number of visits to their physician, to the ER, to hospital outpatient services, and on prescriptions. They will have a large INCREASE in the number of hospital inpatient days provided as well as in home health care days over their current Medicaid benefits. The only cost-sharing category these beneficiaries will have is in their prescription drug coverage. They will receive $600 for July 1 through December 31 of 2004, in order to supplement the costs of their prescriptions. Along with the $600 supplement, they will have the opportunity to sign up for a drug discount card. Medicare is contracting with private companies to offer Medicare-approved drug discount cards. Beneficiaries will choose one of the discount cards offered by these private companies, which will provide savings between 10% and 25% on outpatient prescription drugs. All discount cards approved by Medicare will have their official seal. Then, in January of 2005, they will receive an additional $600 to supplement the costs of their prescriptions through the end of the year. Once January 2006 arrives, these beneficiaries will have BETTER and more COMPREHENSIVE prescription drug coverage under the new Medicare law than they currently enjoy in Medicaid.

For those beneficiaries between 100% and 135% of the poverty level, they will have some cost-sharing. They will also have an unlimited number of visits to their physician, to the ER, to hospital outpatient services, and on prescriptions. They will have a large INCREASE in the number of hospital inpatient days provided as well as in home health care days over their current Medicaid benefits. They will also receive $600 for July 1 through December 31 of 2004, in order to supplement the costs of their prescriptions. Along with the $600 supplement, they will have the opportunity to sign up for a drug discount card. Medicare is contracting with private companies to offer Medicare-approved drug discount cards. Beneficiaries will choose one of the discount cards offered by these private companies, which will provide savings between 10% and 25% on outpatient prescription drugs. All discount cards approved by Medicare will have their official seal. Then, in January of 2005, beneficiaries will receive an additional $600 to supplement the costs of their prescriptions through the end of the year. Once January 2006 arrives, they will have BETTER and more COMPREHENSIVE prescription drug coverage under the new Medicare law than they currently enjoy in Medicaid. No other state in the nation provides coverage in a program such as PLADs for beneficiaries between 100% and 135% of the poverty level.

In addition, the Division was instructed through the legislation to apply for two waivers. These waivers are intended to provide coverage for: 1.) the 5,000 beneficiaries who do not qualify for Medicare and to provide coverage for 2.) the end-stage renal disease patients on dialysis, cancer patients on chemotherapy, and organ transplant recipients on anti-rejection drugs.

The 5,000 beneficiaries for whom the Division is seeking a waiver for continued coverage are a transient group. People fall in and out of this group on a consistent basis because their eligibility changes regularly. Their geographic location is in all 82 counties with the largest concentration in the large metropolitan areas of Jackson and Gulfport.

Governor Barbour promised the members of the Legislature that he would do everything in his power to facilitate the federal government approving these waivers in a timely fashion so as not to leave any beneficiary without the coverage they need. He made good on that promise by flying up to Washington D.C. on Monday, May 17th, and he met with the leadership of CMS and HHS. He presented to them the urgency of these waivers and asked that they provide direction and counsel to the Division in preparing these waiver applications to expedite the process. The leadership agreed to do so and the Division is working with them now on this important matter. They were very cooperative, and we have reason to believe this issue can be resolved.

Eligibility Determination, Establishing a Health Care Home, Disease Management

This legislation authorizes Medicaid to actively re-determine the eligibility of each beneficiary, provide a physical examination, and to establish a health care home for each patient. By providing a physical examination to every Medicaid beneficiary, the Division will establish a baseline health status for each individual. This will allow health care providers to better target disease management practices, focusing on prevention.

Patients who go to the emergency room for primary care are not receiving the best care, because they are receiving care in an environment that is not designed to meet their needs. But they are receiving the most expensive care. To help address this problem, this bill allows for beneficiaries to establish a “health care home” – a physician, health clinic, nurse practitioner, or any place where routine care is provided.

Federal law requires each state to determine the eligibility of Medicaid beneficiaries once a year, but currently, Mississippi does not actively meet this requirement. Presently, the Department of Human Services checks eligibility of approximately 10,000 cases a month, or approximately 120,000 a year, which is far less than the more than 720,000 people on the Medicaid rolls. Furthermore, the current method of re-determining eligibility relies on a one-page mail out which merely asks the beneficiaries if their eligibility status has changed.

Mississippians are the most compassionate people in the world. We are committed to providing quality health care to those who cannot afford it – to those who really need it. But Mississippi taxpayers should not be asked, much less required, to provide free health care to those who can work but choose not to. Parents who work two or three jobs to take care of their families should not pay taxes to provide free health care to people who are able to take care of themselves.

But perhaps even more importantly, the process of re-determination will facilitate programs such as establishing a health care home and promoting disease management.

Maximizing Federal Matching Funds

The prevailing thinking in previous years was that Medicaid was maximizing the use of the nursing home bed assessment, a mechanism in which nursing home assessments are used to generate additional federal matching funds. However, due to a misinterpretation of the law, there is room under federal law to increase our nursing home bed assessment by $2, resulting in an additional $61.5 million for Medicaid services and a net effect of $11 million new state dollars. Nursing homes will now recoup the assessment in the form of higher reimbursements. Therefore, this is NOT a “tax” as defined in the traditional sense, but rather a way to generate additional federal money which will be available for other parts of the Medicaid program.

Pharmaceutical Costs

The fastest growing area in Medicaid is in prescription drugs, and much of the money spent by Mississippi taxpayers to provide this service goes to out-of-state pharmaceutical companies, rather than staying with Mississippi’s health care providers. By establishing a mandatory preferred drug list coupled with a prior authorization program, and by seeking a partnership with another state, the Division of Medicaid will use our bulk purchasing power to negotiate lower acquisition costs. By providing the best drugs at the lowest possible cost, both Medicaid beneficiaries and Mississippi taxpayers are protected, with no adverse effect on Mississippi health care providers.

The bill also increases the number of prescriptions allowed to beneficiaries. Under current law, a Medicaid patient can get five prescriptions and then two more with prior authorization. Modeled after the Florida program, this legislation increases the prescription limits to four brand names plus unlimited generics. The bill also directs the Division to establish a prior authorization process to allow for more than 4 brand names for beneficiaries whose conditions requires it.

The legislation also requires the use of counterfeit-proof prescription pads to help avoid problems with fraud and abuse.

The “Clawback” Payment to the Federal Government In addition to the $106 million in savings of the Medicaid Reform Bill, there is $14 million in savings from the “clawback” payment to the federal government. In Federal Fiscal Year 2006, the Centers for Medicare and Medicaid Services (CMS) will NO LONGER cost-share or rebate drug costs for Medicare eligible beneficiaries that are on Medicaid as well. To help finance the new Medicare drug benefit, states will pay a “Maintenance of Effort” fee to the feds – the “clawback.” This fee will be based on the drug expenditures for the number of people who will be eligible for the Part D program in January 2006 that were on the Medicaid rolls in Federal Fiscal Year 2003. So, the number of beneficiaries we have on the Medicaid rolls directly effects the amount of money the state has to pay to the federal government in a “clawback” payment. Since the bill directs the Division to move 60,000 PLADS beneficiaries from Medicaid to Medicare, starting July 1, 2004, the state’s “clawback” payment will be less than it would have been had the Division kept these beneficiaries on Medicaid. The $14 million in savings will be reduced every year over the next decade.

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