States complain that drug assistance programs are duplicating Medicare plans pharmacy benefits
Medicare / Pharmacy
Directors of the two largest state drug assistance programs for the elderly say they are losing millions of dollars to HMOs and insurance plans that should be paying for their Medicare beneficiaries’ pharmaceuticals, but are not.
The problem is that states are footing the bill for low-income elderly who are enrolled both in state drug assistance programs and in Medicare plans that offer a pharmaceutical benefit.
The states are losing money partly as a result of beneficiary confusion, but also because of HMOs’ obstinacy, say Tom Snedden, director of Pennsylvania’s Pharmaceutical Assistance Contract to the Elderly (PACE) and Kathleen Mason, director of New Jersey’s Pharmaceutical Assistance to the Aged and Disabled (PAAD) programs.
Mr. Snedden says Pennsylvania is trying to recover $15 million in pharmaceutical costs paid out for low-income Medicare managed enrollees, but that outstanding costs are closer to $30 million. Of 280,000 Pennsylvania residents enrolled in PACE, at least 50,000 receive some pharmaceutical coverage through HMOs.
Although Ms. Mason, director of the New Jersey program, has no exact numbers on how many PAAD members also receive drug benefits under a Medicare HMO or insurance plan, she says recovering costs for dual coverage is a growing problem. In 1996, PAAD recovered $12 million from third party insurers — mostly major medical carriers — that should have been the first to pay for seniors’ drugs. While indemnity insurers have been cooperative, managed care plans have been more difficult to recover money from, says Ms. Mason.
"It’s the toughest issue we’re dealing with this year," says Mr. Snedden.
Recovering costs for dual coverage of prescription drugs is likely to be a growing problem for states in the future as more seniors join HMOs. Medicare is one of the fastest-growing areas for the HMO industry. According to Geoffrey Harris, an analyst who follows managed care for Smith Barney, Medicare enrollment rose 33% in1996. A record 110,000 beneficiaries joined HMOs in January 1997, says Mr. Harris.
In the mid-Atlantic and Northeast regions, the elderly are being heavily courted by some of the largest, most successful HMOs, including Aetna/U.S. Healthcare, Oxford Health Plans, and Blue Cross plans. Low-income seniors who qualify for drug assistance programs are increasingly attracted to Medicare HMOs, in part because of the lure of drug coverage, according to both Mr. Snedden and Ms. Mason.
Medicare fee-for-service does not pay for pharmaceuticals, and Medigap policies, which do cover drugs, can be expensive. HMOs typically offer comprehensive coverage with no additional premiums, low deductibles and small co-pays. Medicare HMOs, at least on the East Coast, typically limit drug coverage to $1,000 to $1,500.
Mr. Snedden says he is lobbying the six Medicare HMOs in Pennsylvania to find a fix to the dual coverage problem. PACE beneficiaries need to be identified up front and blocked from using state benefits first. Mr. Snedden says he has not encountered resistance from HMOs about addressing the problem, but says they aren’t in a hurry to pay claims because "we’re picking up their tab."
However, at least one HMO, Aetna/US Healthcare, is now working with PACE, and recently settled for back claims, says Mr. Snedden. The HMO, which has 100,000 Medicare enrollees in Pennsylvania, won’t confirm or deny the settlement for back claims. But spokeswoman Jill Griffith says that Aetna is trying to ensure that dual coverage is eliminated.
A major difficulty is identifying HMO enrollees who are also beneficiaries of state pharmaceutical assistance programs. Both PACE and PAAD ask applicants if they receive drug benefits from any other plan. "The information we get back is notoriously incomplete and inaccurate," says Mr. Snedden. And the same thing happens when seniors fill out enrollment forms for HMOs — they either don’t remember or don’t report their coverage under the state drug assistance program. The enrollees may not understand that their new HMO benefit duplicates their state drug assistance coverage.
The only way for states to determine dual coverage, says Mr. Snedden, is "to do an enrollment match" by comparing databases.
The other issue are the incentives the elderly have for using the state benefit first. PACE beneficiaries are more apt to use the state benefit because there is no deductible to meet under the state program and because the co-pay for the state program is lower than the HMOs’ copays, says Mr. Snedden. PACE has a copay of $6.
To be eligible for PACE, which began in 1984, applicants must be over age 65 and be a state resident; single people must have incomes of less than $16,000 a year, and married couples less than $19,200 a year. PACE is funded entirely by the state lottery, which Mr. Snedden says helps insulate it from cost-cutting pressure.
But the reality is that PACE costs have quadrupled since the program’s start. For fiscal 1997, Snedden expects PACE to spend about $260 million on drug purchases. PACE will get about $30 million in rebates from pharmaceutical manufacturers, bringing costs down to $230 million.
Dual coverage is also a growing problem in New Jersey, and the pressures are even greater to keep costs down, says PAAD director Ms. Mason. PAAD has grown from $8 million-a-year program at its inception in 1975, to about $200 million currently. Costs are rising 13.5% annually, while the major funding source — casino revenues — is only growing 4% a year. "We have definite concerns about future funding," says Ms. Mason, who notes that she’s been charged with finding cuts and dual coverage is one area she is targeting.
PAAD, with 220,000 beneficiaries, cost the state $212 million last year, minus $34 million in manufacturer rebates. The program is open to residents over 65 and those receiving Social Security disability payments if they have lived in the state for at least 30 days. For single people in 1997, the income limit was $17,650 a year, and for married couples, $21,519 a year.
According to state statute, PAAD is supposed to be the payer of last resort. PAAD beneficiaries should use their Medicare plan’s pharmaceutical benefit before they use PAAD benefits, but since there is no deductible or premium for PAAD and only a $5 co-pay, seniors often use PAAD first. Ms. Mason says when the state submits claims to Medicare insurers and plans they often subtract the enrollees’ deductibles from the amount due to the state.
The state has a contractor, Health Management Systems in New York, that matches eligibility for PAAD with data from most of the insurers in the state, and the system worked for the most part —that is, until managed care became more prevalent, says Ms. Mason. The program is trying to collect retroactively from the HMOs. Ms. Mason, like Mr. Snedden, says she is angered by what she calls outright resistance. "The HMO industry is balking at paying us even when we submit the bill," says Ms. Mason.
The New York Elderly Pharmacy Insurance Coverage Program, which has 103,000 enrollees and spends about $70 million a year, has begun experiencing some dual coverage, but director Marilyn Desmond says it’s not pressing issue. There is little managed care penetration in New York, but as enrollment grows, so might the coverage problem, says Ms. Desmond.
In Connecticut, eligible residents cannot enroll in the Connecticut Pharmaceutical Assistance Contract to the Elderly and Disabled if they receive drug coverage elsewhere, says Marcia Mains, manager of the program. The program has 40,000 enrollees. —- Alicia Ault.
Contact Mr. Snedden at 717-787-7313, Ms. Mason at 609-292-2121, Ms. Desmond at 518-452-6828, Ms. Mains at 860-424-5219.
States complain that drug assistance programs are duplicating Medicare plans pharmacy benefits
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