Deficit Reduction Act of 2005:Overview of

Key Medicaid Provisions

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Overview andOrganization of Presentation

Eligibility Acute Care Long-Term Care Payment Fraud, Waste and Abuse Other Summary of Mandates

Eligibility

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Eligibility Changes Long-Term Care (“Medicaid estate planning)

All provisions became effective 1/1/06, except:• Transfers made prior to the date of enactment (2/8/06) are

subject to the old asset-transfer rules• If a state needs enabling legislation, the effective date is the

first day of the quarter following the close of the next legislative session (i.e., for Maryland, 7/1/07).

Proof of Citizenship Effective for all initial determinations and re-

determinations on or after 7/1/06

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Long-Term Care: Asset Transfers Look-back period is changed to five years Transfer penalty begins later of date of transfer or

the date the person first would be eligible for Medicaid, but for the transfer

The purchase of an annuity where the state isn’t the primary or secondary beneficiary is a transfer

The purchase of an annuity where the term exceeds the person’s life expectancy, or with a large balloon payment, is a transfer

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Long-Term Care: Asset Transfers A state “shall not” round down fractional

penalties A state “may” aggregate multiple transfers

into one penalty period, beginning on the date of the first transfer

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Long-Term Care: Transfer Penalties and the Undue Hardship Process The state must create a process to avoid imposing the transfer penalty

where the state decides that an “undue hardship” would result: The penalty would deprive the person of medical care putting him/her at

risk of health or life, or The penalty would deprive the person of the means for securing food,

clothing, shelter, or necessities The state must create a process to notify applicants of this process

and their rights The state must have a timely process to make determinations, and

notify the person of his/her to appeal An institution may pursue it on behalf of an applicant, with his/her

consent HHS must issue rules that would allow a state, if it wants, to pay for up

to 30 days in a NF pending the process

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Long-Term Care: Annuities Applicants must disclose all annuities in

application The state must be primary or secondary

remainder beneficiary (after spouse or surviving minor/disabled child)

The state must notify issuer of the state’s remainder interest

The state may require the issue to notify the state of any changes in the income or principal withdrawal provisions

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Long-Term Care: Home Equity If a person owns a home with equity of $500,000 or more,

the person “shall not be eligible” for Medicaid (unless there is a spouse, or minor or dependent child)

The state may raise this level, at its discretion, to an amount no higher than $750,000

The floor will increase, beginning in 2011, by CPI, rounded to nearest $1,000

Applicants are permitted to use reverse annuity mortgages to reduce their home equity

The state must have an “undue hardship” process

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Long-Term Care: Other CCRCs may require, in their admission contracts,

that a person spend all of their declared assets before applying to Medicaid

CCRC “entrance fees” are countable as a Medicaid resource if (a) they are refundable and (b) they do not confer an ownership interest in the CCRC

States must use an “income-first” approach to spousal impoverishment

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Proof of Citizenship All applicants (and re-applicants) must prove their

citizenship status Exceptions: People who already proved it on a

federal application Prior Medicare (for dual eligibles) Prior SSI Others as specified in rule by HHS

This appeared in fraud and abuse portion of DRA

Acute Care

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Acute Care Changes Benefit Flexibility

Effective 4/1/06 Cost sharing

Effective 4/1/06, except ER provisions (hospitals charging for non-emergent services) become effective 1/1/07

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Benefit Flexibility States may offer benchmark plan (SCHIP-like),

instead of traditional Medicaid benefits Applies to “full benefit” COEs as of February 8,

2006 For children under 19, it must be supplemented

with full EPSDT Note: not up to age 21

Benchmark plans must permit access of covered benefits at FQHCs/RHCs, at their special payment rates

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Benefit Flexibility: Exempt Populations Certain populations are exempt from “benefit flexibility”,

meaning they must receive traditional Medicaid Exempt populations:

Individuals in TANF (children and adults) SSI and SSI-related children Mandatory pregnant woman Dual eligibles Individuals in an institution Individuals meeting institutional level of care Children in foster care Eligibility groups in specialty benefits (breast and cervical cancer,

and hospice) Others with a “special needs status” as defined by HHS (see

3/31/06 State Medicaid Director letter)

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Benefit Flexibility: Major Groups Who May Be Subject to the Provisions

Children in poverty-level groups (who are not on TANF or disabled)

Most adults, including adults with disabilities (SSI adults must have an opt-out)

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Cost sharing: Family Incomes Between 101-150% FPL*

No premiums permitted Coinsurance allowed, up to 10% of cost of service Family cap of 5% of family income Post eligibility income determinations need not be

based on same rules as eligibility determinations, so states may count income differently post determination; e.g., application of disregards

(*Drafting error in DRA: Rules for households below 100% FPL not specified.)

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Cost sharing: Family Incomes at or above 151% FPL

Premiums permitted (amount not specified) Coinsurance allowed, up to 20% of cost of

service Family cap of 5% of family income Post eligibility income determinations may

apply, so state may count income differently post determination (disregards, etc.)

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Cost sharing: Population Exemptions from Premiums

These groups are exempt from premiums:

Mandatory children age 18 or younger Pregnant women Institutionalized individuals Terminally ill individuals receiving hospice Women in breast or cervical cancer eligibility group

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Cost sharing: Service exemptions from Coinsurance

No cost sharing for: Services used by mandatory children to age 18 Preventive services Family planning Pregnancy-related services to pregnant women Services to terminally ill or institutionalized persons Emergent use of ER Women in breast or cervical cancer eligibility group

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Cost sharing: Enforcement Premiums: If required and payment not

made for 60 days, state may terminate eligibility State may waive for hardship State may treat different populations differently

Providers may deny service for nonpayment of coinsurance

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Cost sharing: Special Rules for Rx State may impose higher cost sharing on

non-preferred drugs than preferred drugs

State must waive this rule where physician determines that patient needs non-preferred drug

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Cost sharing: Special Rules for ER After conducting an EMTALA screening

assessment, a hospital may charge coinsurance for the provision of non-emergent services if: It notifies the patient of the name and location of an

alternate non-emergency services provider It notifies the patient that such alternative would not

result in the same level of cost sharing The hospital offers to coordinate the referral to the

alternative provider Other general cost sharing rules largely apply

Long-Term Care

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Long-Term Care Changes HCBS State Plan Option

Effective 1/1/07

Money Follows the Person Demos Effective 1/1/07

Public/Private Insurance Partnerships Effective 2/8/06

Cash and Counseling Without a Waiver Effective 1/1/07

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HCBS State Plan Option States may provide HCBS services under a state

plan amendment Eligibility must be based on needs-based criteria

that is less stringent than NF level of care The state may cap the number of participants If a state raises its NF level of care, it must

grandfather into NF and 1915(c) services people meeting the old level of care, for a period of 12 months

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HCBS State Plan Option Under the HCBS state plan option, states must

conduct an independent face-to-face assessment by an independent entity to help develop the plan of care

Customary approach to the development of a plan of care (treatment team, etc.)

Self-direction permitted Presumptive eligibility (with FFP) okay for up to 60

days

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HCBS State Plan Option Drafting issues in the law:

The law says that the option only may cover people at or 150% FPL

• This is a Catch 22 for the group of people above this level but below 300% SSI, who only would remain eligible for 1915(c) waiver service on basis of financial eligibility

The law says that the state plan option must require 2 ADLs (in one place) and may require 2 ADLs in another

It is unclear whether the necessary waiver of comparability exists under DRA

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Money Follows the Person Demos States must apply If approved, the demo design must include these

requirements: Eligible person:

• At least 6 months (or, at state discretion, for an alternative period not to exceed 2 years), in an institution

• On Medicaid at the time of community-placement• Is expected to continue meeting, and needing, institutional level

of care

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Money Follows the Person: continued Requirements, continued

Eligible placement:• The person’s home• The home of a family member• A congregate setting of no more than 4 residents

Customary approach to the development of a plan of care (treatment team, assessment, etc.)

The demo must last at least two years

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Money Follows the Person: continued Requirements, continued

The state must maintain its effort: total $$ in HCBS must remain at level of year before MFP demo

The demo need not be “statewide” or “comparable”

Enhanced FFP will be provided for HCBS services during the first year per recipient: CMS will pay half the state’s usual share (i.e., in Maryland, if the regular FMAP is 50%, the enhanced FMAP is 75%)

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Money Follows the Person: continued Application

Must be developed with public process Give preference to states with models including consumer-directed

benefit design Must assure CMS that recipients will continue to receive HCBS

services following completion of the year of enhanced FMAP Must assure CMS that recipient participation in the demo is

voluntary Give preference to states targeting multiple populations (NF;

ICF/MR; etc.) Give preference to states offering transition assistance

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Public/Private Partnerships States may initiate dollar-for-dollar

public/private LTC insurance partnerships Requirements:

Eligible person:• Must purchase policy after effective date of SPA• Must be a resident of the state when he/she first

draws LTC insurance benefits

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Public/Private Partnerships HHS to develop reciprocity rules (across

states) by 1/1/07, for portability Issuers must provide reports to HHS in

accordance with TBD regs from HHS Issuers may be required to provide certain

information and data to states, according to state-defined requirements

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Public/Private Partnerships Requirements:

Eligible policy:• Must meet numerous requirements found in the

Model LTC Insurance Act (renewable, prohibition on exclusions and post-claims underwriting, etc.)

• Must be certified by state Insurance Commissioner• Must have inflation protection

The Medicaid agency must provide technical assistance and information to insurance agency

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Cash & Counseling Cash & Counseling models now authorized under

1915(c) may be approved without a waiver State must provide counseling Consumer would have the right to self-direct the

selection, hiring, firing & scheduling of caregivers Consumer would have the right to substitute services

(e.g. microwave or ramp)

Payment

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Payment Changes Pharmacy -- Upper Payment Limit

Effective 1/1/07

Pharmacy – Physician-administered drugs Effective 1/1/06

Managed Care Premium Tax as “Broad Based” Effective 2/8/06

Targeted Case Management Effective 1/1/06

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Pharmacy – Upper Payment Limit The UPL is 250% of the average

manufacturer price (AMP) The AMP is to be used where there is a

multiple source drug, defined as a drug with at least one other similar drug product

HHS shall provide states, on monthly basis, with the AMP by manufacturer and drug (effective 7/1/06)

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Pharmacy: Other Related Issues Manufacturers cannot use “prompt pay” rules to game

AMP Manufacturers cannot use “nominal” prices to game AMP.

“Nominal prices” now defined to only exist where sold/given to: 340B provider ICF/MR State owned or operated nursing facility Any other provided defined as “safety-net” by HHS

HHS must conduct detailed rate study on retail prices

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Pharmacy: Physician-Administered Drugs For single-source drugs, states must provide to

HHS the J codes and NDC codes in a format as specified by HHS to enable recovery of rebates Effective 1/1/06

For multiple-source drugs, by 1/1/07 HHS must publish a list of the 20 highest dollar value drugs, and by 1/1/08, states must report the J codes and NDC codes for these drugs to HHS

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Pharmacy: Other Children’s Hospitals are entitled to 340B

pricing

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Managed Care Premium Tax Law changed to require inclusion of non-

Medicaid managed care premiums in order for the premium tax to be considered “broad based”

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Targeted Case Management “Case management” services are comprehensively defined

in DRA The definition specifically excludes certain activities from

being considered CM. E.g.: Assessing adoption placements Recruiting foster parents Home investigations Making placement arrangements Administering foster care subsidies Providing transportation Serving legal papers

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Targeted Case Management (continued) “Targeted case management” is defined as:

Case management services Delivered to a targeted population

FFP only is available for TCM “if there are no other third parties liable for such services, including as reimbursement under a medical, social, educational, or other program.”

States therefore must extract from TCM rates any funds for services that overlap with IV.E. (foster care), IDEA (education), etc. State Medicaid Directors letter expected 3/31/06

Fraud, Waste & Abuse

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Fraud, Waste and Abuse Changes Encourage states to enact False Claims Act

Effective 1/1/07 Vendor/provider employee education about false claims

recovery: policies and procedures Effective 1/1/07

Prohibition against Rx restocking and double-billing Effective 4/1/06

Expansion of Medi-Medi data match Effective with FY 06 budget

TPL Laws Effective 1/1/06

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Encourage States to Enact False Claims Act A False Claims Act, or whistle-blower statute,

would allow private citizens to bring lawsuits on behalf of the government (with permission)

The incentive to states: under funds recovered under such a law would receive enhanced match (the state would be able to retain 10% more of recovered funds than its normal match rate)

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Vendor/Provider employee education about false claims recovery Any entity that receives or makes annual

payments of $5 million or more from a Medicaid agency must, as a condition of receiving such payments: Establish written policies to notify employees about the

provisions of the federal false claims laws Establish written policies and procedures on what the

entity is doing to prevent and detect fraud, waste and abuse

Include all of this information in any employee handbook

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Prohibition on Restocking and Double Billing for Rx States cannot seek FFP for expenditures

made to a pharmacy where the pharmacy already has received payment for the same ingredient

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Medi-Medi Match HHS is instructed to enter into contracts

with eligible entities to develop new algorithms to look for payment anomalies in data matches between Medicare and Medicaid claims for dual eligibles

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TPL Assurances Each state must provide an assurance to

HHS that its state laws permit Medicaid TPL recoveries against any possible third-party, including self-insured plans, managed care organizations, etc.

Other

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Other Changes Family Opportunity Act

Effective 1/1/07 Health Opportunity Accounts

Effective 1/1/07 Other Miscellaneous

Effective dates vary

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Family Opportunity Act Creates new optional eligibility category for children who:

Are under 19 Would meet SSI disability test Are in households at or below 300% FPL

State must require parents to buy into available ESI if employer contributes at least 50% of the premium

State may require sliding scale premiums and coinsurance (and must give credit to ESI-related premiums paid) Total payments not to exceed 5% for families up to 200% FPL Total payments not to exceed 7.5% for families between 200-300%

FPL

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Health Opportunity Accounts Demo may begin on 1/1/07; up to 10 states

may participate in demo initiative Demos should be based on benefit flexibility

models, and Need not be statewide Need not be comparable Must be voluntary for enrollees

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Health Opportunity Accounts (continued) Demos must include these elements:

Create patient awareness of high cost of medical care Provide incentives for preventive care Reduce inappropriate use of health care Enable patients to take responsibility for health

outcomes Provide enrollment counselors and ongoing education Provide transactions that use accounts and not cash Provide access to negotiated provider rates

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Health Opportunity Accounts (continued) Excluded populations from demos include:

Age 65 or older People with disabilities (regardless of eligibility

category) Pregnancy-related groups People on Medicaid for less than 3 months

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Other Development and support of family-to-family

health information centers Grant process, similar to Systems Change

New demo for up to 10 states to test HCBS services for children in psychiatric residential treatment facilities RTCs are “institutional equivalent” for HCBS

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Other, continued Medicaid Transformation Grants

Competitive grants to “adopt innovative methods.” Examples:

• Reduce medical errors• Improve estate recovery• Reduce payment error rates• New models for medication management

Katrina relief funding Extension of Transitional Medicaid (TMA)

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Other, continued States may select and use a transportation broker without

a 1915(b) waiver Emergency services provided out-of-network to managed

care enrollees “shall be capped” at what the state’s FFS payment to the provider would have been Net of IME and GME, too, if the state’s FFS bundles them (Effective 1/1/07)

States may not use SCHIP funds for childless adults (all such programs in effect on 2/8/06 are grandfathered in for their duration, including renewals)

Summary of Mandates

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Summary of Mandates on State Medicaid Programs Eligibility changes

LTC effective immediately (unless enabling statute needed)

Proof of citizenship effective 7/1/06 Pharmacy: Physician-administered Rx

J Codes and NDC codes for single source immediately Amend MCO contracts if the out-of-network

hospital provisions are not in compliance with the new payment provisions of DRA Effective January 1, 2007

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Summary of Mandates (continued) Managed Care Premium Tax

Program must be broad-based by 1/1/07 Case Management

Re-do time studies to exclude prohibited activities effective; effective immediately

Targeted Case Management Effective immediately

TPL Assurances Effective immediately

Vendor/Provider employee education Effective 1/1/07