1 Medicare Prescription Drug Improvement and Modernization Act & Beneficiaries With Mental Illnesses Presentation to NAMI Convention June 19, 2005 Andrew Sperling, Director of Federal Legislative Advocacy, NAMI

2 Ongoing NAMI Education & Advocacy Activities Meetings with senior CMS Officials Comments on CMS regulations and formulary guidance, USP Guidelines Presentations at NAMI state affiliate meetings Report cards & ratings for PDPs and MA drug plans

3 P.L , Signed on December 8, 2003 Key Features Voluntary drug benefit administered through drug-only plans or integrated plans that provide a full set of Medicare benefits Unprecedented role for private sector plans to administer an optional benefit under Medicare on an at-risk basis Premium and cost-sharing subsidies for low-income beneficiaries Medicare beneficiaries with full Medicaid (dual eligibles) get benefits through Medicare, not Medicaid, beginning January 1, 2006 Nearly half of authorized spending under the MMA goes toward dual eligibles, low-income coverage and subsidies

4 Medicare Drug Benefit - Projected 10-Year Cost Fueling Threats to MMA Original Congressional Budget Office (CBO) 10-year projection - $395 billion (2004 through 2013), Most recent 10-year projection from OMB & CMS Actuary - $724 billion (2006 through 2015), Reaction to “escalating” cost projections cap drug benefit at $400 billion? expand importation? repeal non-interference provision in MMA? threatened Presidential veto!!

5 Dual Eligibles - Who Are They? “Full” dual eligibles -- Medicare services as primary payor for their health care, with Medicaid serving as secondary payor (for services not covered under Medicare such as Rx and long-term care. Medicaid also pays their premium and cost sharing for Medicare (QMB & SLMB) “Partial” dual eligibles receive assistance only with Medicare premium and, in some cases, cost sharing obligations To qualify for full Medicaid under the federal minimum standards, Medicare beneficiaries generally must have income <74% of poverty (about $6,600 for individuals) and assets <$2,000 (i.e., SSI requirements) Elderly and non-elderly people with disabilities above federal minimum levels are covered as a state option

6 Dual Eligibles -- How Many Are There? Full Dual Eligibles million Partial Dual Eligibles -- 1 million 14.1 million elderly <150% of poverty Other Medicare Beneficiaries million Total Medicare Beneficiaries million

7 Treatment of Dual Eligibles in P.L Beginning in November 2005, dual eligibles will be “auto-enrolled” in Medicare Part D plans. Coverage effective January 1, 2006 when drug coverage through Medicaid ends. Full dual eligibles qualify for low-income subsidy regardless of income or assets No premium if a dual selects average or lower cost plan Cost Sharing: no deductible, no co-payment if institutionalized, indexed copay of $1 per generic/$3 per brand name if 100% of poverty, no copay above the $2,200 catastrophic limit

8 Transition of Dual Eligibles into Part D 3 separate notices planned from CMS & SSA Summer notice that new drug coverage is coming in January 2006 October notice of initial enrollment period once all plan options become available November 15, auto-enrollment notice sent to all dual eligibles that have not yet signed up; opportunity to sign up for a different plan Big concerns about “continuity of care” for dual eligibles -- patients currently stable on specific medications need to retain coverage when they shift over the Medicare on January 1, 2006

9 Transition of Dual Eligibles into Part D CMS will require PDPs and MA plans to put in place a special transition plan in cases of enrollment in a PDP or MA plan that excludes an individual dual eligible’s medication from drug plan’s formulary; exception process available if a medication is on the formulary but is prior authorized Dual eligibles will be able to switch drug plans at any time, both before and after January 1, 2006 effective date.

10 Broad Coverage Expected for Medications to Treat Mental Illness CMS will require drug plans to cover “all or substantially all” drugs in 6 “vulnerable” classes that include anti- psychotics, anti-depressants and anti-convulsants CMS guidance states that drug plans should not use prior authorization or step therapy, unless a plan can demonstrate “extraordinary circumstances”

11 Low-Income Subsidies Individuals <135% of poverty and Medicaid eligibility -- up to about $12,920 for individuals and $17,300 for couples, with assets under $6,000 for individuals, $9,000 for couples: - no premium or deductible if average or low-cost plan is selected, - indexed cost sharing ($2 per generic/$5 per brand name), - above catastrophic limit, no cost sharing Individuals from 135% to 150% of poverty -- up to $14,355 for individuals and $19,245 for couples, with assets under $10,000 for individuals, $20,000 four couples: - sliding scale premium assistance & $50 deductible, - 15% co-insurance to catastrophic limit, $2 per generic/$5 per brand name above catastrophic limit

12 Low-Income Subsidies Apply at Social Security or state Medicaid offices now; states screen and enroll applicants for Medicaid, if eligible; but SSA offices will NOT screen for Medicare Savings Plan eligibility Application for low-income subsidy is separate from drug plan enrollment!!!

13 Optional Drug Coverage for Medicare Beneficiaries Above 150% Federal Poverty Level (FPL) Drug coverage in the new Medicare Part D program is optional and will require participants to pay a monthly premium and deductible. After $2,250 there will be no benefit until spending hits $3,600, a.k.a. “the Doughnut Hole.” After $3,600 is reached, enrollees pay either 5% co- insurance or $2 generics/ $5 brand name – whichever is greater. Penalties for late enrollment with “creditable coverage.”

14 True Out of Pocket Costs TrOOP establishes the rules by which a plan enrollee can meet the requirement of spending $3,600 of out-of-pocket costs, and thereby access significantly lower their co-payments. Assistance from most charitable programs and certain state assistance programs (including programs offered by drug manufacturers) will be included in the calculation of TrOOP. Final rules maintain CMS’s position that payments for a drug not on a plan’s formulary will NOT count towards TrOOP.

15 Overarching Concerns in the Final MMA Regulations ensuring that drug plans (PDPs) that will offer coverage to Medicare beneficiaries are required to offer broad access to medications to treat mental illness,  limiting the ability of Medicare PDPs to impose restrictive policies such as prior authorization, “fail first” requirements, tiered co-payments and preferred drug lists,  limiting impact of involuntary disenrollment provision,  promoting a strong set of appeal and grievance rights for beneficiaries and their families, and  ensuring that individuals dually eligible for Medicare and Medicaid are able to make a smooth transition into the new Medicare drug benefit in January 2006.

16 Specific Concerns with the Final MMA Regulations Plan Formularies – In the final rules, CMS declined to require an open alternative formulary for Part D enrollees with severe mental illnesses. Minimum requirement for at least two drugs in each therapeutic class retained, however, if there are only 2 distinct drugs in a particular class, the plan could elect to cover only one. CMS will not require plans to cover off-label uses of FDA approved drugs and can require documentation. Advance notice period for mid-year changes to a plan’s formulary extended from 30 days to 60 days.

17 Exceptions, Grievances & Appeals Final regulations state that determinations must be as expeditious as the enrollee’s health requires. Expedited appeals must be resolved within 24 hours and expedited re-determinations within 72 hours. For standard coverage determinations (i.e., requesting an exception to access a non-formulary drug) a decision must come within 72 hours. An outside independent review can be requested, with a decision required within 7 days. The final rule also clarifies that a prior authorization denial is subject to appeal.

18 Exceptions, Grievances & Appeals Final regulations prevent a denial at the pharmacy counter and instead an enrollee will have to request the denial in writing from the plan -- a requirement likely to discourage many enrollees from pursuing appeals. Independent review entities will not be able to examine the validity of the exceptions criteria used by each plan, and will only be able scrutinize the application of that criteria.

19 Links to More Information More information about prescription drug savings for Medicare beneficiaries is available at: