Jeffrey S. Crowley, Health Policy Institute, Georgetown University
with Bob Williams, Advancing Independence
Beginning on January 1st, all Medicare beneficiaries will have the opportunity to purchase prescription drug coverage from among a choice of competing private plans (individuals can enroll in the new program starting on November 15th). For many Medicare beneficiaries who previously did not have prescription drug coverage, this represents an important updating of the Medicare benefits package. Literally millions of people will have prescription drug coverage for the first time.
Many Medicare beneficiaries with disabilities also receive Medicaid. These individuals, called dual eligibles, already have drug coverage through Medicaid. This will change, however. Medicaid prescription drug coverage of dual eligibles will end at the end of 2005 and they will receive prescription drug coverage through Medicare starting in 2006. These individuals will continue to receive Medicaid for other services. Several steps are being taken to assure that this transition is smooth and does not lead to any gaps or interruptions in drug coverage. But problems will almost certainly arise for certain individuals, including some with potentially serious consequences.
Medicare beneficiaries with disabilities, whether or not they are dually eligible, have an important role to play in ensuring that they have access to the drugs they need.
This guide was developed for people with disabilities who receive Medicare, friends and family members, benefits counselors, disability organizations, and others who will assist individuals in taking advantage of the new Medicare drug coverage option. Reading it should enable individuals to better understand the changes in their prescription drug coverage and what key steps they can take to ensure that their prescription drug needs are met. While this guide will focus in on issues of particular importance to people who are dually eligible, much of the information is critical for all Medicare beneficiaries with disabilities.
What makes some people with disabilities under age 65 eligible for Medicare coverage?
Medicare is a program of the federal government that primarily provides retirement health insurance to Americans once they turn age 65. However, people younger than 65 can also qualify for Medicare if they meet the Social Security Administration’s standard for long-term, serious disability, including End Stage Renal Disease.
There are 3 basic ways that people with disabilities under age 65 qualify for Medicare:
- Most people with disabilities under age 65 that have Medicare are individuals who have worked, but have become disabled and now receive SSDI payments.
- About 10% are eligible for Medicare because they are the “Disabled Adult Children” of parents that are already covered by Medicare or are deceased.
- Others are eligible because they have End Stage Renal Disease.
What is the Medicare waiting period?
Most people with disabilities under age 65 generally must wait two years from when they are determined to be eligible before their Medicare coverage actually becomes effective. But there are two exceptions to this: Individuals with End Stage Renal Disease only wait three months for such coverage to begin and people with amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease) can enroll in Medicare as soon as they are diagnosed. Individuals in the waiting period are not yet Medicare beneficiaries. Thus, if they qualify for Medicaid, they can receive prescription drugs from Medicaid during the waiting period.
What does it mean to be “dually eligible”?
Roughly 7 million Americans – including about two million people with disabilities under age 65 – are dually eligible for both Medicare and Medicaid because they have very low incomes and few other resources.
Medicaid is a federal and state government program that provides health care coverage to certain low income persons, including children and families, pregnant women, seniors (persons 65 or older) and people with disabilities. Persons in these categories qualify if they meet state-established income and resource standards and other eligibility requirements.
As a general rule, Medicare payment levels for providers are higher than for Medicaid. This can mean that Medicare beneficiaries may have a broader choice of providers than Medicaid beneficiaries. On the other hand, Medicaid often covers services that Medicare does not cover. Therefore, for many people with disabilities, the ideal arrangement is to be dually eligible which enables them to access the benefits of both programs. For dual eligibles, Medicare is the primary payer and Medicaid fills in for gaps in Medicare coverage. This includes paying for benefits that Medicare does not cover such as long-term services and supports – this will not change. Medicaid also has and will continue to pay Medicare cost-sharing, including the Part B premium and the cost-sharing associated with physician, hospital, and other services received under Medicare Parts A and B—traditional Medicare. Until now, Medicaid has provided prescription drug coverage for these individuals. As discussed, this coverage will change in January, 2006.
What makes some Medicare beneficiaries with disabilities dually eligible?
As a general rule, an individual whom the Social Security Administration has determined has a serious long-term disability—the basis for receiving Medicare—also falls into a Medicaid eligibility category (except for a limited number of states with a more strict definition of disability for Medicaid). But, for any of these individuals to qualify for Medicaid they must also satisfy income and resource standards.
Income Limits: Most states provide Medicaid to persons who receive Supplemental Security Income (SSI) which provides income support up to 74% of the federal poverty level. A limited number of other states set slightly different income eligibility rules.
States also are permitted to cover people with disabilities and seniors up to the poverty level, but fewer than half of the states do so. The average SSDI payment for a disabled worker, however, is roughly 113% of the poverty level . Therefore, depending on where one lives, a significant number of people with disabilities on Medicare can be quite poor, but have too much income to qualify for Medicaid.
Resource Limits: Additionally, some people are ineligible because they have resources (i.e. financial assets such as money in the bank or property other than their primary home or primary vehicle) in excess of Medicaid’s resource standard which, in most states is $2,000 for a single individual or $3,000 for a couple.
Other Ways to Qualify: For Medicare beneficiaries who do not currently receive Medicaid, there may be additional opportunities in their state to qualify for Medicaid. Many states have chosen to take advantage of a special income rule to make nursing home care available to persons with income up to 300% of the SSI payment level. In 2005, this comes to $1,737 a month. States that take advantage of this rule are also permitted to apply the same income standard to permit people with disabilities to qualify for Medicaid in order to receive community-based long-term services and supports. Additionally, individuals may qualify for Medicaid if their state has a medically needy program which permits individuals to “spenddown” to coverage by incurring medical expenses so that their income minus their medical expenses is below a state established medically needy income limit.
In certain instances, people with disabilities that work can obtain Medicaid coverage. Medicaid eligibility rules can vary dramatically from one state to another. The best way to find out the specific eligibility requirements is to contact the Medicaid office in a specific state. Medicare beneficiaries who are dually eligible receive special treatment in the Part D program, so if individuals think that they may be eligible for Medicaid, but are not currently enrolled in it, they should contact a benefits counselor for assistance or contact Medicaid in their state and ask to be screened for Medicaid eligibility.
Medicaid programs also provide financial assistance with Medicare cost-sharing (i.e. such as paying the Part B premium) for low-income Medicare beneficiaries with too much income and resources to qualify for full Medicaid coverage. These programs are collectively called the Medicare Saving Programs (MSP) and will be discussed further later in this guide.
How is the Medicare program structured?
Medicare consists of several program components, or parts, and each provides different benefits:
- Part A
Hospital insurance, including skilled nursing, some home health, and hospice services
- Part B
Physician and outpatient services, some home health care, durable medical equipment, and ambulance services
- Part C
Alternative to receiving traditional Medicare. Beneficiaries enroll in a Medicare Advantage health plan instead of participating in the other parts of Medicare
Prescription drug coverage program (beginning 01/01/2006)
All Medicare beneficiaries participate in the Part A program. Medicare Part A pays for hospital expenses, including hospitalizations in specialty psychiatric hospitals. Medicare Part A also pays for up to 100 days in a skilled nursing facility and for skilled home health services; for persons with a life expectancy of six months or less, it pays for hospice services.
The Part B program is voluntary. The Part B program provides medical insurance that pays for doctors’ visits/services, skilled home health services, durable medical equipment, outpatient hospital services, ambulance services, and lab tests. The Part B program also covers certain preventive health care services.
Parts A and B are sometimes referred
to as “traditional Medicare.”
The Part C program is a voluntary program providing options to enroll in a Medicare managed care program. The Part C program operates Medicare Advantage health plans that provide an alternative to participating in Parts A and B (and in January 2006, Part D). Medicare Advantage plans combine the benefits of the other parts of Medicare into a health plan that takes responsibility for providing all Medicare benefits.
The Part D program is a voluntary program affording individuals the opportunity to purchase Medicare prescription drug coverage. This new program begins in January 2006 and is the focus of this guide.
What are some key considerations regarding Part D for dual eligibles with disabilities?
Dual eligibles have poorer health status and more extensive prescription drug needs than most other Medicare beneficiaries because the majority of dual eligibles are people with disabilities. Dual eligibles also differ from many other Medicare beneficiaries in that they are generally quite poor, and have limited capacity to pay cost-sharing or to pay out-of-pocket for non-covered drugs.
Therefore, the stakes will often be higher for dual eligibles with disabilities to ensure that they enroll in a prescription drug plan that meets their needs—and to ensure that they take advantage of all of the financial assistance that is available to them. But it is important to note that most people with disabilities under age 65 who have Medicare coverage only also tend to have very limited incomes and resources. In August 2005, for example, the average SSDI payment for a disabled worker was $898/month. In some states, an individual on SSDI that receives this level of income may be eligible for Medicaid; in others they would not.
Understanding how Part D works is important to all Medicare beneficiaries with disabilities. The following section is intended to provide such a basic understanding of the Part D program.
This consumer guide was developed with financial support from the Pharmaceutical Research and Manufacturers of America (PhRMA). Copyright © 2005 by Advancing Independence. Permission to duplicate is granted and encouraged. Please acknowledge the source. Please direct questions to firstname.lastname@example.org.