Senate GOP Aide Criticizes Families USA Report on Effect of Medicare ‘Clawback’ Provision on Medicaid Coverage

An unnamed Senate Finance Committee Republican aide on Thursday said a Families USA report inappropriately blames the 2003 Medicare law for reductions in Medicaid coverage for dual eligibles in some states, CQ HealthBeat reports (CQ HealthBeat, 7/7). The report, which was released Wednesday, said that as a result of a provision in the 2003 Medicare law requiring states to contribute to the cost of the new prescription drug benefit, some states are planning to eliminate coverage for tens of thousands of people who are considered dually eligible for Medicare and Medicaid.

Under the 2003 law, drug coverage for dual eligibles will be transferred from state Medicaid programs to the new Medicare benefit. The so-called "clawback" provision requires states to pay the federal government 90% of the estimated amount they would have paid in drug expenses in 2006, and therefore states could experience savings of 10% from their current prescription drug spending levels for dual eligibles.

However, the National Governors Association maintains that flaws in the formula for calculating the payments mean that many states actually will lose money under the provision. To reduce their payments to the federal government, several states plan to eliminate or have eliminated Medicaid coverage for some dual eligibles.

The study says the expected cuts are occurring in states that expanded Medicaid coverage beyond what is federally mandated for dual eligibles -- people who are elderly or have disabilities and have incomes up to 73% of the poverty level. According to the Families USA study, Florida is expected to eliminate Medicaid coverage for 77,000 beneficiaries, Mississippi will end coverage for 65,000 people and Missouri will drop 8,660 people from Medicaid. In addition, North Carolina lawmakers are considering a proposal to eliminate Medicaid benefits for 65,000 dual eligibles in 2006, according to the study.

In response to the study, CMS spokesperson Gary Karr said the report's findings are inaccurate, noting that no state lawmakers are quoted as saying that language related to the provision prompted them to enact Medicaid cuts (California Healthline, 7/7).

The Senate Finance Committee aide on Thursday also noted that Families USA attributes the loss of Medicaid coverage in Mississippi, Florida and Missouri to the 2003 Medicare law in general, rather than focusing on the clawback provision. "We believe the [Medicare Modernization Act] benefit far exceeds what was being provided in the vast majority of states and certainly covers a far larger population than is currently receiving coverage today," the aide said.

He also "challenged" the study's argument that the planned Medicaid cuts are attributable to the clawback provision itself, adding that the percentage states will be required to pay back to the federal government ultimately will fall from 90% to 75%, CQ HealthBeat reports. "We feel there is no argument to be made that this is not, ultimately, a good deal for the states," the aide said, adding that "as of now, we have yet to see any convincing evidence that any states will lose money under the clawback formula for 2006."

He noted, however, that lawmakers "remain open to conversation with anyone who wants to show us that is the case."

The aide also said that Medicaid cuts are a reaction to fiscal problems that preceded the 2003 Medicare law. "[W]e are still researching the specific states" mentioned in the Families USA report, he said, adding, "However, we feel pretty strongly that Families USA is missing the point. State fiscal crises are not new -- they existed before the MMA. That is why they are looking to lessen coverage for optional populations ... not because of the clawback."

One unnamed state official agreed with the aide's statements, saying, "For all the legitimate problems that states have with the clawback, it simply isn't the reason states are cutting back." He added, "They are doing so for two other reasons: With a Medicare benefit, the need for the Medicaid benefit was lessened. Reason two: state budgets. Keep in mind that these states had expanded coverage to this population beyond what any other states had done ... and now they're being criticized for having to pare back to the national norm?"

Regardless of the impact of the 2003 Medicare law, a number of states could consider reducing coverage for dual eligibles because that is "where the money is," NGA Executive Director Raymond Scheppach said. He added that NGA will lobby for a fix to the repayment formula in the provision (CQ HealthBeat, 7/7).

Additional information on the Medicare drug benefit is available online.