Additional Subsidies Available to Some Low-Income Medicare Beneficiaries

Of the 40 million Medicare beneficiaries, at least 14 million will be eligible for extra financial help paying for their prescriptions when the new Medicare drug benefit begins on January 1, 2006. The drug benefit marks the first time that Medicare will pay for prescription drugs used outside of hospitals.

Based on income and asset guidelines, some beneficiaries will be eligible for at least partial discounts on monthly premiums, copayments and deductibles affiliated with the benefit.

The federal government is spending millions of dollars on mailings and counseling services to help people enroll in the benefit. But some patient advocates have raised concerns about the clarity and effectiveness of the messages. They say many of the people eligible for the additional benefits are among the most vulnerable, likely to have complex health problems and the most difficulty navigating a new asset test.

In fact, the Social Security Administration has just begun mailing the first wave of letters to beneficiaries who might be eligible for the additional subsidy.

About 6.3 million of the 14 million low-income Medicare beneficiaries are “dual eligibles,” people covered by both Medicare and Medicaid, called Medi-Cal in California.

To qualify for Medicare, beneficiaries must be at least 65 years old or have a disability that prevents them from working at any job for at least one year. Medi-Cal beneficiaries must meet income-eligibility guidelines set by California.Dual eligibles are people enrolled in both Medicare and Medi-Cal. Currently, they get all their drugs free through Medi-Cal. Starting January 1, they will get all their drugs supplied by Medicare, and there will be a new copay for each prescription, linked to their income.Under the new rules, dual eligibles will pay no premiums or deductibles, and the copay will not exceed $5 per prescription. CMS Administrator Mark McClellan has said that Medicare will cover about 98% of dual eligibles’ drug costs.When the drug benefit takes effect, Medicare will begin paying for dual eligibles’ prescriptions, a change in policy that will require all the bill-paying records for these people to be transferred to Medicare. If the transfer doesn’t go smoothly, the danger is that people may not get their drugs on time and paid for after January 1.

“Moving millions of people from one system to another is quite a challenge,” Bonnie Burns — a training specialist with California Health Advocates in Sacramento, a not-for-profit organization that works with groups throughout the state to counsel beneficiaries of public health insurance programs — said.

In addition, the Medicare Rights Center, a counseling and advocacy group based in New York, notes that dual eligibles “have higher rates of Alzheimer’s disease, diabetes, pulmonary disease and stroke than other people with Medicare. Nearly four in 10 have a mental or cognitive impairment.” This means a significant number of beneficiaries “may not be able to navigate program changes even if education and communication efforts are appropriately implemented for an older population,” according to the Medicare Rights Center.

To address such concerns, the rules for the Medicare drug benefit state that dual eligibles will be enrolled automatically in one of the many different plans being offered under the new prescription drug program in the fall of 2005. The open enrollment season for this first year runs until May 2006 and people will have the option of switching to a different plan from the one in which they were automatically enrolled.

In addition to dual eligibles, about 7.7 million other low-income Medicare beneficiaries can still receive additional help under the drug benefit. But they must pass an asset test, filling out a questionnaire mailed by the Social Security Administration. The amount of the subsidy is linked to financial assets — money in savings and checking accounts, stocks and bonds. The Congressional Budget Office has estimated that about 1.8 million people who would otherwise qualify on the basis of their income alone, will be ineligible for additional assistance because of the value of their assets.

It is likely that many of those ruled ineligible will be elderly widows with low incomes but some modest savings, according to a study for the Kaiser Family Foundation by Thomas Rice of the University of California-Los Angeles School of Public Health and consultant Katherine Desmond. “The most likely scenario is that when a husband dies, income plummets, making the widow potentially eligible for low-income prescription drug subsidies,” they wrote in the study. But the widow’s “accumulated assets exceed those allowed under the legislation.”

The starting point for financial help is that some form of assistance will be available to people with incomes that do not exceed 150% of the federal poverty level, an amount equal to $1,197 per month for a single person and $1,604 per month for a married couple.

For those with incomes up to 135% of the poverty line, the only charge for medications is a copay of $2 for a generic drug and $5 for a brand-name drug, provided that a single person does not hold assets worth more than $6,000 and a married couple does not hold assets worth more than $8,000, excluding a house, car and furniture. Single people with incomes ranging from 135% to 150% of the federal poverty level can qualify for some assistance if their assets are worth less than $10,000, while a couple in the same income bracket will be eligible for some assistance provided that their assets are not worth more than $20,000. This group will have to pay a monthly premium for the drug coverage on a sliding scale up to $35 a month, a $50 annual deductible and 15% copays on each prescription.

The application for financial aid is just the first hurdle. Later this year, when the federal government certifies the health plans and other vendors that will offer the new benefit, beneficiaries could be faced with letters and phone calls trumpeting the virtues of dozens of different Part D drug plans. And your assignment as a Medicare consumer will be to figure out which drug plan offers the medications you take at the best prices and participation by the pharmacy in your neighborhood.

Already, anxious Medicare beneficiaries “are calling, wanting to know who is selling what,” Bonnie Burns said. “But we can’t give them any information until later in the year.”

Information on Medicare in California is available at CalMedicare.org, a project of California Health Advocates.

The Kaiser Family Foundation study, “Low Income Subsidies for the Medicare Prescription Drug Benefit: The Impact of the Asset Test,” is available online.

The California HealthCare Foundation maintains an online resource center on the Medicare drug benefit.