Good Ideas: How Medicaid Agencies Can Help People Enroll in Medicare Part D Low-Income Subsidies
Raising income guidelines for the Medicare Savings Programs to 150 percent of poverty will simplify state applications and eligibility determination procedures for the Medicare Savings Programs and Part D low-income subsidies.
Introduction
State Medicaid agencies currently administer a key benefit for low-income Medicare beneficiaries: the Medicare Savings Programs that help them pay their Medicare Part B expenses. Under the Medicare Modernization Act (MMA), state Medicaid agencies
have a new obligation with the Medicare Part D prescription drug benefit in that they must accept applications for low-income subsidies. These subsidies will assist eligible Medicare beneficiaries in paying premiums for the drug plans as well as in paying the cost-sharing expenses (co-payments and deductibles) for prescription drugs. When Medicare beneficiaries apply through their states for the new low-income subsidies starting in July 2005, states must also screen them for Medicare Savings Program eligibility. The Medicare Savings Programs have slightly lower-income eligibility guidelines than the low-income subsidies under federal minimum requirements, but states have some flexibility to raise those guidelines. States can streamline and automate their application and eligibility determination processes for the low-income subsidies, thereby helping beneficiaries and saving state money, by raising the eligibility guidelines for the Medicare Savings Programs. This is because all Medicare Savings Program beneficiaries are deemed eligible for the low-income subsidies by the federal government and do not need to file separate applications.
What Are Medicare Savings Programs?
Medicare Savings Programs provide to eligible Medicare beneficiaries assistance in paying Medicare Part B premiums and, in some cases, Medicare cost-sharing. The programs are administered by state Medicaid agencies under federal guidelines and consist of several categories of beneficiaries.
(1) Qualified Medicare Beneficiaries (QMBs) have their Medicare Part B premiums paid through federal and state Medicaid matching funds. If they see providers who accept state Medicaid rates, QMBs do not have to pay Medicare cost-sharing for services.
(2) SLMBs also have their Medicare Part B premiums paid by federal and state Medicaid-matching funds. However, SLMBs are still responsible for Medicare cost-sharing, which is typically 20 percent of Medicare-approved charges for doctor visits.
(3) Qualified Individuals (QIs) have their Medicare Part B premiums paid through a federal block grant to state Medicaid agencies. However, QIs are still responsible for Medicare cost-sharing and if the state exhausts its block grant funds, the state is not required to continue paying premiums for QIs.
In determining eligibility for the Medicare Savings Programs, under federal rules, all states must disregard at least $20 of monthly unearned income and at least $65 of monthly earned income and half of remaining earnings. States must use at least the following income eligibility guidelines:
QMBs—100 percent of the federal poverty guideline;
SLMBs—120 percent of the federal poverty guideline; and
QIs—135 percent of the federal poverty guideline.
For all three of these programs, states must use resource (asset) limits of at least $4,000 for an individual, $6,000 for a couple.
States have the option of increasing these income and resource eligibility guidelines to make more people eligible by disregarding more income or resources, that is, in the language of the law and regulations, by “using a less restrictive methodology” for counting income and resources.
What Are the Part D Low-Income Subsidies?
Medicare Part D provides access to prescription drugs through private plans for Medicare beneficiaries. Medicare beneficiaries with limited incomes and resources can receive extra help in paying the premiums for these Medicare Part D private prescription drug plans and with standard cost-sharing expenses (co-payments and deductibles) that are part of the plans. Though the level of assistance varies by income, Medicare beneficiaries with incomes up to 150 percent of the federal poverty guideline and limited resources will be eligible for some level of subsidy. The resource limits are $10,000 for a single person or $20,000 for a married couple.
Medicare beneficiaries who have either full Medicaid or QMB, SLMB, or QI coverage are deemed eligible for the low-income subsidy.
This means that they will get the subsidies automatically and do not need to file an application for the subsidy program. The data state Medicaid agencies submit to CMS will be used to give full duals and Medicare Savings Program beneficiaries the subsidies automatically. Medicare beneficiaries who are not either Medicaid or the Medicare Savings Programs recipients (such as people with incomes between 135 percent and 150 percent of poverty) must apply for the low-income subsidies. They can apply through either the Social Security Administration (SSA) or their state Medicaid agencies. If an individual is found eligible for the subsidy, the federal government will subsidize drug and premium expenses after the individual enrolls in a Part D plan.
Why Might States Want to Simplify Eligibility Guidelines for the Medicare Savings Programs and Part D Low-Income Subsidies?
If states do not raise the Medicare Savings Program eligibility guidelines, states will need to manage simultaneously two eligibility determination processes for low-income subsidy applicants: one process for people with incomes between 135 percent of poverty and 150 percent of poverty who can receive the low-income subsidies for prescription drug coverage and another application and eligibility determination process for people with incomes between 100 percent and 135 percent of poverty who can get help with their Medicare premiums under the Medicare Savings Programs and be automatically deemed eligible for the low-income subsidy for prescription drug coverage. This compounds the state’s tasks of processing applications, training workers, and providing outreach and education to prospective beneficiaries. However, there is a simple solution to this administrative complexity that streamlines the application process, helps state residents, and saves states money.
How Can Raising Income Eligibility for the Medicare Savings Programs to 150 Percent of the Federal Poverty Level Help States and Residents?
States can save the expense of hiring and training eligibility workers to process subsidy applications if they raise the income guidelines for the Medicare Savings Programs to 150 percent of the federal poverty guidelines. Because all Medicare Savings Program beneficiaries are deemed eligible for low-income subsidies under Part D, by making the guidelines for the Medicare Savings Programs as generous as eligibility guidelines for the low-income subsidies, states can eliminate the need for a separate Medicare Part D low-income subsidy application process.
Once the state finds applicants eligible for the Medicare Savings Programs, the federal government will automatically deem them eligible for low-income subsidies. The District of Columbia is considering this approach and has estimated that its cost for expanding QMB eligibility would be about $42,000 the first year compared to its costs of operating a stand-alone eligibility process for low-income subsidies that could be several hundreds of thousands of dollars a year.
Which Eligibility Guidelines Should the State Raise: QMB, SLMB, or QI?
States may be most interested in raising their QI guidelines to 150 percent of the federal poverty guideline, especially if they are not now using their full QI allotment, because the QI program is entirely federally funded. There are two potential disadvantages to this approach. First, the QI program is scheduled to sunset under federal law. It has been extended numerous times under Congressional resolutions, but its future fate is always uncertain. Secondly, CMS has said that any disregard that is applied to the QIs or SLMBs must also be applied to the QMBs. Thus if states increase income guidelines for the QI program by $100 per month, they would also need to increase income guidelines for the QMB program by $100 per month.
CMS has stated that if states raise their QMB income guidelines to 150 percent of poverty, they can subsume SLMB and QI beneficiaries in the QMB program and not raise the income guidelines for those two programs. In other words, in a state that raised the QMB income eligibility level to 150 percent of the federal poverty guideline, all Medicare Savings Program beneficiaries would be QMBs. This provides the simplest formula for streamlining eligibility. One possible shortcoming with this approach is that the expenses of the expanded coverage would be shared by the state and the federal government according to the Medicaid matching formula. However, depending on the number or Medicare beneficiaries with incomes between 120 and 150 percent of the federal poverty guideline in the state and the state’s Medicaid matching rate, this may be a fairly small additional expense.
What Documents Does a State Need to File in Order to Increase Income Guidelines for the Medicare Savings Program to 150 percent of the Federal Poverty Level?
States need to amend their state Medical assistance plans to disregard additional income in order to raise eligibility levels of Medicare Savings Program beneficiaries to 150 percent of the federal poverty guideline, and state plan amendments must be submitted to CMS for approval. A sample state plan amendment (as well as the relevant section of its Supplement 8b to Attachment 2.6A) has been discussed with CMS. Depending on state law and the state’s administrative procedures act, a state may also need to pass specific state legislation, propose a regulatory amendment, or get approval from state legislators as part of a budget submission in order to raise income eligibility guidelines. One state agency’s justification for such a request serves as an example.
In practice, state Medicaid agencies may delegate the function, for example, to the state’s social service or public assistance department, but the Medicaid agencies remain ultimately responsible.
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Another category, Qualified Working Disabled Medicare beneficiaries, is not discussed in this paper because this group is not deemed eligible for low-income subsidy assistance under Medicare Part D.
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Section 1902(r)(2) of the Social Security Act and 42 CFR 435.601 say that a state can use methods for determining income and resource eligibility for QMBs, defined in 1905(p) of the Social Security Act, that are less restrictive, but not more restrictive, than those used in the SSI program. The SSI program does not count $20 of monthly unearned income or $65 of monthly earned income and also does not count certain kinds of resources, so at a minimum, states must apply these disregards when determining QMB eligibility. States can thus disregard more income than the required $20 and $65 and/or disregard additional resources to effectively raise QMB eligibility. Section 1902(a)(10)(E) (iii) and (iv) of the Social Security Act provide for the payment of Medicare Part B premiums for people who would be qualified Medicare beneficiaries except that their incomes are over the state’s threshold but below 120 percent of poverty, and for people who would be qualified Medicare beneficiaries except that their incomes are between 120 and 135 percent of poverty.
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Full duals who have full Medicaid coverage as well as Medicare are deemed eligible even if they do not meet the income guidelines above. This may be the case, for example, for some nursing home residents and other people with extremely high medical expenses.
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Correspondence between Marguerite Clark, CMS, and Brian Haile, Income Maintenance Administration, D.C. Department of Human Services. Also see footnote 3. In May 2001, CMS issued guidance saying that states could apply income disregards selectively to any eligibility group, and that QMBs, SLMBs and QIs were distinct eligibility groups (http://www.cms.hhs.gov/medicaid/eligibility/elig0501.pdf.) Subsequently, CMS changed its interpretation after the Office of the General Counsel reviewed the statutory construction of the three programs, although there is no new written guidance. CMS's current position is that states can apply income disregards to QIs and QMBs; SLMBs and QMBs; QMBs only; or all three programs. (Oral information from Roy Trudel, CMS, April 19, 2005.)
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Prepared by the Health Assistance Partnership
April 2005
