New Medicare Drug Law Puts Lowest-Income

Key Provision of New Medicare Law Prompts States to Save Money by

Washington, D.C. -  A key provision of the Medicare Modernization Act (MMA) will cause serious—and perhaps irreparable—harm to many of the lowest-income elderly and people with disabilities, according to a special report issued today by the national consumer health organization Families USA.

Those most at risk of losing essential health care services are the 6.4 million low-income individuals who receive both Medicare and Medicaid, also known as "dual eligibles."

On January 1, 2006, when the MMA is implemented, dual eligibles will begin receiving drug coverage through the Medicare drug benefit rather then through Medicaid. In order to help finance the new drug benefit, states are required to pay the federal government most of the savings that they would realize from no longer having to provide drugs to dual eligibles in their Medicaid programs. This provision is called the "clawback" payment because the federal government is seen as "clawing back" the savings that would otherwise have accrued to the states.

"The clawback formula creates a perverse incentive to cut the poorest of the poor off the Medicaid program because that is the only way states can reduce their payments to the federal government," said Ron Pollack, Executive Director of Families USA. "Unfortunately, this will threaten the health and well-being of the most vulnerable elderly and people with disabilities."

Three states—Florida, Mississippi, and Missouri—have already announced plans to reduce or eliminate Medicaid coverage for some or all elderly enrollees and people with disabilities, and at least one other state—North Carolina—is considering similar cuts.

Although there is no way to predict which states will follow the lead of Florida, Mississippi, and Missouri in cutting enrollees, it is highly likely that other states will at least consider such cuts as they look for ways to reduce spending.

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Families USA is the national organization for health care consumers. It is nonprofit and nonpartisan and advocates for high-quality, affordable health care for all Americans.

1201 New York Avenue NW, Suite 1100 · Washington, DC 20005
202-628-3030 · Email: info@familiesusa.org · www.familiesusa.org