Pharmacy plus: the perfect cure? States are experimenting with using medicaid to cover drug costs for the "not-quite-so-poor".

If seniors 65 and over have reasonable care under Medicare, but lack vital prescription drug coverage, can Medicaid make up the difference?

Last year, three states were determined to find out. connecticut, Illinois and Maryland each enacted laws that defied traditional thinking and requested matching federal funds for a "stand alone," pharmacy-only benefit plan under a Medicaid 1115 demonstration waiver. The intent was to serve the not-quite-so-poor, those with retirement incomes up to $17,720 or in the Illinois case up to $28,000 for an elderly couple. The states filed waiver requests, with some hope, but no guarantees.

In January 2002, the answer emerged. Health and Human Services Secretary Tommy Thompson personally announced the approval of the Illinois Senior Rx program, and declared that Medicaid would help cover all people 65 or over with incomes between 100 percent and 200 percent of the federal poverty level. The 50 percent federal matching reimbursement meant a potential savings to the state of up to $75 million. HHS calculated that up to 368,000 people could benefit in Illinois alone.

The administration went one bold step further. Unlike previous "single-state demonstrations," Thompson announced that Illinois was the start of a new coast-to-coast model, named Pharmacy Plus. States were encouraged to apply, using simplified rules published in template form. Suddenly, the once-dreaded waiver process was user friendly!

Not surprisingly, state reactions varied. South Carolina and Wisconsin applied within days. But other states with state-funded programs were worried about fine print requirements. The Medicaid programs had to expand coverage without costing more and somehow ensure primary care coverage for enrollees. Was this really a federal entanglement that could bust budgets in the midst of the latest revenue shortfalls?

In July, four more states were approved. Florida was permitted to cover people with incomes up to only 120 percent of federal poverty. Maryland was allowed to have an assets test and a discount program where enrollees pay 65 percent out of pocket. Wisconsin was granted the authority to include copayments up to $15 per prescription, a feature never permitted in "traditional" Medicaid. For just these five states, HHS calculates that up to 740,000 people could be served.

By late fall, seven additional states had filed Pharmacy Plus waivers, and two others have legislative declarations favoring the process.

"We are hopeful about the prospects of this waiver," says Rhode Island Senate President William Irons. "It will allow us to use Medicaid matching funds to help reduce the out-of-pocket cost of medications for lower income elderly and disabled people. It also would expand the scope of medicines available to participants in the Rhode Island Pharmaceutical Assistance for the Elderly Program. The waiver also builds in medical exams and pharmacy coordination components that will help decrease medication errors."

Rhode Island hopes to combine three existing state-funded groups and get a 55 percent federal matching fund rate. The state would still cover a smaller group with higher incomes, up to $31,120.

"This waiver program should be a win-win for the people of Rhode Island," Irons says.

New proposals are emerging for 2003. Montana Senator Fred Thomas announced a bill to establish a new program, using earmarked tobacco settlement funds. He says it "promises to be one of the best market-based and significant assistance programs in the nation," aimed at serving up to 25,000 seniors. In West Virginia, early exploration about creating a subsidy program made headlines statewide.

Pharmacy Plus plans have another unusual advantage--they have not attracted industry opposition. PhRMA (Pharmaceutical Research and Manufacturers of America) attorney Jan Faiks says that the brand name pharmaceutical manufacturers have "no position" on the program, although they have concerns that spreading restrictions, such as Medicaid prior authorization, "could hinder seniors' access to the best medicines."

With congressional leaders newly determined to create a pure Medicare prescription drug benefit, is Pharmacy Plus soon to be just a footnote? Perhaps not. Some of these states already provide a more generous low-income benefit than envisioned federally. If so, these state-inspired, HHS endorsed waivers may be a lasting bridge for one group of older Americans.

For the latest developments, see the NCSL Report at www.ncsl.org/programs/health/pharmplus.htm

STATES WITH PHARMACY PLUS PLANS

State           Status         Eligibility/benefit       Est. enrollees

Arkansas        Filed     85-100% federal poverty level      5,800

Connecticut     Filed      200% federal poverty level

Florida         Approved   120% federal poverty level;       68,000
                               $160 month maximum.

Illinois        Approved   200% federal poverty level;      368,000
                             $1,750 annual maximum.

Indiana         Filed      135% federal poverty level        30,000

Maine           Filed

Maryland        Approved   175% federal poverty level;       90,000
                                 state pays 35%

Massachusetts   Filed      188% federal poverty level

New Jersey      Filed      200% federal poverty level

Rhode Island    Filed      200% federal poverty level        30,000

South Carolina  Approved   200% federal poverty level;       26,000
                              $500 annual maximum.

Wisconsin       Approved   200% federal poverty level;      177,000
                              $500 annual maximum.

Note: Federal poverty level is $8,860 for individual; $11,940 for a
couple.

Source: NCSL, Nov. 2, 2002.

Richard Cauchi covers health insurance and managed care issues for NCSL.