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From the CQ Newsroom: HHS Plan to Cover Medicare Drug Costs that Some States Have Shouldered

JANUARY 24, 2006 -- The Bush administration announced Tuesday that either insurance plans or the federal government will reimburse states that have stepped in to pay for medications for low-income seniors enrolled in the new Medicare drug benefit. The Health and Human Services Department will assist states with recouping their costs, said HHS Secretary Michael O. Leavitt. The government will pay the states whatever they cannot recover from insurance companies, he said.

More than 20 states have stepped in to pay such costs since Jan. 1, when low-income seniors began reporting problems obtaining prescription medications under the new Medicare drug program. These beneficiaries, known as "dual eligibles" because they qualify for both Medicare and Medicaid, had received drug coverage under Medicaid. In anticipation of the rollout of the new drug benefit, they were automatically enrolled in a private drug plan through Medicare. On Jan. 1 Medicaid no longer covered this group, and some seniors who were supposed to receive drug coverage under Medicare were turned away or forced to contribute high co-payments because pharmacies had incomplete or inaccurate information.

Funding for states' payments would come from the part of the HHS budget that funds Medicare demonstration programs.

Tuesday's White House announcement follows criticism from congressional Democrats about the drug benefit implementation—and appeals from governors in both parties to help cover states' drugs costs while the federal program is sorted out.

A group of Democratic senators—including John D. Rockefeller IV of West Virginia, Debbie Stabenow of Michigan, Frank R. Lautenberg of New Jersey and New Yorkers Charles E. Schumer and Hillary Rodham Clinton—introduced legislation last week that would require the federal government to reimburse states.

'We Don't Need Legislation'
Centers for Medicare and Medicaid Services (CMS) administrator Mark McClellan emphasized that Congress does not need to act to remedy the problems. The process of getting reimbursements to states "can start right away," he said. "We don't need legislation."

Under the proposal released Tuesday, HHS will require states to stop covering costs for Medicare patients by Feb. 15.

Leavitt and McClellan also compiled a list of seven aspects of the drug law (PL 108-173) that need improvement, saying they were working to quickly alleviate problems and prevent glitches.

Among the areas needing attention are a smoother data transmission of patient information to the private plans, more customer service personnel at Medicare and at private health plans, and a stronger surveillance to ensure drug plans are complying with the law.

To remedy these and other problems, the agency has increased outreach to pharmacists and states, and has been closely monitoring the program.

Leavitt said there could be another round of problems beginning Feb. 1 if new information for seniors who changed their plan in late January had not yet reached all the databases.

Because of potential problems later in the year, some members have suggested delaying the May 15 deadline for all Medicare beneficiaries to enroll in a plan without an added late fee. Republican Sen. Olympia J. Snowe of Maine introduced a bill (S 2168) that would extend that date by six months.

But Finance Committee Chairman Charles E. Grassley, R-Iowa, said there was no need to push back that deadline. "CMS can fix these problems using its authority under the law and can do it faster than if Congress comes in and changes the law," he said. Members of his committee will meet with Leavitt and McClellan Wednesday morning.

"Any time you make a change this big in a small amount of time, there's bound to be some problems," Leavitt said. "Every day the system is getting better."

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