D.  Changes affecting Dual-Eligibles

The QMB, SLMB, and PACE provisions of the BBA all relate to the low income Medicare beneficiary population commonly referred to as dually eligible.  That is, they are eligible for Medicare Parts A and/or B, and for some payment from Medicaid.  This population of nearly 6 million individuals has received increased attention by policymakers in recent years, as they have both high health care needs and high health care costs.

1.  Capped Expansion of the Specified Low-Income Medicare Beneficiary (SLMB) program

Under provisions already in law, state Medicaid programs must pay the Medicare Part B premium for Medicaid beneficiaries who have incomes between 100 percent and 120 percent⁽²⁵¹⁾ of the federal poverty level and who have resources not more than $4,000 for an individual.⁽²⁵²⁾  The program is an entitlement: upon application, all who are eligible are entitled to the benefit.

Under the Balanced Budget Act, Medicare premiums will rise at a faster rate than they would have under prior law: whereas the premium would have been $51.50 per month in the year 2002, the BBA provisions raise it to $67 per month.⁽²⁵³⁾  To alleviate the burden of higher Part B premiums on the poorest Medicare beneficiaries, the BBA expands the existing premium benefit by allocating an additional $1.5 million to states over the next five years to provide coverage for individuals with incomes between 120 percent and 135 percent of poverty⁽²⁵⁴⁾ and to pay a small portion of the Part B premium for those with incomes between 135 percent and 175 percent⁽²⁵⁵⁾ of poverty.⁽²⁵⁶⁾   The new benefits are reimbursable to the states from the federal government at 100 percent, rather than at the state's regular rate of federal financial participation.⁽²⁵⁷⁾

The new benefit, however, is extremely limited.  First, while the pre-exisiting SLMB program is and remains an entitlement, the new, expanded benefit will be allotted on a first- come, first-served basis, with those receiving benefits at the end of one year being in a preferred position to receive the benefits the following year.⁽²⁵⁸⁾  This requirement raises the grim specter of frail elderly and disabled individuals camped out on the doorsteps of their state Medicaid eligibility offices on January 1 in order to be first in line on January 2.  Second, although Medicare Part B premiums will continue to increase indefinitely into the future, expanded premium coverage for low-income beneficiaries is authorized for only five years.⁽²⁵⁹⁾  Third, for beneficiaries with incomes between 135 percent and 175 percent of poverty, the amount of the new benefit is limited to that portion of the Part B premium attributable to moving the Medicare home health benefit from Part A to Part B.⁽²⁶⁰⁾  According to the Congressional Budget Office, the actual value of expanded premium protection for this group will be only $1.20 per month in 1998 and $8.10 per month in 2002, when the benefit ends.⁽²⁶¹⁾  Finally, many states do not have simplified application procedures, such as short forms or phone or mail applications, in effect for the buy-in programs.⁽²⁶²⁾  The complexity of the process coupled with the limitations of the new benefit is likely to result in extremely limited use of the benefit.⁽²⁶³⁾  Advocates are presented with the opportunity to work with their states to streamline the process.

2.  Expansion of Program of All-Inclusive Care for the Elderly (PACE) in Medicare and Medicaid

PACE (Programs of All Inclusive Care for the Elderly) is a small demonstration program that beginning in 1986 granted waivers of certain Medicare and Medicaid requirements to not more than 10 non-profit private community-based organizations to provide health and long-term care services on a capitated basis to frail elderly persons at risk of institutionalization.   PACE was modeled after an earlier demonstration program, On Lok in California, and was expanded in 1990 to a total of 15 programs.  The BBA authorizes PACE programs under Medicare and replaces the existing Medicaid waiver for PACE programs with a Medicaid option.⁽²⁶⁴⁾
 
a.  Expansion; for-profit demonstrations

The BBA allows for the expansion of the number of not-for-profit PACE programs starting with a baseline of 40 as of the date of enactment and adding up to 20 each year thereafter.  An additional demonstration for 10 for-profit entities also is authorized.  After four years from enactment, for-profit entities will not be prohibited from being PACE providers unless the Secretary finds, in a report submitted to the Congress, that program expenditures are higher than they would have been without the demonstrations or that, compared with not-for- profit or public programs, the numbers enrolled are significantly smaller, the population is less frail, or access or quality is lower.

b.  PACE eligible individual

Individuals are eligible for PACE if they are 55 years old or older, require a nursing facility level of care, reside in the service area of the PACE program and meet any other eligibility criteria imposed under a PACE agreement.⁽²⁶⁵⁾  Although much of prior PACE experience has revolved around serving those who are dually-eligible for Medicare and Medicaid, the new law does not require that an individual must be eligible for both programs to be eligible for PACE.⁽²⁶⁶⁾   Nonetheless, since states are interested in developing programs to serve the dually-eligible population and to lower Medicaid expenditures for this costly and needy population,⁽²⁶⁷⁾ it is likely that most participants in PACE will be dually-eligible.

c.  Scope of Benefits

PACE providers must provide all benefits covered by Medicare and Medicaid, but without the Medicaid requirements for sufficiency of amount, duration and scope and without Medicare and Medicaid requirements for deductibles, co-insurance and co-payments.  They also must provide services specified in regulations, based on the PACE protocol, a document published by On Lok, Inc as of April 14, 1995 or any successor document.  The services must be available 24 hours a day, 365 days a year and must be provided through multidisciplinary health and social services systems that integrate acute and long-term care services.⁽²⁶⁸⁾

d.  Beneficiary Safeguards

PACE providers must have quality assurance systems in effect and must have a patient bill of rights and grievance and appeals procedures that accord with federal regulations and federal and state law.⁽²⁶⁹⁾

e.  Eligibility Determinations

The Secretary of HHS or, for Medicaid, the "state administering agency" (which may or may not be the Medicaid agency) determines eligibility for PACE according to regulations and the requirements in effect under the PACE demonstration waiver programs that predate the BBA.⁽²⁷⁰⁾  Most individuals must be reevaluated annually except those for whom there is "no reasonable expectation of improvement or significant change in . . . condition. . ."⁽²⁷¹⁾

f.  Enrollment/Disenrollment

An enrollee can disenroll at any time without cause; the PACE program can only disenroll an individual for non-payment of applicable premiums or "for engaging in disruptive or threatening behavior, as defined in . . . regulations," but cannot disenroll for "noncompliant behavior if such behavior is related to a mental or physical condition of the individual."⁽²⁷²⁾  The terms "disruptive or threatening" and "noncompliant" are both subject to regulations to be developed by the Secretary in consultation with the States; advocates will want to pay particular attention to these definitions.

g.  Payments to PACE providers

Providers are paid on a capitated basis similar, for Medicare enrollees, to the basis used under current Medicare risk contracts or, beginning January 1, 1999 that used for Medicare+Choice providers.  Payments under both Medicare and Medicaid will be adjusted for the comparative frailty of the PACE population, but the total amount paid must be less than would be spent for a comparable population not enrolled in PACE.⁽²⁷³⁾

h.  Data Collection and Development of Outcome measures

PACE program agreements shall required the provider to collect data and maintain records, including financial, medical and personnel records that are available to the Secretary and the state agency.  In addition, during its first three years as a PACE provider, the provider must provider additional data as specified by the Secretary in regulations.⁽²⁷⁴⁾  The Secretary, the state and the PACE provider together will develop and implement health status and qualify of life outcome measures for eligible individuals.

i.  Oversight and Termination of PACE agreements

Under both Medicare and Medicaid, during the first three years (the trial period) of a PACE provider's operation of a PACE program, the Secretary conducts comprehensive annual reviews including an on-site visit, assessment of fiscal soundness, assessment of capacity of provider to provide all services to all enrollees, analysis of substantial compliance with program requirements and regulations and any other elements the Secretary and the state agency deem appropriate.⁽²⁷⁵⁾  After the trial period, the Secretary's review of programs is undertaken as appropriate, taking into account the provider's performance and compliance.⁽²⁷⁶⁾  The results of review of PACE providers shall be made available to the public upon request.  Advocates should not that the standard for review after the first three years is extremely vague and discretionary to the Secretary; consumer diligence will be required to alert federal and state officials to program problems of which they may not otherwise become aware.

The PACE provider may terminate an agreement after "appropriate notice" to the Secretary, the state and enrollees.  Under procedures outlined in the law, the Secretary or state agency may terminate a PACE agreement for cause, including the existence of significant deficiencies in quality of care or failure to comply substantially with program requirements if the provider has not developed or initiated a plan of correction.⁽²⁷⁷⁾  In addition, under certain conditions, the Secretary and the state agency have a range of sanctions available to them: requiring a corrective action plan, withholding some or all future payments, imposing civil penalties, or denying payment for new enrollees.⁽²⁷⁸⁾

j.  Regulations

Although the statutory provisions are fairly detailed, they also direct the development of regulations in at least sixteen different places.  Advocates will want to participate in the regulatory process in many of these areas, to ensure the best protections for program beneficiaries.
 

E.  Treatment of Veterans' Pensions under Medicaid

Under provisions already in law, veterans in a private nursing home eligible for Medicaid who have no spouse or child and are eligible for a VA pension receive a pension of only $90, all of which they are permitted to retain as a personal allowance.⁽²⁷⁹⁾  This provision was due to expire in 1998, but has been extended by the BBA to September 30, 2000.⁽²⁸⁰⁾  In addition, the BBA provides that veterans living in state operated nursing homes that receive reimbursement from the Veterans Administration will also have a $90 personal allowance.⁽²⁸¹⁾  This latter provision states that, in the case of  veterans in state operated nursing homes receiving VA payments who do not have a spouse or child, any VA pension payment, including Aid & Attendance (A & A) and Unreimbursed Medical Expenses (UME), in excess of $90 per month will be counted as income for the purpose of applying such excess payment to the cost of the nursing home in the state veteran's home.
 
By contrast, when the veteran has a spouse or child in the community, HCFA has ruled that A & A and UME benefits are not income for any purpose and are not third party liability payments, and all states have been so notified.⁽²⁸²⁾  However, a number of states have refused to conform to the HCFA ruling.  The BBA amendment codifies HCFA's ruling by stating that A & A and UME are income only if there is no spouse or child.

251. The federal poverty level for a single individual in 1997 is $9780 (including a $240 income disregard). back to text

252. 42 U.S.C. 1396a(a)(10)(E). back to text

253. Congressional Budget Office Budgetary Implications of the Balanced Budget Act of 1997 (August 12, 1997) at 40. back to text

254. $10,982 in 1997 including the disregard. back to text

255. $14,048 in 1997 including the disregard. back to text

256. BBA § 4732(a) (amending Social Security Act Section 1902(a)(10)(E), to be codified at 42 U.S.C. § 1396a(10)(E)(iv)). back to text

257. BBA § 4732(d) (amending Social Security Act Section 1902(a)(10)(E), to be codified at 42 U.S.C. § 1396a(10)(E)(iv)). back to text

258. BBA § 4732(c) (adding new Social Security Act § 1933. The law explicitly states that "except as provided in this section," the benefit is not an entitlement to any individual. BBA § 4732(e).  The law also says, in a section headed "Selection of Qualifying Individuals" that "all qualifying individuals may apply."  Id.  This phrase is confusing as it suggests that one's eligibility is determined before an application is filed; in contrast, other provisions of Medicaid law require states to ensure that "all individuals wishing to make application for medical assistance" can do so.  42 U.S.C. § 1396a(a)(8). back to text

259. BBA § 4732(c) (adding new Social Security Act § 1933(c).  Part B premiums will increase more after the end of the five year period of expanded premium protection than they will during it.  For example, the year 2002 premium increase is 30% higher than it would have been under pre-existing law, but the 2007 increase is 77% higher.  Similarly, the portion of the premium attributable to the home health changes is 3% of the premium in 1998, 12% in 2002, and 15% in 2007. back to text

260. BBA § 4732(a) (amending Social Security Act § 1902(a)(10)(E), to be codified at 42 U.S.C. 1396a(a)(10(E)(iv)(II)). back to text

261. Congressional Budget Office, Budgetary Implications of the Balanced Budget Act of 1997, August 12, 1997 at 40. back to text

262. See T. Nemore, Variations in State Medicaid Buy-in Practices for Low-Income Medicare Beneficiaries, a report prepared for the Henry J. Kaiser Family Foundation, to be released October 1997. back to text

263. The current SLMB benefit is estimated to be used by only 10 percent of those eligible for it. See Marilyn Moon, Crystal Kuntz, and Laurie Pounder, Protecting Low-Income Medicare Beneficiaries, The Urban Institute, December 1996, at 11. back to text

264. BBA § 4801 amends Title XVIII of the Social Security Act by adding a new section 1894;  All subsequent references to the Medicare PACE program in this discussion will cite to section 1894.  Section 4802 amends Title XIX of the Social Security Act by redesignating section 1934 as section 1935 and inserting after section 1933 a new section 1934.  All subsequent references to the Medicaid PACE program in this discussion will cite to section 1934. back to text

265. BBA §§ 4801, 4802 (adding Social Security Act § 1894(a)(5) [Medicare] and  § 1934(a)(5) [Medicaid], respectively). back to text

266.  Id. (adding Social Security Act § 1894(a)(1) [Medicare] and § 1934(a)(1) [Medicaid], respectively). back to text

267. Dually eligible individuals are among the most costly of both Medicare and Medicaid beneficiaries.  They comprise 16% of Medicare beneficiaries and use 30% of Medicare dollars; they comprise 17% of Medicaid beneficiaries and use 35% of Medicaid dollars.  About 4.1 million (71%) of them are age 65 or older; the rest are under 65 and disabled.  They are generally in worse health than Medicare beneficiaries with higher incomes.  For example, dually eligible individuals are nearly twice as likely to self-report fair to poor health as other Medicare beneficiaries, and nearly twice as likely to have used an emergency room in the past year.  They are three times more likely to have needs for assistance due to functional impairments in activities such as dressing, eating and bathing.  Medicare expenditures for them are 70% higher than for Medicare beneficiaries who are not dually eligible. back to text

268. BBA §§ 4801, 4802 (adding Social Security Act § 1894(b)(1) [Medicare] and § 1934(b)(1) [Medicaid], respectively). back to text

269. Id. (adding Social Security Act § 1894 (b)(2) [Medicare] and § 1934(b)(2) [Medicaid], respectively). back to text

270. Id. (adding Social Security Act § 1894(c) [Medicare] and § 1934(c) [Medicaid], respectively). back to text

271. Id. back to text

272. Id. (adding Social Security Act § 1894(c)(5)(B)(i) and (ii) [Medicare] and § 1934(c)(5)(B)(i) and (ii) [Medicaid], respectively). back to text

273. Id. (adding Social Security Act § 1894(d) [Medicare] and § 1934(d) [Medicaid], respectively). back to text

274. Id. (adding Social Security Act § 1894(e)(3)(A) [Medicare] and § 1934(e)(3)(A) [Medicaid], respectively). back to text

275. Id. (adding Social Security Act § 1894(e)(4)(A) [Medicare] and § 1934(e)(4)(A) [Medicaid], respectively). back to text
 

276. Id. (adding Social Security Act § 1894(e)(4)(B) [Medicare] and § 1934(e)(4)(B) [Medicaid], respectively). back to text

277. Id. (adding Social Security Act § 1894(e)(5)(A) & (B) [Medicare] and § 1934(e)(5)(A)&(B) [Medicaid], respectively). back to text

278. Id. back to text

279. 38 U.S.C. § 5503 (f). back to text

280. BBA § 8015 (amending 38 U.S.C. § 5503(f)(7)). back to text

281. BBA § 4715.(amending 42 U.S.C. § 1396a(r)(1), which addresses the post-eligibility treatment of income for Medicaid long-term care). back to text

282. Letter from Sally K. Richardson, Medicaid Director, HCFA, to Regional Administrators, April 11, 1996. back to text