The Centers for Medicare & Medicaid Services predicts that 10.9 mil. Medicare beneficiaries eligible for low-income assistance will enroll during the first year of the new outpatient prescription drug benefit.

During a July 26 press conference to unveil the Medicare Rx implementing regs, CMS highlighted the generous coverage offered under the low-income provisions of the new benefit - and the agency's determination to ensure that a large number of seniors are able to take advantage of it.

In the proposed rule, CMS estimates that 14.5 mil. beneficiaries, or about a third of all Medicare recipients, will be eligible for low-income subsidies in 2006. Beneficiaries with incomes below 150% of the poverty line are eligible for the low-income assistance.

Of the 14.5 mil. who qualify, 6.4 mil. are dual eligibles currently covered under Medicaid. Those beneficiaries will be automatically enrolled in a Medicare prescription drug plan.

The agency predicts that about half of the remaining 8.1 mil. low-income beneficiaries will enroll in the benefit the first year.

"While we assume 100% uptake among full-benefit dual eligibles...we assume that roughly 56% of other beneficiaries who are eligible for the low-income subsidy will choose to enroll in it," the proposed rule on the Part D drug benefit states.

"We assume less than full uptake of the low-income subsidy among these beneficiaries based on experience with other means tested programs such as Medicaid and Medicare Savings (QMB/SLMB) programs, which suggests that full take-up does not generally occur."

CMS notes that "it can be difficult to project enrollment rates in this entirely new program."

The agency's projections for enrollment in the Medicare drug discount card program illustrate that difficulty.

So far, CMS has only enrolled about half the number of seniors expected to sign up for the discount card. Among low income seniors (who are eligible for up to $1,200 in cash assistance for drug costs), only about one-quarter of the projected 4 mil. enrollees have signed up so far - and most were auto-enrolled through state drug assistance programs or Medicare Advantage plans (¹ Also see "Medicare Card Auto-Enrollment Is Compatible With Competition – AARP" - Pink Sheet, 26 July, 2004., p. 18).

CMS believes that enrollment in the Part D benefit will be higher.

"States over the next 18 months will also be doing aggressive outreach particularly related to the low-income population," CMS noted.

The Medicare legislation provides for transitional grants to states in 2005 and 2006 to "help facilitate enrollment in Part D," the proposed rule notes.

The enthusiasm of states for the drug benefit may be tied to their faith in CMS' projections for the overall impact of the benefit on state budgets. The proposed rule maintains that states will see net savings from the implementation of the Medicare benefit starting in the first year (see ² Also see "States Will Save $500 Mil. In 2006 From Medicare Rx, CMS Predicts" - Pink Sheet, 2 August, 2004. ).

The size of the low-income population eligible for the enhanced benefit will be determined in part by CMS' application of the $10,000 "asset test" established for Part D.

Critics of the legislation maintain that the asset test will sharply limit the number of seniors eligible for more generous coverage, or else force them to choose between keeping family heirlooms or saving money on prescriptions (³ Also see "Medicare Benefit Will Cut Low-Income Seniors’ Drug Bills In Half, PwC Says" - Pink Sheet, 26 July, 2004., p. 19).

The Part D reg proposes to base the asset test for low-income supplemental benefits on "liquid resources (that is, those that could be converted to cash within 20 days) and real estate that is not an applicant's primary residence."

"Thus, we will not consider other non-liquid resources (for example, a second car) to be available to the applicant for this purpose."

"We believe any such program costs associated with not counting non-liquid resources other than countable real estate would be offset by the administrative savings resulting from a more simplified program," the reg states.

CMS Administrator Mark McClellan highlighted the "efficient and straightforward" asset test during the July 26 press conference.

Overall, CMS is predicting close to universal enrollment in prescription drug plans by the Medicare population in 2006.

CMS estimates that 95% of all Medicare beneficiaries (or 41.2 mil. people) will receive coverage under Part D through a stand-alone drug plan, Medicare Advantage, or an employer-sponsored plan eligible for subsidies in 2006.

"This assumption is based in part on the experience of high participation rates in Medicare Part B," which has a similar cost-sharing structure, CMS explained.

In addition, "we think that beneficiaries' concern about current prescription drug costs and the likelihood that as an elderly or disabled individual they will have even greater need for prescription drugs as they age, in combination with the substantial late enrollment penalty, will result in high initial enrollment in the Medicare drug benefit," the rule states.

CMS also assumes that the late-enrollment penalty will encourage virtually all seniors to sign up by the Jan. 1, 2006 start date.

The retiree coverage option is also an important part of CMS' enrollment assumptions. The agency is attempting to craft the regulations to encourage employers to maintain or expand retiree drug coverage wherever possible.

Medicare beneficiaries not eligible for the additional low-income assistance will save an average of 53% on out-of-pocket drug costs under Part D, CMS projects.

Beneficiaries with income above 150% of the poverty line are expected to save $1,274.50 a year out of an annual median drug spend of $2,400, a CMS analysis released with the proposed rule says.

The calculation assumes 15% in cost management savings by Part D plans through discounts and utilization management.

Beneficiaries with income under 135% of the poverty line and with low assets will save 95% ($2,290 of the $2,400 median spend), CMS predicts.

For those with income below 150% of poverty and modest assets, the projected savings is 77%, or $1,837.50.

CMS Predicts 11 Mil. Low-Income Seniors Will Enroll In Medicare Rx

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