Policy Directive                                                      Issuance Number: FSC 04-12

                                                                                                                        MS 04-09

Food Stamp Certification Manual                     Issuance Date: 10-01-2004

Medical Services Policy Manual

From: Joni Jones, Director                                Expiration Date: Until Superseded

Subj: Revised Instructions- The Impact of Medicare Approved Prescription Drug Coverage on the Food Stamp Program and the Medicaid Program

I.          INTRODUCTION

The Centers for Medicare and Medicaid Services (CMS) and the Department of Agriculture, Food and Nutrition Service, recently issued new guidance concerning treatment under the Medicaid program of the discounts and $600 credit available to Medicare beneficiaries under the new Medicare-Approved Drug Discount Card.  This information provided in this directive is different than what was previously provided to county offices in Screen Message # 1554.  This directive replaces Screen Message #1554 and provides updated procedures for determining eligibility and benefit amount for applicants and recipients with a Medicare-Approved Drug Discount Card.

These revised instructions affect both the Food Stamp Program and the Medicaid Program.  See section II for a description of Medicare-Approved Drug Discount Card benefits.  See Section III for Food Stamp Program information.  See Section IV for Medicaid information.  See Section V for ANSWER procedures.

II.        MEDICARE PRESCRIPTION DRUG DISCOUNT CARD BENEFITS

Under the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA), Medicare beneficiaries, except those who have Medicaid drug coverage, may enroll in a Medicare-approved prescription drug discount card.  Private companies offer Medicare-approved discount cards.  These companies apply to the Centers for Medicare and Medicaid Services (CMS), a division of the Department of Health and Human Services, to offer the discount card.  To obtain approval, a company must meet certain standards and have experience offering prescription drug discounts.  If the company is authorized to offer Medicare-approved drug discount cards, the company must make the discount card available to every Medicare recipient in the State or region that the card covers.  The company decides which prescription drugs will be discounted and the amount of the price discount for those drugs.  The company may charge an annual enrollment fee of no more than $30.  Some companies charge less than $30 or don’t charge any enrollment fee.

Prescription drug discount cards should provide beneficiaries with negotiated prices that are lower than the regular price of prescription drugs.  In addition, from June through December 2004, $600 in transitional assistance will be provided through the drug discount cards as a credit for Medicare recipients whose incomes are not more than 135% of the poverty guideline.  An additional credit of up to $600 will be provided in 2005.  The Federal government will pay the annual enrollment fee for low-income beneficiaries who qualify for the $600 credit.  The $600 credit may be used by beneficiaries to purchase any drug considered to be a “covered drug” under CMS regulations.  The credit is expected to end after 2005.

All beneficiaries who qualify for the credit will also qualify for discounts on drugs not covered by the credit.  Medicare beneficiaries whose income exceeds 135% of the poverty guideline will not receive a $600 credit but will qualify to receive a discount on drug purchases.

III.       IMPACT OF COVERAGE ON FOOD STAMP APPLICANTS AND RECIPIENTS

The MMA mandates that availability of negotiated prices or transitional assistance received through a prescription drug discount card “shall not be treated as benefits or otherwise taken into account in determining an individual’s eligibility for, or the amount of benefits under, any other Federal program.”  In order to prevent food stamp applicants and recipients from experiencing any reduction in food stamp benefits as a result of receiving a drug discount card, the case manager must follow the procedure explained in this directive. 

NOTE:   These procedures will not apply to prescription co-pays or discounts received through insurance coverage other than a Medicare-approved prescription drug discount card.  (A Medicare-approved drug discount card will carry a seal with the words “Medicare-approved”.)

A.        Calculating Prescription Drug Costs for Card Users

At initial application, at recertification, when a midpoint review is processed, when a semi-annual report is processed or when a reported change is processed and the case manager verifies that a household member has a Medicare-approved drug discount card, that household member will be given the option of using as their prescription drug costs either:

• Their current out-of-pocket prescription costs plus at least one standard amount.  The standard amounts are $23 per month for each covered household member and an additional $50 per month for each covered household member with a $600 credit.  (See the NOTE on the next page for additional information about the standard for the $600 credit.)  The $23 standard represents the amount that Centers for Medicare and Medicaid Services has estimated as the value of the discounts received by drug discount card holders.  The $50 per month represents the $600 per year credit averaged over a 12-month period.  Verification of the $600 credit will not be required if the income of the individual who has the card is less than the Food Stamp Program gross income pretest for a household size of one. 

OR

• The actual out-of-pocket expenses that this household member was incurring before they began using the Medicare-approved drug discount card expenses if these expenses exceed the total amount calculated with the standard amount(s) and there has been no change in a prescription.  No change means: 

-       No change in the medicine’s overall price,

-       No change in the dose,

-       No new prescription, or

-       No stopping an old prescription.

NOTE     Each household member that enrolls in a Medicare-approved drug discount card during 2005 will be allowed a credit as follows:

-       January through March - $600 (Use $50 per month as the standard expense.)

-       April through June - $450 (Use $38 per month as the standard expense.)

-       July through September - $300 (Use $25 per month as the standard expense.)

-       October through December - $150 (Use $13 as the standard expense.)

When a food stamp applicant or recipient must pay the $30 enrollment fee to secure a Medicare-approved drug discount card, the $30 expense will be handled as a one-time medical expense.  See FSC 6523.1 for additional instructions.  The household must provide verification of the one-time expense.

The $600 credit is expected to be authorized for two years - 2004 and 2005.  Therefore, if the household is certified for 24 months during the year 2004, the $50 monthly medical expense will be allowed for the full 24-month certification period even though the certification period will extend into the year 2006.  If the household is certified for 12 months, the $50 monthly medical expense will be allowed for the full 12-month certification period even though the certification period will extend into the year 2005.  If the same household is recertified in 2005, the $50 monthly medical expense will be allowed for an additional 12-month period even though the certification period will extend into the year 2006. 

NOTE:    These credits are allowed on an individual basis, not by household.

Example          Mr. Smith receives social security disability benefits.  His wife, who is not disabled, and their minor children also receive social security benefits.  Mr. Smith has a Medicare-approved drug discount card.  He did not have to pay an enrollment fee, and he did receive the $600 credit.  He submits an initial application for food stamp benefits in October 2004.  He reports that his prescription costs were $150 per month before he received his Medicare-approved discount card, that he has used all of his $600 credit and that his prescription expenses after his discount are $100 per month.  The case manager will add his prorated credit standard expense of $50 per month to his out-of-pocket standard expense of $23 per month and will then add his current actual out-of-pocket expenses to the two standard amounts.  ($50 + $23 + $100 = $173)

Since the calculated amount of $173 exceeds his pre-card prescription costs, $173 will be allowed as his prescription drug costs when his household’s medical deduction is calculated.  Mr. Smith will be assigned a twelve-month certification period.  The $50 prorated credit standard amount will be allowed for the full 12-month period.  When Mr. Smith is recertified in September 2005, another $50 prorated credit standard will be allowed during his certification period beginning in October 2005 and ending in September 2006.

B.        Verification and Documentation

For any Medicare beneficiary without Medicaid drug coverage, the worker must ask if this individual has a Medicare-approved drug discount card.  If yes, the case manger must request verification of the drug discount card.  Acceptable verification includes:

• A discount card that has a seal with the words “Medicare Approved” on it. 
• Paperwork or correspondence from the company administering the card
• Confirmation from the pharmacy that the individual uses a Medicare-approved drug discount card
• Any other documentary evidence that demonstrates that the individual has a Medicare-approved drug discount card

C.        Revised Forms

The form, Instructions for Completing the Midpoint Review (DCO-235), has been revised to instruct households with a Medicare-approved drug discount card to report and verify the use of the card.  (The revised form will be issued at the same time as this directive.)  The revised form must be used on all midpoint reviews sent after 10-01-04.  The revised form will be available on DHS GOLD on 10-01-04.  An initial supply of the form will be sent to each county.  After a county has received their initial supply of the forms, a shelf supply may be ordered from the warehouse.

The Request for Information at Midpoint Review (DCO-103) has also been revised to provide households about acceptable forms of verification of Medicare-approved discount card information.  (The revised form will be issued at the same time as this directive.)  The revised form must be used on all midpoint reviews sent after 10-01-04.  The revised form will be available on DHS GOLD.  An initial supply of the form will be sent to each county.  After a county has received their initial supply of the forms, a shelf supply may be ordered from the warehouse.  As soon as possible, the Food Stamp Midpoint/Medicaid Review (DCO-244) will be revised to capture this information. 

D.        Restored Benefits

Households with Medicare-approved prescription drug cards may be entitled to a restoration of benefits if an application was approved, a change was processed, a semi-annual report was processed or a mid-point review was processed between June 1, 2004, and September 30, 2004, and the household lost food stamp benefits as a result of reporting the use of a Medicare-approved prescription drug card.  The restoration period will begin with the first month that the household lost benefits as a result of the use of the card and will end with the last month that the household lost benefits as a result of the use of the card.

Example 1     A household applied in June 2004.  Worker used the household’s reduced prescription costs to calculate their medical deduction and certified the household for 24 months – June 04 to May 06.  When the household submits their Mid point Review in May 2005, the case manager determines what the household’s medical deduction would have been if it had been calculated using the instructions in this directive.  Since the household did lose benefits, a restoration will be authorized when the Midpoint Review is processed.  The restoration period will begin in June 2004 and will end in May 2005. 

Example 2     A household’s Midpoint Review was submitted in September 2004.  The household reported decreased prescription drug costs as the result of the use of a Medicare-approved prescription drug card.  The household’s budget for the upcoming year was calculated based on the reduced prescription costs.  When the household is recertified in September 2005, the case manager determines what the household’s medical deduction would have been if it had been calculated using the instructions in this directive.  Since the household did lose benefits, a restoration will be authorized when the application for recertification is processed.  The restoration period will begin in October 2004 and will end in September 2005.

Example 3     In August 2004, a household submitted a Semi-Annual Report form.  On the report form, the household reported decreased prescription drug costs as the result of the use of a Medicare-approved prescription drug card.  The household’s budget for the upcoming six-month period was calculated based on the reduced prescription costs.  When the household is recertified in February 2005, the case manager determines what the household’s medical deduction would have been if it had been calculated using the instructions in this directive.  Since the household did lose benefits, a restoration will be authorized when the application for recertification is processed.  The restoration period will begin in September 2004 and will end in February 2005.

Households that lost benefits as a result of reporting the use of a Medicare prescription card at any of the case actions listed above will be entitled to a restoration even if the household fails to complete the case action. 

Example:       A household submitted an application for recertification.  The worker determines that the household’s benefits were reduced when the semi-annual report was processed due to use of a Medicare approved prescription drug card.  The household subsequently failed to provide required information and the application for recertification was denied.  The household will still be entitled to restored benefits to offset any reduction that occurred as a result of the use of the prescription card.

To calculate the amount of the restoration, the worker will use either of the following methods that will be most beneficial to the household: 

-       The household’s pre-card prescription drug expenses as documented in the case record; or

-       The $23 standard plus, if applicable, the $50 prorated credit.

IV.       IMPACT OF MEDICARE DRUG DISCOUNT CARD ON MEDICAID

For Medically Needy Spend Downs, if the Medicare-Approved Drug Discount Card and/or the $600 credit was used, the county caseworker will use the following procedures in determining the amount of the liable expense:

A.        $600 Credit (Transitional Assistance)

Any portion of the $600 credit that is used  to pay for prescription drugs should be treated as a medical expense incurred by the individual. 

Example 1:   The applicant purchased a prescription on July 1^st for $100.  The individual paid the entire cost of the $100 charge using a portion of the $600 credit.  The entire $100 would be considered an incurred medical expense in the eligibility determination.

Example 2:  The applicant purchased a prescription on July 1^st for $100.  The individual used $50 of the credit and $50 cash to pay for the drug.  The entire $100 would be considered an incurred medical expense in the eligibility determination. 

B.        Discounts Under the Medicare-Approved Drug Discount Card

The incurred medical expense is the amount the individual would have had to pay in the absence of the Medicare-Approved Drug Discount Card.  For purposes of establishing the amount of the incurred medical expense, the “pre-discount price” of a prescription is what the individual would have had to pay if he or she were not enrolled in the Medicare-Approved Drug Discount Card. 

To determine the pre-discount price of the drug:

1.      Review the receipt of the charge provided by the client.  If the receipt states the pre-discount price, use that amount as the amount of the incurred medical expense.  If the receipt does not provide the pre-discounted price, go to # 2.

2.      Call the pharmacist and ask what the pre-discounted price is.  Use what the pharmacist states as the amount of the incurred medical expenses. 

3.      If the pharmacist for whatever reason cannot provide the pre-discounted price, use an amount determined by CMS of $48.17, or the discounted amount, whichever is greater.   $48.17 is the average cost of a drug nationally.   

If you are aware of a case worked where these deductions were not given, please reopen the case and re-determine eligibility.

This special consideration is only allowed when prescriptions are discounted using the Medicare-Approved Drug Discount Card.  This does not apply to drugs discounted through other discount programs.

V.        ANSWER CHANGES TO ACCOMMODATE THESE POLICY CHANGES

A.        Spreadsheet

A new spreadsheet has been added to the ANSWER spreadsheet package to help the case manager determine if the actual costs prior to the Medicare drug discount are greater than the current out-of-pocket expenses and the allowable deductions.

B.        Online Changes

Two new expense types, Medicare Drug Subsidy (Credit) and Medicare Drug Standard have been added to ANSWER.  The expense type of Medicare Drug Subsidy (Credit) - $50.00 if the individual enrolled in 2004 and varying amounts if the individual enrolls in 2005 - should not be selected unless there is an income type of Medicare Drug Subsidy (Credit).  The Medicare Drug Standard is the $23.00 standard allowance.

Inquiries to:       Betty Helmbeck, Food Stamp Section, 501-682-8284

                        Jack Tiner, Medicaid Eligibility, 501-682-8259

                        Shawn Barnes, ANSWER Support, 501-683-4153

AGED/DISABLED HOUSEHOLD

HANDLING PRESCRIPTION DRUG COSTS IN THE FOOD STAMP PROGRAM