Medicare Savings Programs: Analyzing Options for Expanding Eligibility

Article excerpt

The Medicare Savings Programs (MSPs) are designed to provide financial assistance to Medicare beneficiaries who do not qualify for full Medicaid coverage. This paper considers changes in eligibility that would better align MSP program rules with those related to receiving low-income subsidies, for the Medicare Part D drug benefit. These changes would make more people eligible for the MSPs and could encourage greater participation; similar changes were incorporated in recently passed legislation. Out" analysis. based on 2006 data from the Health and Retirement Study, shows there is a trade-of/ between making larger numbers of beneficiaries eligible by eliminating resource requirements and better targeting of individuals with greater health care needs by expanding income standards.

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Medicare Savings Programs (MSPs) are designed to provide financial assistance to Medicare beneficiaries whose income and assets may be too high to allow them to qualify for full Medicaid coverage. Depending on the beneficiary's income and assets, these joint federal-state programs may pay for Part A (hospital insurance) and Part B (medical insurance) premiums as well as cover cost-sharing. In terms of assistance, they range from the Qualified Medicare Beneficiary (QMB) program, which pays premiums and cost-sharing expenses, to the Specified Low-Income Medicare Beneficiary (SLMB) program, which pays only Part B premiums, to the Qualified Individual (QI) program, which also pays premiums, but is funded as a block grant and can limit the number of participants.

Despite the meaningful financial assistance offered by these programs, many eligible beneficiaries do not enroll. Some estimates suggest that the aggregate MSP enrollment may be as high as 64% of those eligible (Haber et al. 2003), but other estimates indicate that less than one-third of eligible people sign up for the QMB program and only 13% enroll in the SLMB program (GAO 2005). By comparison, about two-thirds of people eligible for Medicaid enroll in that program.

When Medicare introduced a prescription drug benefit (Part D), it was done as an add-on as opposed to being incorporated into either Medicare Parts A or B. In addition to establishing another set of premiums, deductibles, and copayment rules, the decision to keep the drug benefit separate in Part D also resulted in creation of a new set of low-income subsidies. Rather than build on the existing Medicare Savings Programs, policymakers chose to establish new subsidies with different income and resource standards.

Beneficiaries with incomes just above the MSP levels but below 150% of the federal poverty level (FPL) can pay reduced premiums for Medicare Part D along a sliding scale and face lower deductibles and cost-sharing. (1) Although implementation of the new Part D subsidies deemed that people enrolled in the MSPs were eligible for the full Part D low-income subsidy (LIS), the opportunity to align the eligibility rules for these two sets of programs (and coordinate enrollment) was missed.

As a result, Medicare beneficiaries face different income-eligibility criteria because of discrepancies in how the MSPs and Part D LIS compute income and federal poverty levels, and beneficiaries must satisfy different resource standards in the two programs. Resource requirements for the Part D subsidies are more generous than those used in the MSPs. (2) For example, because the QMB program's resource requirements are generally more stringent than those in the full Part D LIS benefit, it has been possible for beneficiaries with incomes below the FPL (the cutoff for QMB eligibility) to be ineligible for QMB because of their resources but eligible for the full LIS benefit. (3) Policymakers recognized these anomalies and chose to coordinate the Medicare Savings Programs with the LIS offered through Medicare Part D in the "Medicare Improvements for Patients and Providers Act of 2008" (HR 6331). …