Pennsylvania Department of Public Welfare Releases Statement on Co-payment Initiative

HARRISBURG, Pa., Sept. 24, 2012 /PRNewswire-USNewswire/ -- - Department of Public Welfare Secretary Gary D. Alexander today released a statement about the department's proposed co-payments for families of eligible children with mental and physical disabilities. 

Eligible families are those earning more than 200 percent of the federal poverty level who fall into the eligibility category of Medical Assistance often referred to as the "loophole" category.

Act 22 of 2011 gave the Department of Public Welfare the ability to establish co-payments for families based on income. The new co-payment initiative was originally announced in the Pennsylvania Bulletin on Aug. 11, 2012, and co-payments are scheduled to be implemented on Oct. 1, 2012.

In his statement, Alexander said:

"Medicaid services in this category for children with mental and physical disabilities cost taxpayers approximately $700 million a year, yet many of the families receiving this care have the ability to pay their fair share. About 80 percent of these families have incomes above 200 percent of the federal poverty level and one in four have an income above $100,000 a year.

Currently, no other state has eligibility criteria as generous as ours, and we will continue to maintain services for eligible participants. However, we cannot continue to do so solely at the expense of the taxpayer. The department has been applying co-payments in Medical Assistance for 30 years. Targeting co-payments for this Medicaid category based on ability to pay will allow us to continue to effectively serve those Pennsylvanians who need it most."

The Department of Public Welfare also released a letter to the legislature with an update about the co-payment initiative. For more information about the Department of Public Welfare, visit the department's website at www.dpw.state.pa.us.

Pennsylvanians who suspect welfare fraud should call 1-800-932-0582.

Media contact: Carey Miller or Anne Bale, 717-425-7606

Editor's Note:

The text of the letter to the General Assembly about the initiative is included below.

"Dear Members of General Assembly:

I am writing to provide you with an update on the department's efforts to implement co-payments for families making over 200 percent of the federal poverty level (FPL) in the category of Medical Assistance (MA) often referred to as the "loophole" category, which covers eligible children with mental and physical disabilities.  First and foremost, it is important to note that we take our role in protecting Pennsylvania's children very seriously. While many opponents have sensationalized this initiative, here are the key facts:

• There will be no changes to services or health care benefits as a result of this initiative. Services provided to children with disabilities will not change.  The department will continue to cover health care needs for these children now and well into the future. 
• Care for children receiving services through this category is costly.  Today, nearly 48,000 children receive Medicaid services under this category, costing taxpayers approximately $700 million a year.
• Many of the families who receive these services have the ability to pay their fair share.  About 80 percent of these families have incomes above 200 percent of the federal poverty level and 1 in 4 have incomes above $100,000 a year.
• All in-school services provided by schools are exempt from the co-payment requirement.
• No other state has eligibility criteria as generous as Pennsylvania's. Pennsylvania is the only state that allows a child whose disability does not require institutional care to be eligible for Medicaid without considering the parent's income, child support or Social Security benefits received by the child. 
• We must act now to protect the safety net.  Targeting co-payments based on ability to pay will allow us to continue to effectively serve the most vulnerable Pennsylvanians who need it most.

Background

Under federal law, states have the option in their Medicaid program to cover children with physical and mental disabilities, without regard to their family's income, if the child needs an institutional level of care but can receive that care at home. This option was authorized by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) (Pub. L. No. 97-248). Twenty states have elected the TEFRA option, commonly referred to as a Katie Beckett Waiver.

Currently, Pennsylvania is the only state that allows a child whose disability does not require institutional care to be eligible for Medicaid without considering the parent's income, child support or Social Security benefits received by the child. This is why it's been referred to as the "loophole" category.  Pennsylvania started covering these children in November 1988, and the number has grown significantly through the years.  Today, nearly 48,000 children receive Medicaid services through this category resulting in hundreds of millions of dollars at the expense of the taxpayer each year. Unlike other families served by the department, these families have the means to afford the co-payments for the services they receive.  About 80 percent of these families have incomes above 200 percent of the FPL, and one in four has an income above $100,000 a year.

Co-payments

Through this initiative, we are asking those families with incomes above the normal Medicaid eligibility levels to contribute to the cost of services for their children.  The department currently applies co-payments to other individuals with income levels substantially below 200 percent FPL.  Targeting co-payments based on ability to pay will ultimately protect the safety net and allow us to continue to effectively serve Pennsylvanians now and well into the future.

There has been some discussion regarding the department's decision to implement co-payments instead of a premium, both of which have been approved by the General Assembly and are currently authorized in the Public Welfare Code.  Unfortunately, as with many issues facing our department, our actions are limited by Maintenance of Effort (MOE) provisions in the president's health care law: the Affordable Care Act.  The department received early guidance from the Centers for Medicaid and Medicare Services (CMS) that a premium would likely violate the MOE requirements. We will continue to explore a premium as an option. However, we need to move forward with implementing co-payments to establish cost sharing.

In addition to the authority in Act 22 of 2011 to establish co-payments for families with incomes above 200 percent FPL, the federal Deficit Reduction Act of 2005 (DRA) gave states the option to apply cost sharing to non-exempt populations based on family income, including disabled children who are traditionally exempt from cost sharing.  While the DRA allows for flexibility in how income is counted, it caps the maximum aggregate cost sharing at five percent of total family income. 

The following points are intended to provide an update and further information regarding the department's co-payment policy.

• A public notice was published in the Pennsylvania Bulletin on Aug. 11, 2012 to announce the department's intent to amend our state plan to apply co-payments to children with disabilities, and the department will issue a Medical Assistance bulletin to providers before Oct. 1.
• The department will implement the co-payments in the fee-for-service delivery system on Oct. 1 for newly eligible recipients, and Nov. 1 for those currently eligible. The difference in dates is due to recipient notification requirements.  These notices have recently been mailed to impacted families.
• As indicated in the public notice, most co-payments will be on a sliding scale with a specified co-payment amount for each range, or tier, based on the MA fee for the service, not to exceed 20 percent of the lowest fee on each tier (i.e., the higher the cost of the service, the higher the co-payment).  Co-payments for inpatient hospital stays, prescription drugs, diagnostic services, and psychotherapy will be set at fixed amounts, not on a sliding scale.
• Upgrades to the department's eligibility and claims processing systems, in order to support the new co-payments, are complete and ready to be put into operation.
• DPW has established a tracking system to ensure each family's total co-payments will be capped to not exceed five percent of the family's aggregate annual income, prorated and applied on a monthly basis, as determined by the county assistance offices. Not all families will hit the cap, however, as it is dependent on the family's utilization of services. The family's co-payment liability will be portioned across the fee-for-service, physical health managed care and behavioral health managed care delivery systems based on the utilization analysis completed by the department. 
• Services exempt from the co-payment requirement include all the services currently excluded for adult MA recipients, as identified in MA program regulations.  Further, preventive services, MA services provided through the School Based ACCESS Program, Early Intervention and Home and Community-Based Program waivers will also not require a co-payment.
• Managed Care Organizations (MCOs) may implement the co-payments, but are not mandated to do so. MCOs that choose to implement the co-payments will need to determine and develop the process for how co-payments will be assessed and collected.  The department will inform them of their respective portions of the maximum monthly co-payment liability amount.  They will then be required to notify members and network providers of their intent to apply co-payments and of their liability amount, track co-payments applied within their respective systems, and shut off the co-payments if a family reaches the MCO's portion of the maximum co-payment liability amount. MCOs may also apply the co-payments in a less restrictive manner (i.e., a lesser co-payment amount for the same service(s) applied by the department). 

In addition to the information provided in this letter, we have included a document of frequently asked questions to assist you and your constituents in understanding this change.

Sincerely,
Gary D. Alexander, Secretary
Department of Public Welfare"

SOURCE Pennsylvania Department of Public Welfare