NORTH DAKOTA DEPARTMENT OF HUMAN SERVICES
BISMARCK, NORTH DAKOTA
October 6, 2004

	Revised IM #4953
	Revision in LIHEAP Section ONLY

TO:		County Social Service Directors
Economic Assistance Policy Regional Representatives
Economic Assistance Policy Quality Control Reviewers

FROM:	Blaine Nordwall, Director, Economic Assistance Policy
		David Zentner, Director, Medical Services

SUBJECT:	Medicare Prescription Drug Card as an Expense

PROGRAMS:	Food Stamps, Medicaid and LIHEAP

RETENTION: 	December 31, 2005 for Food Stamps and Medicaid
		September 30, 2005 for LIHEAP

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), authorized the prescription drug discount card that provides Medicare beneficiaries with negotiated prices that should be lower than the regular price of prescription drugs.  In addition, from June through December 2004, Medicare is providing through the drug discount cards a $600 credit (“transitional assistance”) to Medicare beneficiaries whose income is not more than 135 percent of the poverty line and who do not have certain other drug coverage.  An additional credit of up to $600 will be provided in calendar year 2005.  The credit may be applied to any drugs they receive; even for drugs not discounted through the card. 

Initial guidance received from Food and Nutrition Services (FNS) and the Center for Medicare and Medicaid Services (CMS) advised State agencies to not treat any discount and/or credit households receive through the prescription drug discount card program as income or resources in determining eligibility and benefits for the Food Stamp or Medicaid Program.  We were also advised that households receiving a discount or credit through the drug card could only claim their out-of-pocket costs when determining the amount of any medical expense deduction.

After further review of the MMA and regulations issued by CMS, FNS and CMS determined that the initial guidance did not fully comply with the MMA.  The Social Security Act as amended by the MMA states that the availability of negotiated prices or transitional assistance received through the prescription drug 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”.  By allowing the household to claim only their out-of-pocket costs and not the pre-discount costs of any prescriptions purchased at a discount and/or with the credit, we would be taking into account the benefits of the prescription discount card when determining eligibility for assistance.  

To prevent households from experiencing any reduction in their Food Stamp or Medicaid benefits as a result of receiving the discount card the following policies must be followed.  These policies apply only to the Medicare Approved Prescription Drug Discount Card and not to other drug company discount cards. The Medicare Approved Prescription Drug Discount Card will have the “Medicare Approved” symbol on the front of the card.  

Individuals with a Medicare Approved Prescription Drug Discount Care are required to pay a co-payment for the drugs they receive.  If they are entitled to the credit, the credit may pay all or part of the remaining drug costs, but not the co-payment.

Food Stamps

Effective June 1, 2004, FNS is requiring that the discounts and credit a household receives through the Medicare Approved Prescription Drug Discount Card be treated as an allowable medical expense and used in determining the household’s medical expense deduction for Food Stamps.  These monthly expenses are added to any other medical expenses the household incurs during the month, including any enrollment fee the household is required to pay.  This policy is being implemented October 1, 2004 for any new applications or recertifications received on or after that date for individuals who are Medicare Approved Prescription Drug cardholders.  However, the policy must be applied retroactively to any new applications or recertifications received between June 1, 2004 and September 30, 2004.  

A report of Food Stamp individuals that are potentially eligible for the Medicare Approved Prescription Drug Card, that applied or recertified for the Food Stamp Program between June 1, 2004 and September 30, 2004, will be sent to eligibility workers the first week of October.  The system will also send the Medicare Approved Prescription Drug Card notice (attachment 1) to each of the household’s identified on the report.  The notice informs the household that they may be eligible for additional Food Stamp benefits if they are in receipt of the Medicare Approved Drug Discount Card and what information must be provided to their county social service office to obtain the additional benefits.  This notice serves as notification of the change and will also be recorded on the Notice History screen in TECS.  The report is to inform workers which cases received the notice.

If a household reports and verifies receipt of the Medicare Approved Prescription Drug Card, claims the credit and provides verification of out of pocket prescription drug costs needed to allow the deduction:

•	The worker must make the change effective with the application or recertification date, or the date the household received the Medicare Approved Drug Discount Card, whichever is later, through the current benefit month.  
•	Actual out-of-pocket prescription drug costs must be used when calculating the medical expense deduction when working past months.  For Food Stamp/Medicaid cases the re-budgeted RL must be used.  
•	The prorated amount of the credit is allowed.   

Examples:

1.	Household initially applied for Food Stamps on July 10, 2004 and was certified for one year.  The household received the Medicare Approved Prescription Drug Card notice and reports household member received a card in June 2004.  If the household verifies receipt of the card and reports the credit, the household must be allowed these expenses for July forward.  

2.	Household recertified in August 2004, for September benefits and was certified for one year.  The household received the Medicare Approved Prescription Drug Card notice and reports a household member received a card in August 2004.  If the household verifies receipt of the card and reports the credit, the household must be allowed these expenses for September forward.

If a household reports and verifies receipt of the Medicare Approved Drug Discount Card, but does not provide verification of out-of-pocket prescription drug costs needed to allow, the deduction the worker must send the F442 requesting the verification.  Client statement is acceptable verification for the credit.    

•	If the household provides the verification, the worker must make the change effective with the application or recertification date or the date that the household received the Medicare Approved Drug Discount Card, whichever is later, through the current benefit month.  
•	Actual out-of-pocket prescription drug costs must be used when calculating the medical expense deduction when working past months.  For Food Stamp/Medicaid cases the re-budgeted RL must be used.
•	If a household does not provide the verification of out-of-pocket prescription drug costs and claims the credit, the prorated amount of the credit is allowed as a medical expense deduction and the case cannot be closed and no changes are made in the case.  

If a household does not report receipt of the Medicare Approved Prescription Drug card or provide verification of the card, there is nothing more the worker needs to do until the household’s next recertification unless the household reports the change in medical expenses.    

	Example:

Household initially applied in July 2004 and was certified for 6 months.  The household was sent the Medicare Approved Prescription Drug Card notice in October 2004.  At recertification in December for January benefits, the household reports that they received the Medicare Approved Prescription Drug Card in June of 2004.  Since this household did not report the change until recertification, the expenses are allowed for the recertification month forward.  

For cases that are not identified on the report (households that did not have an application or recertification during June 1, 2004 and September 30, 2004), information and verification must be gathered at their next recertification unless the household reports the change in medical expenses.  If the household reports a change in medical expenses, the worker must act on the change.  

	Example:

Household initially applied in January 2004 and was certified for one year.  The household did not receive a Medicare Approved Prescription Drug Card notice.  The household reports on October 12, 2004 that they received a card in June 2004.  If the household verifies receipt of the card and reports the credit the expense must be allowed.   

Step 1 – Credit

Medicare Approved Prescription Drug Cardholders with income at or below 135 percent of the income poverty level are eligible for a $600 credit in both the remainder of calendar year 2004 and 2005.  For calendar year 2004 the credit must be prorated over the remaining calendar months from the month of application or recertification and the prorated amount allowed as a medical expense deduction.  Client statement is acceptable verification for the credit.  

	Examples:

1.	Case recertifies for food stamp benefits in September 2004 for the benefit month of October 2004.  An individual in the household was approved for and received a Medicare Approved Prescription Drug Card and the $600 credit in July of 2004.  The $600 credit must be prorated over the months of October, November and December.  The prorated amount of $200 per month must be allowed as a medical expense deduction along with other allowable medical expenses for October, November and December 2004.

2.	Household applies in August 2004.  At the time of application an individual in the household verifies receipt of the Medicare Approved Prescription Drug Card in June 2004 and reports receipt of the credit. The $600 credit must be prorated over the months of August, September, October, November and December.  The prorated amount of $120 per month must be allowed as a medical expense deduction along with other allowable medical expenses for August, September, October, November and December 2004.

For calendar year 2005, the credit must be prorated over the calendar year  ($50 a month) and that amount allowed as a medical expense deduction.  Individual’s in receipt of the $600 credit in 2004 are automatically renewed and will receive the $600 credit in 2005.  For any individual who received the $600 credit in 2004, the prorated 2005 credit must be anticipated.  

	Example:

Household applies in November 2004.  At the time of application an individual in the household reports and verifies receipt of the Medicare Approved Prescription Drug Card in July 2004.  The $600 credit must be prorated over the months of November and December.  The prorated amount of $300 per month must be allowed as a medical expense deduction along with other allowable medical expenses for November and December 2004.  

When working benefits for the month of January 2005, the $600 credit for 2005 must be anticipated.  The prorated amount of $50 per month must be allowed as a medical expense deduction along with other allowable medical expenses for 2005.  

In 2005, an individual who is newly applying for the prescription drug card loses $150 with every quarter that passes.  If an individual receives a reduced credit in 2005, the reduced credit must be prorated and allowed as a deduction for the remainder of 2005.

	Example:

An individual applies for the prescription drug card in May of 2005 and is eligible for the credit.  Because that individual did not apply for the card until the second quarter of 2005, the individual will only receive a $450 credit.  At recert in June for July, this individual reports and verifies receipt of the card.  The $450 credit must be prorated over July through December ($450 divided by 6 months) and $75 a month used as a deduction for the benefit months of July through December.  

A new medical expense code of ME CR has been added to the TECS system with an effective date of June 1, 2004.  This code must be used when entering the prorated amount of the credit in the TECS system.  

Step 2 – Verify Actual Out-of-Pocket Costs

All Medicare Approved Prescription Drug Cardholders will qualify to receive a discount on drug purchases.  Individuals applying or recertifying for Food Stamp benefits will be required to verify their out-of-pocket prescription drug costs, including discounted prescription drug costs.  

A new medical expense code of ME PR has been added to the system with an effective date of June 1, 2004.  This code must be used when entering the verified out-of-pocket prescription drug costs into the TECS system.  For households that are not in receipt of the Medicare Approved Prescription Drug Card, verified out-of-pocket costs must continue to be coded as ME FS in TECS. 

In combination Food Stamp/Medicaid cases that report an individual in the household is in receipt of the Medicare Approved Drug Discount card, there is no need to verify their actual out-of-pocket costs.  The amount of the current RL allowed for Food Stamps must be coded as ME PR in the TECS system and the credit if appropriate, prorated over the appropriate months and allowed as ME CR.    

In order to prevent a reduction in benefits as a result of the discounted price for households that do not receive the credit, the TECS system will multiply the verified prescription drug out-of-pocket costs (ME PR) by a discount factor of 1.25.  The discount factor was determined by FNS as the average value of the discounts received by low-income individuals.  For households that also receive the credit, the TECS system will add the prorated credit (ME CR) to the verified prescription drug out-of-pocket costs (ME PR) and multiply that amount by the discount factor of 1.25.

The TECS system will then take this calculated amount and add any additional allowable medical expenses prior to budgeting the amount in excess of $35.

Step 3 – Actual Expenses

Cardholders must be allowed to claim prescription drug costs prior to using the discount card if those expenses exceed the total of their current out-of-pocket expenses using the discount card, plus the credit if appropriate, multiplied by the discount factor of 1.25.  To claim their pre-discounted medical costs, cardholders must provide verification of their prior prescription drug expenses.  If the individual was in receipt of food stamp benefits prior to using the discount card, information on prior expenses from the case file is used.  If the household chooses to claim their pre-discounted medical costs, these expenses must be coded as ME FS in TECS and the credit is not allowed.  The worker must document the household’s choice.

QC Hold Harmless for Food Stamps

Federal Regulations allow for a 120-day hold harmless period for implementation of the revised policy.  This hold harmless period is effective beginning October 1, 2004 and continues through January 28, 2005.  In addition to the 120-day hold harmless period, variances that occur between June 1, 2004 and October 1, 2004 are also excluded.  

Medicaid

Individuals who are eligible for drug coverage under Medicaid are not eligible to receive a Medicare Approved Prescription Drug Discount Card (Medicare drug card).  They can, however, receive a Medicare drug card before they are on Medicaid, and still receive the benefits of the card after they become eligible for Medicaid.  A monthly file is sent to CMS (about the tenth of the month) indicating who was eligible for Medicaid as of the end of the previous month.  This file is used to determine whether someone applying for a Medicare drug card is eligible to receive one.  

Medicaid recipients who are medically needy eligible with a recipient liability are not considered to be Medicaid “eligible” until they incur their recipient liability.  That means recipients could obtain a Medicare drug card if they have not incurred their recipient liability by the time the Medicaid eligible file is sent to CMS.  For example, a medically needy recipient who did not incur their recipient liability for August, by September 10, could receive a Medicare drug card in September.

For individuals who receive a Medicare drug card and are, or become, eligible for Medicaid, further action will only be necessary if the individual has a recipient liability.   

Applicants and recipients with recipient liability who have the Medicare drug card are entitled to a medical expense deduction equal to the amount of the Medicare drug card discount on their prescriptions, and the amount paid by any credit on the card.  A deduction is not allowed for the Medicare drug card co-payment, and any amount not paid by the credit, because those charges will be applied against recipient liability, or paid by Medicaid if there is no remaining recipient liability, when the claim is billed to Medicaid.  To receive the medical expense explained above, the applicant or recipient must provide verification of the amount of the discount and the amount paid by the credit.  If an applicant or recipient cannot get the amount of the discount from their pharmacist, they can provide verification of the cost of the prescription from before they received the card.  By subtracting the current discount price from the pre-discount price, the amount of the discount can be obtained.  In the event an applicant or recipient cannot get the pre-discount verification from the pharmacy, and does not have verification of the cost from before they received the card, you can assume a pre-discount price of $48.17 per prescription.  This amount is based on the national average and will allow for a deduction if the Medicare drug card discount price is less than that amount.  Deductions for the pre-discount price and the amount paid by credit are allowed upon request from the individual and are based upon the verification they provide.  The following examples will help explain:
 
EXAMPLE WITH CREDIT:  

The recipient has a $200 recipient liability.  The recipient has a Medicare drug card with $600 in credit.  The pre-discount price for their prescription is $150.  With the discount card the drug only costs $100.  The recipient picks up the prescription and pays a $10 Medicare drug card co-payment.  The remaining $90 cost is covered by the drug card credit.  The recipient provides the amount of the discount, $50, and the amount paid by the credit, $90, and is allowed a medical expense deduction of $140.  This reduces the original recipient liability from $200 to $60.  When the pharmacy bills Medicaid, the $10 Medicare drug card co-payment will apply against the recipient liability leaving a remaining recipient liability of $50.

EXAMPLE WITHOUT CREDIT:  

The recipient has a $200 recipient liability.  The recipient has a Medicare drug card but does not have the $600 credit.  The pre-discount price for their prescription is still $150, and with the discount the drug only costs $100.  The recipient picks up the prescription and pays a $10 Medicare drug card co-payment.  The recipient provides the amount of the discount, $50, and is allowed a medical expense deduction of $50.  This reduces the original recipient liability from $200 to $150.  When the pharmacy bills Medicaid, the $10 Medicare drug card co-payment and the remaining $90 apply against the recipient liability leaving a remaining recipient liability of $50.

EXAMPLE USING THE NATIONAL AVERAGE:  

The recipient has a $200 recipient liability.  The recipient has a Medicare drug card but does not have the $600 credit.  The recipient is not able to verify the pre-discount price for their prescription.  The pre-discount price for their prescription is assumed to be $48.17, and with the discount the drug only costs $30.  The recipient picks up the prescription and pays a $5 Medicare drug card co-payment.  The amount of the discount is $18.17 ($48.17 - $30 = $18.17), and is allowed as a medical expense deduction.  This reduces the original recipient liability from $200 to $181.83.  When the pharmacy bills Medicaid, the $5 Medicare drug card co-payment and the remaining $25 apply against the recipient liability leaving a remaining recipient liability of $151.83.

The Medicare drug card enrollment fee is also allowed as a medical expense deduction if the applicant or recipient had to pay it in a month for which Medicaid eligibility is determined.  This should only happen if processing one of the three prior months, or the individual received a Medicare drug card because they were medically needy eligible and did not incur their recipient liability.  Individuals who receive the credit are not charged an enrollment fee, but others who do not receive the credit may have had to pay to receive the card.  The deduction for the card enrollment fee is a one-time deduction in the month the fee is paid.

The Medicare drug card is not considered third party insurance, so no information for the drug card or its benefits should be entered on the TPL screens.

QMB only, SLMB only, and QIs are Medicaid recipients, however, they do not have Medicaid drug coverage, so are eligible to receive the drug card while in receipt of those Medicaid benefits.  These three coverages do not allow deductions for medical expenses (and have no recipient liability) so the drug card will have no affect on eligibility for those coverages.  

Attached (attachment 2) is an instruction sheet that can be provided to applicants or recipients who have the Medicare drug card.  The attachment explains the deductions and what they need to do to receive a deduction.

Some individuals who applied for Medicaid between June 1 and September 1 may have received a Medicare drug card and may be unaware that they can reduce their recipient liability.  Accordingly, we have identified those applicants who were approved for Medicaid, have Medicare, and have a recipient liability.  A copy of Attachment 2 will be sent to them.

LIHEAP

The LIHEAP policy is patterned after that of Food Stamps, with exceptions to allow for LIHEAP’s annual certification process.

Upon verification that a client has a Medicare Approved Prescription Drug Discount Card (Medicare Card), the total of all out-of-pocket prescription drug costs will be multiplied by a factor of 1.25.  As always, out-of pocket costs in this category that exceed $500 must be verified.

For clients who have received a credit, the amount of the credit will be added to the total of the household’s out-of-pocket prescription drug costs.

For clients with both the Medicare Card and a credit, the factor of 1.25 should be applied to the costs after adding the credit.

If a household receives a credit in 2004, and will receive a second credit in 2005, the sum of the two credits should be used in calculating the LIHEAP share percentage for the 2004 – 2005 heating season.  This means a credit of as high as $1,200 could be allowed in the 2005 fuel year.  (LIHEAP will allow the actual amount of the credit, not a flat $600.)

NOTE:	Households who are eligible for the 2005 credit, and whose cases have been worked prior to the date of this revision, must have their cases reworked.

Attachment 1

MEDICARE APPROVED PRESCRIPTION DRUG CARD

THIS NOTICE IS BEING SENT TO INFORM YOU OF A CHANGE IN THE FOOD STAMP AND MEDICAID PROGRAMS.  

IF YOU HAVE RECEIVED A MEDICARE APPROVED PRESCRIPTION DRUG DISCOUNT CARD, YOU MAY BE ELIGIBLE TO RECEIVE MORE FOOD STAMP BENEFITS AND REDUCE YOUR MEDICAID RECIPIENT LIABILITY.  PLEASE PROVIDE THE COUNTY SOCIAL SERVICE OFFICE WITH VERIFICATION OF YOUR PRESCRIPTION DRUG CARD.  YOU WILL ALSO NEED TO LET THE COUNTY SOCIAL SERVICE OFFICE KNOW IF YOU RECEIVED A $600.00 CREDIT FOR PRESCRIPTION DRUG COSTS AND PROVIDE VERIFICATION OF YOUR PRESCRIPTION DRUG COSTS.    

THE PRE-DISCOUNTED PRICES AND THE CREDIT WILL BE USED AS A DEDUCTION FROM INCOME AND MAY INCREASE YOUR FOOD STAMP BENEFITS AND DECREASE YOUR MEDICAID RECIPIENT LIABILITY.

IF YOU HAVE ANY QUESTIONS PLEASE CONTACT YOUR COUNTY SOCIAL SERVICE OFFICE.

PLEASE READ THE BACK OF THIS NOTICE FOR ADDITIONAL INFORMATION REGARDING YOUR RIGHTS AND REPORTING RESPONSIBILITIES.

THIS ACTION IS BASED ON FOOD STAMP MANUAL 430-05-55-20 AND FEDERAL REGULATION 7 CFR 273.9 (D)(3) AND SECTION 1860D-31(G)(6) OF THE SOCIAL SECURITY ACT.

Attachment 2
Medicaid Applicants with 
Medicare Prescription Drug Card 

Recipient liability is the amount you have to pay toward your medical costs each month, and is based on how much income you have.  Medicaid pays for medical costs that are higher than the recipient liability.  

If you have a Medicare Approved Prescription Drug Card you may be able to lower your recipient liability.  Your recipient liability can be lowered by the amount of the discount the card gives on your medications.  It can also be lowered by the amount of any credit that pays for your medications.  The following examples will help explain:

EXAMPLE 1:  John has a $200 recipient liability.  He also has the Medicare drug card with credit.  The original price for his medication is $150.  With the discount card the drug only costs $100.  When he picks up his medication he pays a $10 Medicare drug card co-payment.  The remaining $90 cost is covered by the drug card credit.  The amount of the discount, which is $50, and the amount paid by the credit, which is $90, (a total of $140) is allowed to lower his recipient liability from $200 to $60.  When the pharmacy bills Medicaid, the $10 co-payment he had to pay will count toward his $60 recipient liability.  He now has only $50 of recipient liability left.

EXAMPLE 2:  Mary has a $200 recipient liability.  She also has the Medicare drug card but does not have the credit.  The original price for her medication is $150.  With the discount card her medication only costs $100.  When she picks up her medication she pays the $100.  The amount of the discount, which is $50, is allowed to lower her recipient liability from $200 to $150.  When the pharmacy bills Medicaid, the $100 she had to pay will count toward her $150 recipient liability.  She now has only $50 of recipient liability left.

What do I have to do to get the lower recipient liability?

You will need to provide proof of the amount of the discount from the Medicare drug card and the amount paid by the credit on the card.  

•	Ask your pharmacy for proof of these amounts when you pick up your medications.  Give this proof to your county social service office.
•	If you cannot get the amount of the discount from your pharmacy, you can still lower your recipient liability if you have proof of what your medication cost before you received the Medicare drug card.
•	If you still cannot get proof, tell your county social service office.  They may be able to lower your recipient liability by a limited amount. 

Questions?

If you have questions about what you need to do, please ask the people at your county social service office.