The Deficit Reduction Act of 2005 (DRA) provides state Medicaid agencies with new options as of March 31, 2006, to impose increased premiums and cost sharing upon certain Medicaid recipients above 100 percent of the federal poverty level (FPL). It allows states to make the payment of premiums a condition of Medicaid eligibility and payment of cost sharing a condition of receiving services. In addition, the DRA allows states to vary the premiums and cost sharing charged based on income, eligibility category, and type of service.
States must submit a state plan amendment to the Centers for Medicare and Medicaid Services (CMS) to implement cost sharing options allowed under the DRA. CMS has not yet filed regulations on these provisions. DRA cost sharing provisions have limited applicability in Texas because of the restrictions on cost sharing imposed for most populations served by Medicaid in Texas. A premium is an enrollment fee or similar charge, such as a monthly fee. Cost sharing is any deduction, co-payment or similar charge required to use Medicaid services. The DRA restricts the total amount of premiums and cost sharing to not more than 5 percent of the family’s income (applied quarterly or monthly at the option of the state). Attachment 1 includes a table that outlines premium and cost sharing allowances and restrictions by Texas Medicaid eligibility category and income. States are required to exempt the following services from cost sharing: preventive services for children, family planning services, and emergency services. The DRA includes cost sharing provisions intended to limit utilization of certain prescription drugs and inappropriate use of emergency room services. Attachment 1 provides detailed information on cost sharing allowances and restrictions for these services by eligibility category and income. Prescription Drugs States may impose varied cost sharing amounts depending on whether the drug is a preferred drug or a non-preferred drug. In Texas, preferred drugs would be those drugs reviewed by the Pharmaceutical and Therapeutic Committee and approved by the Health and Human Services Commission (HHSC) to be on the Medicaid preferred drug list based on cost effectiveness, clinical efficacy, and safety. The DRA allows states to impose lesser cost sharing requirements for use of preferred drugs.
However, the DRA also stipulates that cost sharing for a non-preferred drug is limited to preferred drug cost sharing amounts if a physician determines a preferred drug would not be as effective as a non-preferred drug, would have an adverse effect on the individual, or both. Because Texas requires a prior authorization before non-preferred drugs can be dispensed, the DRA requirement effectively limits cost sharing for all drugs to the limits defined in the DRA for preferred drugs. The DRA allows states to require beneficiaries to pay cost sharing before receiving prescription drugs, and it requires states to reduce the amount of reimbursement to pharmacies by the amount of beneficiary cost sharing obligations.