Medicare and Spenddown
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Medicare and Spenddown


Revised April 29, 2013



Purpose: This section provides information about what the department allows as medical expenses for clients who have spenddown, are entitled to Medicare and who may qualify for a Medicare Savings Program (MSP).

Clients, who may be entitled to Medicare, must apply for and enroll in Medicare as a condition of Medicaid eligibility, if the department will pay the cost of the Medicare premiums.  See WAC 388-503-0505 General eligibility requirements for medical programs for more information about this requirement.   For detailed information on the health insurance coverage plans Medicare offers, see the Medicare section of this manual.

Qualified Medicare Beneficiaries (QMB)

The QMB program is the only MSP that pays for Medicare coinsurance charges, deductibles, and co-pays as well as both Medicare Part A and Medicare Part B premiums. 

Remember to open QMB coverage whenever a client is eligible.  Because it is federally matched, DSHS gets federal reimbursement for part of what it pays out for QMB clients.

QMB doesn't pay for Part C or Part D premiums, or for Part D prescription drug co-pays.  Very few medical expenses can be used to meet a spenddown liability when clients have both QMB and Medicare because between these two programs they are already fully covered.


EXAMPLE

Joe brings you a current Explanation of Benefits statement showing a recent 10-day hospital stay ($15,000) and what Medicare paid on the bill.

Medicare assigned $1068 to Joe's Medicare deductible and charged him an additional $2670 for coinsurance.

Medicare paid $6800 to the hospital.  The hospital did an insurance adjustment for the remaining balance.

  • If Joe is eligible for QMB coverage, his charges of $1068 and $2670 will be paid by the QMB program and can't be used towards his spenddown liability.
  • If Joe isn't eligible for QMB coverage, these charges could be used towards meeting his spenddown liability.


Carefully review medical expense for a QMB eligible client before using any portion of the expense towards meeting spenddown liability.

Medicare premiums

Medicare premiums may only be allowed as an expense towards meeting spenddown when the department (through the MSP programs, for Part A and Part B) or the federal government (through the Part D low income subsidy) is not paying them.  Allowable Medicare premiums are coded in ACES as a spenddown expense and aren't used as an income deduction on the MEDX screen.  Enter the expense based on the date it is incurred by the client.

Medicare Part A

The department pays Part A premiums when the client is eligible for the QMB (S03) program or the QDWI (S04) program in ACES. Allow Part A premium expenses for spenddown only if:

  • The client incurred the expense in the month of application and isn't eligible for QMB until the first of the following month, or
  • The client is eligible under an MSP that doesn't pay for Part A costs, or
  • The client incurred the expenses in the three months prior to the application month and they weren't a QMB or QDWI recipient at that time.

Medicare Part B

The department pays Part B premiums under the QMB (S03) program and SLMB (S05) program until the certification period ends.  Don't allow Part B premiums as a spenddown medical expense for clients who receive coverage under these programs.

The department pays Part B premiums under the QI-1 (S06) program as long as the client isn't eligible for CN or MN coverage and pays under the State Buy-in program when they are otherwise eligible for CN or MN coverage.


NOTE:

When a QI-1 client becomes MN or CN eligible, the QI-1 closes.  If MN or CN coverage ends, the client remains eligible for the rest of their original QI-1 certification.  Be sure to reopen the S06 AU at the time you initiate the review on an MN program. 


Medicare Part C

Part C premiums are paid by the client.  The department no longer pays them.  Part C is an option for Medicare clients who choose to receive Medicare services through a Managed Care plan instead of through the original Medicare fee-for-service program.  Part C coverage is also known as Medicare Advantage.

Some Part C plans also include a prescription drug benefit as part of their Part C coverage.  A client who receives prescription drug coverage under Part C doesn't have to enroll in a separate Part D plan.  Since Part C premiums can't be paid by the department, do not refer Part C clients to the Premium Payment  program for assistance. 

Part C premiums are an allowable medical expense for spenddown.  Enter the expense into ACES as the expense is incurred.  Part C premiums are not allowed as an income deduction so do not code Part C premiums as a medical deduction on the MEDX screen.

Medicare Part D

The department doesn't pay for Part D premiums.  Clients with income below certain standards may apply to the federal government for help paying Part D premiums.  This is called the low-income subsidy (LIS).  Once the government determines clients are eligible for the LIS, they remain eligible until the end of the calendar year.

Each year in January, individuals need to reapply for the LIS unless they are Medicaid clients.  Medicaid clients are automatically 'deemed' eligible for the LIS and remain eligible until the end of the calendar year in which they lose their Medicaid eligibility.  

All States have a range of 'benchmark' Part D plans.  Benchmark plans are considered average Medicare plans.  They have adequate healthcare coverage and their premiums can be fully covered by the LIS.  Other Part D plans have higher premiums than the benchmark plans.  The premiums for these plans are higher than what the LIS covers.  In these plans, the LIS pays a portion of the premium (up to the benchmark amount) and the client pays the amount above the LIS limit if they want to remain with a specific Part D plan. 

Don't allow Part D premiums as an allowable expense for spenddown unless they were:

  • Incurred prior to a period of eligibility for the LIS, or
  • The client is paying the portion above the subsidy amount.  In this case, allow only amount the client is really paying.

When are a Medicare client's prescription drug costs allowed for spenddown?

For the purposes of Medicaid spenddown, incurred Part D pharmacy costs are treated just like any other costs incurred for medical care.  Apply all the usual rules for determining a client's liability, insurance coverage and spenddown eligibility.  Costs paid in whole or in part by a public program may be counted as incurred medical expenses to establish eligibility under a Medicaid spenddown.

Part D enrollment is voluntary, so not all Medicare clients will be enrolled in a Medicare Part D plan (PDP) or a Medicare Advantage plan (MA-PD) when the department first receives a medical application. 

However, per WAC 388-503-0505, Part D enrollment is a condition of eligibility for Medicaid coverage.  The department notifies the federal government (CMS) when a client becomes eligible for MN coverage.  The client is then automatically eligible for the LIS and enrolled in a Part D plan.

 


NOTE:

Even if a client is only eligible for MN coverage in one three-month base period a year, that certification provides extra help (through LIS) paying Part D premiums for the rest of that calendar year.


Enrollment in a PDP or MA-PD doesn't ensure that all drugs are covered.  Each plan may have a different combination of covered drugs, deductibles, co-pays and coverage gaps.  To determine if drug costs incurred by Medicare clients are allowable for spenddown, apply the following rules:

  • If the client wasn't enrolled in a PDP or MA-PD on the date of service, allow the prescription drug cost.  The reason the client wasn't enrolled when the expense was incurred doesn't matter.
  • If the client was enrolled in a Part D plan on the date of service and chose to self-pay for a covered prescription to try and meet spenddown liability, the expense can't be allowed because the drug was covered under their Part D plan.
  • If the client was enrolled in a PDP or MA-PD on the date of service, the plan must issue a periodic (at least monthly) statement to the client explaining all benefits paid and denied, and amounts attributed to cost-sharing.  If the drug charge is identified on the statement as a client liability; such as part of a deductible, co-pay or coverage gap, allow the expense.
  • When a plan denies coverage of a prescription, the client has the right to request an exception for coverage of the drug.  The client receives a written decision on any exception requested.  If the drug charge appears on the statement as a denial, and no exception was requested, do not allow the charge.
  • If the drug charge appears on the statement as a denial, and an exception was requested and denied by the plan, allow the charge. 

Important:  Ask for, and review the monthly plan statements for questionable expenses before allowing the expenses towards meeting spenddown liability.

Modification Date: April 29, 2013