Department of Health Policy

School of Public Health and Health Services

George Washington University

2021 K St., NW

Suite 800

Washington, DC 20006

March 20, 2008

Centers for Medicare and Medicaid Services

Dept. of Health and Human Services

ATTN: CMS-2244-P

P.O. Box 8016

Baltimore, MD 21244-8016

Subject: Comments on Proposed Medicaid Cost-sharing Regulations
CMS-2244-P

Sent electronically to http:www.cms.hhs.gov/eRulemaking

Dear Sir or Madam,

We appreciate the opportunity to comment on the proposed February 22,
2008 Medicaid cost-sharing regulations. The three of us are members of
the Department of Health Policy at the School of Public Health and
Health Services at George Washington University. Collectively, we have
substantial expertise concerning Medicaid, the Deficit Reduction Act,
regulatory policy and cost-sharing for low-income populations.

The methods proposed for annual adjustments for inflation for
cost-sharing amounts in Medicaid and SCHIP, which are being promulgated
in response to Section 6041 of the Deficit Reduction Act (DRA), are
seriously flawed. The nominal copayment levels have very broad scope and
affect tens of millions of Medicaid beneficiaries (including those with
incomes below the poverty line) for almost all of the medical care,
prescriptions and other services. The DRA requires indexing Medicaid
cost-sharing amounts by the medical care component of the consumer price
index, which already rises about twice as fast as the incomes of
low-income Medicaid beneficiaries. The method proposed by CMS
exacerbates this problem by further distorting the process of adjusting
cost-sharing levels. A substantial body of research indicates that
low-income patients are often unable to afford high copayments; thus,
they may be unable to obtain necessary and appropriate health care
services or medications and their health may deteriorate.[^1]

The relevant subsection of the DRA reads as follows:

> \(h\) In applying this section and subsections (c) and (e) of section
> 1916A, with respect to cost sharing that is 'nominal' in amount, the
> Secretary shall increase such 'nominal' amounts for each year
> (beginning with 2006) by the annual percentage increase in the medical
> care component of the consumer price index for all urban consumers
> (U.S. city average) as rounded up in an appropriate manner.

There are three principal problems with the method proposed by CMS:

1.  **Rounding up to the next 10 cent increment is too high, a 5 cent
    increment is more reasonable and consistent with other federal
    policy.** A 5 cent increment is consistent with the level recently
    established to index copayment levels for prescription drugs under
    Medicare Part D for inflation.[^2] In the preamble, CMS justifies
    this by saying that rounding to 10 cents "will simplify calculation
    and collection of the amounts involved." A 5 cent increment is
    sufficiently simple for Medicare and should be applied in Medicaid
    as well. In selecting a standard, CMS ought to consider comparable
    policies in comparable programs. There are a large number of
    beneficiaries (i.e., dual eligibles) and providers (e.g.,
    pharmacies) that serve both Medicaid and Medicare patients; using
    the same standard will reduce confusion and simplify and coordinate
    policies across the programs. In addition, as demonstrated below, a
    5 cent increment keeps the annual inflation adjustment closer to the
    levels intended by Congress under the DRA.

2.  **Future adjustments to maximum copayments should be based on
    adjustments from the original 2006 base, then rounded up.** Instead,
    CMS proposes to round up, then adjust, then round up again. For
    example, after determining that a copayment equal to \$3.00 in
    fiscal year 2006 should be raised to \$3.20 in 2007, the proposal
    then says that this amount (\$3.20) should be increased by the CPI-U
    for medical care again for fiscal year 2008. In turn, the fiscal
    year 2009 amount would be based on inflating the rounded 2008 level.

> This seriously overstates the copayment level in a fashion that is
> inconsistent with Congress's intent. The statutory language indicates
> that indexing is to be established on a base year of 2006 and **then**
> rounded up. CMS instead has proposed to index up based on each
> successive year's rounded copayment level, not based on the base year
> of 2006.

3.  **It is inappropriate to set higher copayments for Medicaid managed
    care organizations (MCOs) for beneficiaries with incomes below the
    poverty line.** The proposal modifies current policies on copayments
    for MCOs, in a way neither anticipated nor required under the
    Deficit Reduction Act. Under current policy at Section 447.60, MCO
    copayments are limited to the levels permitted under
    fee-for-service. The proposal permits copayments for MCO services
    that are higher -- \$5.20 in 2007 ---than in fee-for-service. The
    preamble states that the reason is that "some States do not have
    fee-for-service programs." First of all, this is not true. Every
    Medicaid program in the nation---even Arizona's---has at least some
    fee-for-service component (if only for groups like the dual
    eligibles or medically needy or for coverage before MCO membership
    begins). Even if it was true, the proposal would grant higher limits
    to **all** Medicaid MCOs, not just those areas or groups with no
    fee-for-service component. Second, there is no reason why MCO
    copayment limits should be set at a higher level than permitted
    under fee-for-service. When MCOs are paid capitation rates, they
    accept the responsibility of managing utilization and price and
    there is no rationale for giving MCOs a financial advantage over
    fee-for-service care. This would both reduce payments made to
    providers by the MCOs, as well as cost beneficiaries more. To
    clarify the intent that MCO copayments should be in accord with
    those used under fee-for-service, we recommend slight wording
    changes to Section 447.60. For those with incomes over 100 percent
    of the poverty line, we understand the relevance of the \$5
    copayment limit for those in managed care, but recommend a change in
    the computation of those limits.

The following illustrates the net effects of CMS's proposal using actual
data for the medical care component of the CPI-U from September of one
year to September of the next. The increases reported by the Bureau of
Labor Statistics are:

Sept. 2004 to 2005: 3.9% Used by CMS to adjust from FY 2006 to FY 2007

Sept. 2005 to 2006: 4.2% Would be used to adjust from FY 2007 to FY 2008

Sept. 2006 to 2007: 4.6% Would be used to adjust from FY 2008 to FY 2009

Over 3 years: 13.2% Cumulative increase

Using the methods proposed by CMS (10 cent increment and round up,
adjust, round up), the annual limit for a \$3.00 copayment would be:

FY 2006 **\$3.00**

FY 2007 \$3.00 times 1.039 = \$3.117, rounded up to **\$3.20**

FY 2008 \$3.20 times 1.042 = \$3.334, rounded up to **\$3.40**

FY 2009 \$3.40 times 1.046 = \$3.556, rounded up to **\$3.60**

Over 3 years 20% cumulative increase

Using methods that are more consistent with Medicare and with the
statute (5 cent increment and adjust from 2006, then round up) the
\$3.00 copayment rate would be:

FY 2006 **\$3.00**

FY 2007 \$3.00 times 1.039 = \$3.117, rounded up to **\$3.15**

FY 2008 \$3.117 times 1.042 (or \$3.00 times 1.039 times 1.042) =
\$3.248, rounded up to **\$3.25**

FY 2009 \$3.248 times 1.046 (or \$3.00 times 1.039 times 1.042 times
1.046) = \$3.397, rounded up to **\$3.40**

3 years 13.3% cumulative increase

**The method proposed on February 22 clearly overstates the increases by
a large margin**. The actual increase in the CPI-U for medical care
is13.2 percent over three years, but the proposed rule would increase
Medicaid copayments by 20 percent, a level much higher than the actual
inflation. The alternative proposed would be much closer to the actual
change in the consumer price index and in keeping with Congressional
intent.

Such a process should be used not only for the \$3 copayment, but for
cost-sharing amounts at the 50 cent, \$1, \$2, \$5 and \$10 levels.

For the sake of clarity, we also suggest that CMS annually publish a
notice in the *Federal Register* of the maximum cost-sharing amounts by
March 31 for the upcoming Federal Fiscal Year.

Using the actual levels of the medical care component of the CPI-U, here
is a table of the values that result from the alternative proposed:

  --------- --- --------- ----------- --- --------- ---------- --- --------- ----------
  **FY          **For FY                  **For FY                 **For FY  
  2006**        2007**                    2008**                   2009**    

                \*1.039   Round Up        \*1.042   Round Up       \*1.046   Round Up

  \$0.50        0.520     \$0.55          0.541     \$0.55         0.566     \$0.60

  \$1.00        1.039     \$1.05          1.083     \$1.10         1.132     \$1.15

  \$2.00        2.078     \$2.10          2.165     \$2.20         2.265     \$2.30

  \$3.00        3.117     \$3.15          3.248     \$3.25         3.397     \$3.40

  \$5.00        5.195     \$5.20          5.413     \$5.45         5.662     \$5.70

  \$10          10.390    \$10.40         10.826    \$10.85        11.324    \$11.35
  --------- --- --------- ----------- --- --------- ---------- --- --------- ----------

Specific recommendations to the proposal are:

[Section 447.54(a)(1)]{.underline} Delete the proposed last sentence and
substitute the following:

"Thereafter, any deductible should not exceed these amounts as updated
each October 1, based on the amount in effect on September 30, 2006 and
increased by the percentage increase in the medical care component of
the CPI-U from September 2004 to September ending in the preceding
calendar year and then rounded to the next higher 5-cent increment, as
announced in an annual notice in the *Federal Register."*

[Section 447.54(a)(3)(i)]{.underline} Replace the proposed table for FY
2007 with a revised table for FY 2007 and 2008

+-----------------------+-----------------------+-----------------------+
| State Payment         | Maximum copayment     | Maximum copayment     |
|                       |                       |                       |
|                       | FY 2007               | FY 2008               |
+-----------------------+-----------------------+-----------------------+
| \$10 or less          | \$.55                 | \$.55                 |
|                       |                       |                       |
| \$10.01 to \$25       | \$1.05                | \$1.10                |
|                       |                       |                       |
| \$25.01 to \$50       | \$2.10                | \$2.20                |
|                       |                       |                       |
| \$50.01 or more       | \$3.15                | \$3.25                |
+-----------------------+-----------------------+-----------------------+

[Section 447.54(a)(3)(ii)]{.underline} Replace the proposed sentence
with the following sentence:

"Thereafter, any copayments should not exceed these amounts as updated
each October 1, based on the amounts in effect on September 30, 2006 and
increased by the percentage increase in the medical care component of
the CPI-U from September 2004 to September ending in the preceding
calendar year and then rounded to the next higher 5-cent increment, as
announced in an annual notice in the *Federal Register."*

[Section 447.54(a)(4)]{.underline} Strike this proposed subsection in
its entirety. Instead modify **Section 447.60** to read as follows (the
sections modified are underlined):

"Contracts with MCOs must provide that any [maximum]{.underline}
cost-sharing charges the MCO imposes on Medicaid enrollees are in
accordance with the requirements set forth in Secs. 447.50 and 447.53
through 447.58 for cost-sharing charges imposed [under
fee-for-service]{.underline} by the State agency[, except in cases as
permitted under Secs. 447.72(a)(3) or 447.74(b)]{.underline}."

[Section 447.55(b)]{.underline} Replace the amount "\$.60" with "\$.55".

[Section 447.72(a)(3)]{.underline} Replace the proposed second sentence
with the following:

"Thereafter, any copayment should not exceed these amounts as updated
each October 1, based on \$5.00, increased by the percentage increase in
the medical care component of the CPI-U from September 2004 to September
ending in the preceding calendar year and then rounded to the next
higher 5-cent increment, as announced in an annual notice in the
*Federal Register."*

[Section 447.74(b)]{.underline} Replace the final proposed sentence with
the following:

"Thereafter, any copayment should not exceed these amounts as updated
each October 1, based on \$5.00, increased by the percentage increase in
the medical care component of the CPI-U from September 2004 to September
ending in the preceding calendar year and then rounded to the next
higher 5-cent increment, as announced in an annual notice in the
*Federal Register."*

[Section 457.555(a)(1)(i)]{.underline} Replace the table shown with the
following for Fiscal Years 2007 and 2008

+-----------------------+-----------------------+-----------------------+
| State Payment         | Maximum copayment     | Maximum copayment     |
|                       |                       |                       |
|                       | FY 2007               | FY 2008               |
+-----------------------+-----------------------+-----------------------+
| \$15 or less          | \$1.05                | \$1.10                |
|                       |                       |                       |
| \$15.01 to \$40       | \$2.10                | \$2.20                |
|                       |                       |                       |
| \$40.01 to \$80       | \$3.15                | \$3.25                |
|                       |                       |                       |
| \$80.01 or more       | \$5.20                | \$5.45                |
+-----------------------+-----------------------+-----------------------+

[Section 457.555(a)(1)(ii)]{.underline} Replace the proposed sentence
and replace it with:

"Thereafter, any copayments should not exceed these amounts as updated
each October 1, based on the amounts in effect on September 30, 2006 and
increased by the percentage increase in the medical care component of
the CPI-U from September 2004 to September ending in the preceding
calendar year and then rounded to the next higher 5-cent increment, as
announced in an annual notice in the *Federal Register."*

[Section 457.555(a)(2)]{.underline} Replace the proposed second sentence
with the following:

"Thereafter, any copayment should not exceed these amounts as updated
each October 1, based on the amount in effect on September 30, 2006 and
increased by the percentage increase in the medical care component of
the CPI-U from September 2004 to September ending in the preceding
calendar year and then rounded to the next higher 5-cent increment, as
announced in an annual notice in the *Federal Register."*

[Section 457.555(d)]{.underline}. Replace the final proposed sentence
with the following:

"Thereafter, any charge should not exceed these amounts as updated each
October 1, based on \$10.00, increased by the percentage increase in the
medical care component of the CPI-U from September 2004 to September
ending in the preceding calendar year and then rounded to the next
higher 5-cent increment, as announced in an annual notice in the
*Federal Register."*

Thank you for considering these comments. We should note that these are
our personal views and should not be viewed as representing positions of
George Washington University or the School of Public Health and Health
Services. If you have any questions, please feel free to contact
Leighton Ku at 202-416-0479 or leighton.ku@gwumc.edu

Yours truly,

Leighton Ku, PhD, MPH

Professor

Department of Health Policy

Sara Rosenbaum, JD

Hirsh Professor and Chair

Department of Health Policy

Joel Teitelbaum, JD, LLM

Associate Professor and Vice Chair

Department of Health Policy

[^1]: For example, L. Ku and V. Wachino, "The Effect Of Increased
    Cost-Sharing in Medicaid: A Summary Of Research Findings"
    (Washington, DC: Center on Budget and Policy Priorities, May 7,
    2005) or J. Newhouse, *Free For All? Lessons from the Rand Health
    Insurance Experiment* (Cambridge: Harvard University Press, 1996).

[^2]: Section 1860D-2(b)(4)(A)(ii) in the Medicare Prescription Drug,
    Improvement and Modernization Act.