States and "Pharmacy Plus" Medicaid Waiver Options

Updated: March 2007

In recent years, a number of states have pursued the idea of obtaining federal matching funds through Medicaid for a single benefit and/or coverage for people with incomes above traditional eligibility limits. With pharmaceutical coverage a particular focus, beginning in 2000 several states enacted laws and filed Medicaid 1115 waivers seeking approval for this approach to state pharmaceutical subsidy programs.

As of December 2005 five states had received "Pharmacy Plus" special waiver approval for their subsidy plans: Illinois, Wisconsin, South Carolina, Florida and Maryland.  Separately, Vermont (1996) and Tennessee (2002) have traditional, broader 1115 waivers affecting subsidy programs.  Indiana was approved in 2002, but has subsequently requested further changes in terms and conditions, which remain unimplemented as of spring 2005.   Nine other states filed applications with HHS; about a half-dozen others have passed laws or are engaged in discussions about establishing such a program. The Delaware and Hawaii applications were disapproved in 2003.

Most Programs End:  The implementation of the Medicare Part D pharmaceutical benefit under federal law ended the brief duration of Pharmacy Plus programs.  As of August 2006, Wisconsin is the only state to continue the waiver program, through summer 2007.   Illinois, Maryland and South Carolina converted all enrollees to Part D or state subsidy status.  Florida ended its entire state subsidized program in favor of the federal plans. 

The 1st Program: "Pharmacy Plus" Plan in Illinois

On January 28, 2002 the U.S. Department of Health and Human Services (HHS) approved an Illinois Medicaid 1115 demonstration project to help cover "virtually all drugs for most of the seniors who currently participate in the state subsidy program." The newly defined program provides an estimated 368,000 low- and moderate-income seniors prescription drug coverage through the Medicaid program starting in June. The previous state-only program covered individuals with income up to $21,218 and couples up to $28,480. The new Medicaid program covers individuals and couples earning up to 200 percent of poverty (or $17,720 annually for an individual and $23,880 for a couple in 2002). Enrollees pay a $3 co-payment for each prescription for expenses of up to $1,750 a year. Above that figure, the program pays 80 percent of the costs and the enrollee is responsible for 20 percent. The HHS approved program requires an annual enrollment fee of $5 but no co-payment for participants with household income under the federal poverty level guidelines ($8,860, for an individual) and a $25 enrollment fee for those with income greater than that. (In 2001, the Illinois legislature's budget, HB 3491, included a requirement that the state seek federal reimbursement under Medicaid for people up to 250 percent of federal poverty served by the state subsidy program.)

In addition, HHS Secretary Tommy Thompson announced a model state demonstration application form, "Pharmacy Plus," which will allow states to immediately expand Medicaid coverage for prescription drugs to Medicare beneficiaries and other individuals with family incomes up to 200 percent of federal poverty guidelines. The exact income level to which coverage can be extended will vary depending on the eligibility levels in a state's existing Medicaid program. HHS states that "with a streamlined application, available electronically, Pharmacy Plus will allow states to move quickly to implement effective programs." See:

• CMS Technical Guidance and Fact Sheet (8/02 online version)

Private Insurance Assistance. To provide an incentive for individuals who have private insurance coverage (which may require more costly copayments than those of the demonstration) from dropping that coverage to enroll in the demonstration, "demonstration eligible individuals" with private insurance coverage for pharmaceuticals may be able to choose to receive a monthly "rebate check" of a set fee (approximately $25) rather than a direct demonstration benefit.

The Medicare Drug Assistance law (MMA) signed December 8, 2003 has substantial impacts on states with operational or active Pharmary Plus waiver applications. In particular, the five state receiving federal matching funds for some or all of their enrollees cannot "double-dip" by also facilitating benficiary enrollment in Medicare discount cards with a direct "transitional assistance" benefit of $600 for 2004 and 2005.  Additional features and restrictions tied to the MMA law are available in a separate NCSL online page on Medicare Pharmaceutical Resources.

Maryland: An alternative model with discounts, subsidies and coverage of non-Medicare people.

On July 30th, 2002, Maryland received approval from CMS to establish the Maryland Pharmacy Discount Program within its existing Medicaid Section 1115 Health Reform Demonstration. Maryland will offer Medicaid pharmacy benefits to certain low-income individuals and will provide a prescription drug discount to persons with somewhat higher incomes.

Aged, blind or disabled persons who are Qualified Medicare Beneficiaries (QMBs) and persons of all ages who meet specified income and asset requirements will receive full Medicaid pharmacy coverage. QMBs are Medicare beneficiaries with incomes at or below the poverty level ($8860 for a family of one in 2002) and few assets ($4000 for a family of one in 2002). Other eligible persons must meet the income and asset standards of Maryland's state-funded Pharmacy Assistance Program. In 2002, those income standards are $10,300 for a family of one (approximately 116% of poverty) and $11,150 for a family of two (approximately 97% of poverty) with additional increases for each family member. Asset standards are $3750 for a family of one and $4500 for a family of two. Income and asset standards for other family sizes are listed at http://dhmh.state.md.us/mma/mpap/pdf/MPAP-incomechart.pdf . Individuals do not need to be Medicare beneficiaries or meet age or disability requirements to qualify for coverage.

Medicare beneficiaries with incomes at or below 175% of poverty (approximately $15,500 for a family of one and $20,900 for a family of two in 2002) will be eligible for discounts on prescription drugs. There are no asset standards for this part of the program. Eligible persons will pay 65% of the Medicaid reimbursement rate for each drug, plus a $1 processing fee, and the state will pay the remaining 35%.

The program, launched July 1, 2003, builds on some of the principles of the Pharmacy Plus initiative, but was submitted as a modification to the state's existing 1115 waiver rather than as a Pharmacy Plus waiver. Unlike Pharmacy Plus waivers approved for certain Medicare beneficiaries in Illinois, Wisconsin, Florida, and South Carolina, Maryland's program covers both persons who are Medicare beneficiaries and those who are not. In addition, unlike the income-based programs in the other four states, Maryland has both income and asset standards for persons who receive the pharmacy benefit. Maryland program description, July 2003.

2004: More States, Next Steps?

At least nine states continue to pursue waivers in the hope of a positive outcome, while four more have laws directing their state to apply. Here is the view of Senate President William Irons of Rhode Island, whose waiver is pending at HHS: "We are hopeful about the prospects of this waiver. It will allow us to use Medicaid matching funds to help reduce the out-of-pocket cost of medications for lower income elderly and disabled persons, and it would expand the scope of medicines available to participants in the RI Pharmaceutical Assistance for the Elderly Program. The waiver also builds in medical exam and pharmacy coordination components that will help decrease medication errors and improve health outcomes. This waiver program should be a win-win for the people of Rhode Island." (Source: NCSL interview, December 20, 2002)

"The Financing of Pharmacy Plus Waivers: Implications for Seniors on Medicaid of Global Funding Caps" (download full text - 8 pages) In May 2003 a new in-depth study was released by the Kaiser Commission. It provides an updated analysis of the legal terms in these waivers.

 State Laws and Approved Waiver Actions

In Tennessee, TennCare received HHS waiver approval for a comprehensive redesign of the state's Medicaid program, including a new pharmacy-only program for low-income Medicare beneficiaries enrolled as of December 31, 2001, who are not otherwise entitled to Medicaid. The demonstration enrollees will receive benefits comparable to the State Employees Health Maintenance Organization package. (Agency application approved June 2002)

Discounted Pharmaceutical benefits: The Healthy Maine Program

In January 2001, Maine received HHS approval to create a new category of Medicaid benefit for residents up to 300% of federal poverty guidelines ($26,580 for an individual; $35,820 for a couple). A December 2002 federal court decision has halted this program (See details below). The benefit allowed eligible persons to purchase prescription drugs at the established Medicaid discount price. Although the state contributes a small portion (2%) of state funds, the enrollee pays the rest of the discount purchase price. Details of the program are available at:

• Prescription Drug Laws of Maine - NCSL web report, 2002
• ME waiver application to HHS, 1/5/01

The Healthy Maine program was halted by a U.S. Court of Appeals ruling on December 24, 2002. The ruling affects most of the 110,000 people already enrolled in Maine; it has delayed or affected 2002 laws enacted in Hawaii, New Mexico and Vermont. 
Court-related information:

• Court decision: PhRMA v. Thompson (II) (U.S. Cir. DC, 02-5110), 12/24/02 [4 pages]
• NCSL's Prescription Drug Laws of Maine - history and overview
• PhRMA Litigation fact sheet, 12/5/02
• Maine Dept. of Human Services statement, 12/26/02

Vermont actually was the first state to seek and receive approval for a discount category --a 2000 state law led to HHS/HCFA approval in November 2000. The "Pharmacy Discount Program" established discounts for Medicare and uninsured individuals. Vermont's FY 2001 appropriations bill - Sec. 117(d) stated "The department of social welfare shall submit to the health care financing administration (HCFA), a request to include in Vermont's federal Medicaid waiver for the Vermont Health Access Plan's (VHAP) pharmacy program any Medicare-covered individual with household income above 175 percent of federal poverty level with no Medigap policy that covers drugs and other individuals with household incomes up to 300 percent of the federal poverty level who do not have an insurance program that includes a prescription drug benefit." (The state V-Script program already provides limited coverage for persons between 150 percent and 225 percent of FPL). "Individuals in this expanded coverage group shall receive a financial subsidy for prescription drugs equal to the average rebate paid to the Medicaid program by pharmaceutical manufacturers." The law was signed by Governor Dean, 5/29/2000. The required federal approval was granted by HCFA on 11/3/2000 with implementation scheduled to start January 2001. However, the federal District Court in D.C. struck down the approval and the program was halted in its first weeks of implementation.

• Vermont Health Access Plan - Pharmacy Discount Program (PDP) - HCFA approval; "Terms and Conditions", 11/3/00 (20 pages)
• VT Program summary - agency release, 11/00
• "Drug Industry Sues to Block Rx Program" - 12/14/00

In fall 2000 New Hampshire filed a waiver application, but HHS did not approved it (as of 12/31/03) and state sources do not expect approval.

2002 activity: Three states passed laws seeking similar discount programs: New Mexico (SB 91), Hawaii (HB 1950) and Vermont (H.31 of 2002). Maryland's approved Pharmacy Plus waiver (see above) includes a discount component. Another seven states considered similar bills for Medicaid discounts.

Other State Resources

• 1115 Waiver Research and Demonstration Projects - General explanation by CMS, 7/02
• Conn. PACE 1115 Demonstration Waiver - legislative research report, 2/02
• Indiana Pharmacy Plus Waiver - filed July 1, 2002
• West Virginia considers waiver - news article, November 1, 2002

NCSL Rx Reports:

These web documents include the latest on laws and initiatives to provide state subsidies, as well as experiments with discounts, bulk purchasing and price regulation:

• State Pharmaceutical Assistance Programs - Features tables summarizing current state subsidy and discount programs for seniors, people with disabilities, uninsured and others, updated 2006. [20 pages]
• Pharmaceuticals Overview - A menu page of NCSL on-line reports, recent news, statistics and more. Updated regularly.
• Medicaid Prescription Drug Laws and Strategies for 2001-2005 -Updated 2006 [12 pages]
• Non-NCSL Reports: Prescription Drug Resources for 2006 - Additional reports from government, academic, industry and consumer sources, including 40+ direct web links, updated regularly.