A CRS Series on Medicaid: Dual Eligibles

Order Code RL32977
CRS Report for Congress
.Received through the CRS Web
A CRS Series on Medicaid:
Dual Eligibles
July 6, 2005
Karen Tritz
Analyst in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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A CRS Series on Medicaid: Dual Eligibles
Summary
The term “dual eligibles” generally refers to individuals who qualify for both
Medicare benefits and all Medicaid benefits offered in their state. Although dual
eligibles represent about one-eighth of Medicaid and one-sixth of Medicare
beneficiaries, the high cost, significant needs, and considerable challenges in
delivering Medicaid and Medicare services to this group have drawn the attention of
both state and federal policymakers.
In FY2002, about 6.6 million individuals were considered dual eligibles
(including those who only received assistance with Medicare premiums and cost-
sharing). These individuals comprise a disproportionate care of Medicaid spending
— representing 13% of Medicaid beneficiaries and 41% of Medicaid spending. In
2002, Medicaid spent $91.7 billion on dual eligibles including $86.5 billion for
Medicaid services and Medicare cost-sharing and $5.2 billion for Medicare
premiums. Of the spending for Medicaid services and Medicare cost-sharing, 69%
was for long-term care services, followed by 17% for prescription drugs.
This report also provides an overview of dual eligible individuals and discusses
the specific role of Medicaid in serving this group. Dual eligibles are more likely to
be female, in a minority group, have less education, and have higher levels of
functional limitations than the average Medicare beneficiary.
Several current issues exist in providing services to dual eligibles, such as the
challenges in coordinating the delivery of Medicaid and Medicare services. Some
efforts have been made by states and the federal government to increase the
coordination of these services; several of these efforts are discussed in the report.
Another significant policy issue is the implications for dual eligibles of the new
Medicare prescription drug benefit enacted by the 108th Congress, (P.L. 108-173).
Starting in January 2006, dual eligibles will be required to enroll in the new Medicare
Part D benefit for coverage of their prescription drugs.
Finally, states must also cover the Medicare premiums and/or cost-sharing for
certain groups of low-income Medicare beneficiaries (some of whom may also
qualify for Medicaid). States also have the option of covering the Medicare
premiums of other individuals who are enrolled in the state’s Medicaid program.
Despite the variety of groups covered, identifying and enrolling these low-income
Medicare beneficiaries remains challenging.
To assist Congress in reviewing policy alternatives and understanding the
current status of Medicaid programs, the Congressional Research Service (CRS) is
producing a series of reports on various aspects of Medicaid. This series will address
Medicaid programs and policies. This report is one in that series and will be updated.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Current Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Cost of Providing Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Coordinating Care for Dual Eligibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Medicare Prescription Drug Benefit for Dual Eligibles . . . . . . . . . . . . . . . . . 2
Who Are the Dual Eligibles? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Definition and Eligibility Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Demographic Information on Dual Eligibles . . . . . . . . . . . . . . . . . . . . . . . . . 4
Estimates of Growth in Dual Eligible Population . . . . . . . . . . . . . . . . . . . . . 6
Medicaid Services for Dual Eligibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Total Medicaid Expenditures for Dual Eligibles . . . . . . . . . . . . . . . . . . . . . . 8
Long-Term Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Nursing Facility Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Intermediate Care Facilities for Individuals with Mental Retardation . 11
Personal Care Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Home Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Rehabilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Home- and Community-Based Waivers . . . . . . . . . . . . . . . . . . . . . . . 13
Prescription Drugs and Changes Resulting from the Addition of a
Medicare Drug Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Changes to the Scope of the Prescription Drug Benefit . . . . . . . . . . . . 15
Changes to Premiums and Cost-Sharing Requirements for
Prescription Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Phase-Down State Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Cost of Providing Services to Dual Eligibles . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Coordinating or Integrating Medicaid and Medicare Services . . . . . . . . . . . . . . 19
Issues in Care Coordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Program Administration and Operations . . . . . . . . . . . . . . . . . . . . . . . 19
Coverage of Similar Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Shifting Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Strategies to Coordinate or Integrate Services . . . . . . . . . . . . . . . . . . . . . . . 20
Care Coordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Managed Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Individuals Who Receive Assistance with Medicare Premiums and
Cost-Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Qualified Medicare Beneficiaries (QMB) . . . . . . . . . . . . . . . . . . . . . . 25
Specified, Low-income Medicare Beneficiary (SLMB) . . . . . . . . . . . 26
Qualified Disabled and Working Individuals (QDWIs) . . . . . . . . . . . 26
Qualifying Individual-1 (QIs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

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Traditional Medicare Buy-In . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Total Number of Individuals Receiving Medicare Premium
Assistance through Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Issues in Providing Assistance with Medicare Premiums and Cost-Sharing . . . . 30
Use of More Liberal Methods of Counting Income and Resources . . . . . . . 30
Coverage of Medicare Managed Care Premiums and Cost-Sharing . . . . . . 33
Amount of Medicaid Coinsurance for QMBs . . . . . . . . . . . . . . . . . . . . . . . 33
Outreach for Medicare Premiums and Cost-Sharing Assistance . . . . . . . . . 34
Summary of Premiums and Cost-Sharing Assistance Groups . . . . . . . . . . . 36
Administration and Data Issues for Dual Eligible Programs . . . . . . . . . . . . . . . . 38
Administration of Claims Payment for Dual Eligibles . . . . . . . . . . . . . . . . 38
Administration of Medicare Premium Assistance . . . . . . . . . . . . . . . . . . . . 38
Data Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Appendix A. Estimated Medicaid Expenditures for Dual Eligibles by
State and Category of Service, FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Appendix B. Estimated Number of Dually Eligible Recipients for Selected
Service Types by State, FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
List of Figures
Figure 1. Dually and Non-Dually Eligible Medicare Beneficiaries by Age,
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
List of Tables
Table 1. Comparison of Dual Eligible to Non-Dual Eligible Medicare
Beneficiaries by Key Demographic Factors, 2002 . . . . . . . . . . . . . . . . . . . . . 5
Table 2. Estimated Growth in the Number of Dual Eligibles, FY2004-2015,
by Basis of Medicaid Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Table 3. Estimated Medicaid Expenditures for Dual Eligibles by
Category of Service, FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 4. Estimated Number of Dually Eligible Recipients for Selected
Service Types, FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 5. Estimated Number of Recipients and Spending on Medicaid
Long-Term Care Services for Dual Eligibles, FY2002 . . . . . . . . . . . . . . . . 10
Table 6. An Overview of Medicare Premiums and Cost-Sharing Requirements,
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Table 7. Number of Individuals Receiving Assistance with Medicare
Premiums, April 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Table 8. States Using Less Restrictive Income or Resource
Methodology for Determining Eligibility for QMB and SLMB in 2001 . . . 31
Table 9. Summary of Medicare Premiums and Cost-sharing Coverage by
Assistance Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

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A CRS Series on Medicaid: Dual Eligibles
Introduction
The term “dual eligibles” generally refers to individuals who qualify for both
Medicare benefits and those Medicaid benefits offered in their state. Persons qualify
for Medicare because they are either age 65 or older, or under age 65 and have a
disability and have been receiving Social Security Disability Insurance (SSDI) for
two years.1 Persons qualify for Medicaid because they meet one of the categories
specified in federal law (e.g., aged, blind, or disabled) and meet the income and asset
standards states use for eligibility under this means-tested program.
However, the Centers for Medicare and Medicaid Services (CMS)2 also includes
in the definition of “dual eligibles” certain low-income Medicare beneficiaries for
whom Medicaid covers only certain Medicare premium and cost-sharing obligations.
This latter group (also referred to as the ‘Medicare Savings programs’) consists of
several subcategories of low-income Medicare beneficiaries. Congress requires state
Medicaid programs to cover certain Medicare premiums, co-payments and/or
deductibles for each of these groups, and gives states the option of covering
premiums for other groups. Unless otherwise specified, all data on dual eligibles
provided in this report include both those with full Medicaid benefits and the low-
income Medicare beneficiaries receiving only premium and cost-sharing assistance
from Medicaid.3
This report describes Medicaid’s coverage of dual eligibles including
demographic information on these beneficiaries, the high cost and intensive service
needs of dual eligible individuals and associated Medicaid spending, the delivery and
administration of dual eligible services and assistance with Medicare cost sharing.
Some features of the Medicare program are described to compare the two programs
and discuss their interaction, but a full discussion of Medicare expenditures for dual
eligibles and Medicare program issues is outside the scope of this report.
Current Issues
Dual eligibles represent about one in eight Medicaid beneficiaries and one in six
Medicare beneficiaries. However, the high cost, significant needs, and considerable
1Also qualifying for Medicare are persons who have End-Stage Renal Disease (ESRD).
2The federal agency administering Medicaid and Medicare within the Department of Health
and Human Services (HHS).
3The data used in this report, provided by CMS, does not differentiate between Medicaid
service expenditures and expenditures for Medicare co-payments and deductibles.

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CRS-2
challenges in delivering Medicaid and Medicare services to this group have drawn
the attention of both state and federal policymakers. This section provides a brief
introduction of three key policy issues for dual eligibles — the cost of providing
services, coordinating care for dual eligibles and the new Medicare drug benefit.
Each of these issues is discussed in more detail later in the report.
Cost of Providing Services
Some policymakers have raised concerns about the overall expenditure growth
in both Medicaid and Medicare. Because dual eligible individuals account for a
disproportionate share of Medicaid and Medicare expenditures compared to other
groups, policy alternatives for dual eligibles are often discussed as ways to address
the growing cost of these programs. Some of these discussions include how to
provide the services in a more cost-efficient manner, but they also include which unit
of government (federal or state) should cover the cost of services for these
individuals.
Coordinating Care for Dual Eligibles
States and the federal government have attempted to address costs and at the
same time improve the quality of services through efforts to coordinate or integrate
services for dual eligibles. Coordinating services for these individuals is a challenge
because: (1) Medicare and Medicaid are administered and operated very differently
from one another; (2) the two programs cover comparable services that differ in the
eligibility requirements or scope; and (3) incentives exist to shift costs between the
two programs which do not necessarily result in the best quality or continuity of care
for the beneficiary.
Medicare Prescription Drug Benefit for Dual Eligibles
The 108th Congress enacted the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (MMA, P.L. 108-173). This legislation made several
changes to the Medicare program including offering Medicare beneficiaries access
to discounted prescription drugs during 2004 and 2005 and adding a voluntary
prescription drug benefit under a new Medicare Part D beginning January 2006.
These benefits include significant changes for dual eligibles and those who receive
assistance with Medicare premiums and cost-sharing. In 2006, dual eligible
individuals will no longer be eligible for prescription drug benefits provided under
the Medicaid state plan.4 To receive prescription drug coverage, dual eligibles must
enroll in a private drug plan authorized to provide the new Medicare Part D benefit.5
4The Medicaid state plan is the document that states submit to the federal government for
approval which describes the eligibility groups covered and the services provided.
5For additional information, see CRS Report RS21837, Implications of the Medicare
Prescription Drug Benefit for Dual Eligibles and State Medicaid Programs, by Karen Tritz;
and CRS Report RL32902, Medicare Prescription Drug Benefit: Low-Income Provisions,
by Jennifer O’Sullivan.

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CRS-3
Who Are the Dual Eligibles?
Definition and Eligibility Requirements
As noted above, the term “dual eligibles” refers to persons qualifying for both
Medicare and Medicaid benefits. In FY2002, about 6.6 million individuals were
considered dual eligibles (including those who only received assistance with
Medicare premiums and cost-sharing).6 In order to qualify for Medicare, individuals
or their spouses (or, in some cases, their parents) must have worked and paid
Medicare taxes, and they are either elderly or they are under age 65 and have
blindness or a disability as determined by Social Security law.7
Persons qualify for Medicaid if they have limited income and resources and
meet other eligibility requirements. For a Medicare beneficiary to qualify for all state
Medicaid benefits, he or she must meet the Medicaid eligibility criteria in that state.
A common pathway into Medicaid for a Medicare beneficiary is through his or her
eligibility for the Supplemental Security Income (SSI) program which, in most states,
provides automatic Medicaid eligibility.8 SSI is a cash welfare program providing
assistance to low-income individuals. Another common Medicaid eligibility pathway
for a Medicare beneficiary is through the “medically needy” option. Under this
option, the state sets an income standard and allows certain individuals whose
income exceeds that standard to “spend down” to the qualifying level, by deducting
the amount of incurred medical expenses from the person’s income before
determining eligibility for Medicaid.
The majority of dual eligibles are eligible for both Medicare benefits9 and all
Medicaid benefits provided within state guidelines (including help with Medicare
premiums and cost-sharing charges). A smaller percentage of Medicare beneficiaries
are eligible only for Medicare premium and cost-sharing assistance. Individuals who
qualify for such assistance are generally those who have limited income and
resources, but do not meet the state’s Medicaid eligibility criteria.
Congress requires state Medicaid programs to cover the Medicare premiums
and/or cost-sharing for certain groups of low-income Medicare beneficiaries (some
of whom may also qualify for Medicaid). States also have the option of covering the
Medicare premiums of other Medicaid beneficiaries.
6FY2002 are the latest data available for analyzing the eligibility and services of dual
eligibles.
7To be considered to have blindness or a disability under Social Security law, an individual
must meet certain functional criteria depending upon the type of disability and have
countable earnings less than $830 for a disability and $1,380 for blindness in 2005.
8 The SSI income standard is about 73% of the federal poverty level.
9Medicare benefits are separated into Part A and Part B. Part A covers inpatient hospital
services, up to 100 days of post-acute care in a skilled nursing facility following a hospital
stay, some home health services, and hospice services. Part B covers services such as
physicians, outpatient hospital, laboratory, durable medical equipment and some home
health care.

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CRS-4
These five groups are introduced below to provide context for the remaining
discussion, but are described in more detail later in this report.
! Qualified Medicare Beneficiary (QMB) program includes individuals who
have Part A Medicare benefits and whose income does not exceed 100% of
the federal poverty level (FPL).
! Specified Low-Income Medicare Beneficiary (SLMB) program includes
individuals who would otherwise be QMBs but whose income is more than
100% but less than 120% of FPL.
! The Qualifying Individual (QI-1) program covers persons who meet the other
criteria but whose income is less than 135% of FPL.
! Qualified Working Disabled program (QDWI) includes persons who were
entitled to Medicare, but lost that entitlement because of earnings from work
and whose income is below 200% of FPL; and
! Traditional Medicare Buy-In covers persons who are eligible for Medicaid
but are not eligible for any one of the previously described groups. The state
has the option of paying the Medicare Part B premiums for these individuals.
Demographic Information on Dual Eligibles
In FY2002, more than 98% of dual eligibles qualified for Medicaid through the
eligibility pathways of elderly, blindness or disability (6.5 million individuals).10
About 1.3% were persons who qualify under other Medicaid eligibility pathways
such as children and non-disabled adults (about 88,000 individuals).
In FY2002, 92% of all elderly Medicaid beneficiaries were dually eligible (3.6
million individuals), and 39% of Medicaid beneficiaries who were blind or had a
disability were dually eligible (2.9 million individuals). Some Medicaid beneficiaries
with disabilities do not qualify for Medicare because they do not have a sufficient
work history in which they paid Medicare taxes or do not qualify under a parent’s or
spouse’s earnings record. Many of these individuals include persons with mental
retardation and/or developmental disability.
Compared to non-dually eligible Medicare beneficiaries, dually eligible
individuals were more likely to be female, in a minority group, have less education,
and have more and higher levels of functional limitations than the average Medicare
beneficiary (see Table 1).11 Some of these demographic differences have
implications for the types and amounts of services needed by dual eligibles and the
strategies for outreach and beneficiary education compared to other Medicare
beneficiaries. For example, a lower level of formal education in this group may mean
that beneficiary education materials should be targeted to a certain reading level.
10Includes dual eligibles who qualified for full Medicaid benefits and those who qualified
just for assistance with Medicare premiums and cost-sharing.
11A report by the Medicare Payment Advisory Commission (MEDPAC) also found that 38%
of dual eligible beneficiaries had a cognitive or mental impairment. This could include a
variety of conditions including mental retardation, mental illness, dementia, etc. MEDPAC,
Report to the Congress: New Approaches in Medicare, June 2004.

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CRS-5
Table 1. Comparison of Dual Eligible to Non-Dual Eligible
Medicare Beneficiaries by Key Demographic Factors, 2002
Dually eligible
Non-dually
beneficiaries
eligible
(percent of
Medicare
Gender
Female
64%
55%
Male
36%
45%
Race/ethnicity
White
57%
84%
Black
22%
7%
Hispanic
13%
6%
Other
8%
3%
Years of schooling
0-8 years
37%
10%
9-12 years (no diploma)
24%
15%
High school graduate
23%
32%
Voc/Tech
3%
7%
Some college
7%
16%
College degree
6%
20%
Functional limitations
None
24%
55%
IADL onlya
18%
15%
1-2 ADLsb
27%
20%
3-5 ADLs
31%
11%
Source: Centers for Medicare and Medicaid Services, Characteristics and Perceptions of the
Medicare Population, 2002, pp. 36-39, at [http://www.cms.hhs.gov/MCBS/CMSsrc/2002/sec8.pdf].
a. IADLs refer to Instrumental Activities of Daily Living including managing one’s money, shopping
for groceries, doing housework, etc.
b. ADLs refer to Activities of Daily Living including eating, bathing, dressing, etc.
A disproportionate number of dual eligible beneficiaries tend to be under age
65 or over age 85 compared to the general Medicare population (see Figure 1).
Individuals under age 65 likely qualify for Medicare because they have a disability
that either they were born with or that has been acquired such as by means of an
accident.

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CRS-6
Figure 1. Dually and Non-Dually Eligible Medicare Beneficiaries by Age, 2002
50
45
ries
ia 40
fic
e 35
30
e Ben 25
icar 20
15
f Med
t o 10
5
cen
0
Per
Under 45
45-64
65-74
75-84
85+
Age of Beneficiary
Dual Eligible
Non-Dually Eligible
Source: Centers for Medicare and Medicaid Services, Characteristics and Perceptions of the Medicare
Population, 2002, pp. 36-39. [http://www.cms.hhs.gov/MCBS/CMSsrc/2002/sec8.pdf].
Estimates of Growth in Dual Eligible Population
In FY2002, about 6.6 million individuals were considered dual eligibles
(including those who only received assistance with Medicare premiums and/or cost-
sharing). Assuming that the proportion of dual eligibles in the total Medicaid
population remains constant, the number of dual eligibles would grow from an
estimated 8.4 million in FY2004 to 11.1 million in FY2015. This projected growth
in the number of dual eligibles would result in additional challenges for federal and
state governments because of the increased cost to Medicaid and Medicare given the
higher than average cost per person and the increased demand for care coordination.
See Table 2 below for an estimate of the growth in the number of dual eligibles by
category of Medicaid eligibility.12
12The recent addition of the Medicare prescription drug benefit, described above, is reflected
in these estimates of the dual eligible population.

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CRS-7
Table 2. Estimated Growth in the Number of Dual Eligibles,
FY2004-2015, by Basis of Medicaid Eligibility
(in millions)
Basis of Medicaid eligibility
Fiscal year
Total
Individuals with
Aged
blindness or
Other
disability
2004
8.4
4.7
3.5
0.2
2005
8.8
5.0
3.6
0.2
2006
9.0
5.1
3.7
0.2
2007
9.2
5.3
3.8
0.2
2008
9.5
5.4
3.8
0.2
2009
9.7
5.5
3.9
0.2
2010
9.9
5.7
4.0
0.2
2011
10.1
5.8
4.1
0.2
2012
10.4
6.0
4.2
0.2
2013
10.5
6.1
4.2
0.2
2014
10.8
6.3
4.3
0.2
2015
11.1
6.5
4.4
0.2
Sources: CRS analysis based on Congressional Budget Office, Mar. 2005 baseline projections for
total Medicaid enrollment and the Medicaid Statistical Information System, (MSIS), FY2002 data
which provides percentage of dual eligibles by basis of eligibility.
Medicaid Services for Dual Eligibles
Overview
Both Medicare and Medicaid offer comprehensive coverage for acute medical
care services. Medicare benefits are separated into Part A and Part B. Part A covers
inpatient hospital services, up to 100 days of post-acute care in a skilled nursing
facility following a hospital stay, some home health services, and hospice services.
Part B covers services such as physicians, outpatient hospital, laboratory, durable
medical equipment and some home health care. Medicaid covers a similar array of
acute care benefits. However, Medicaid covers several additional categories of
services not covered by Medicare but needed by many elderly individuals and those
with disabilities. Long-term care, including both institutional and community-based
services, is one such category of services covered by states. Prescription drugs have
also been covered by states, but will be covered by Medicare beginning in 2006.
For individuals who are eligible for full Medicaid benefits and Medicare
benefits, Medicare is the primary payer. Medicaid benefits not available under
Medicare (e.g., long-term care services, medical transportation) are paid by Medicaid
unless there is a third-party to cover the cost. Medicaid is generally the payer of last
resort.

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CRS-8
Within broad federal guidelines, states can design the scope and availability
of Medicaid benefits. Medicaid law requires states to provide certain services such
as hospital and physician services. Within federal guidelines, states may, at their
option, cover other services, and limit the amount, duration or scope of any Medicaid
service. For example, a state may limit Medicaid coverage of a particular service to
a certain number of hours or days or make a service available only to those with a
particular condition (e.g., individuals who need at least 10 hours of personal care per
week).
Total Medicaid Expenditures for Dual Eligibles
In FY2002, Medicaid spent $91.7 billion on dual eligibles including $86.5
billion for Medicaid services and Medicare coinsurance and deductibles and $5.2
billion for Medicare premiums.13 The majority of expenditures, $59.5 billion, or
69%, were for long-term care services. The second highest category of Medicaid
spending for dual eligibles was prescription drugs at $14.9 billion, or 17%. Table
3 provides the estimated Medicaid expenditures for dual eligibles by category of
Medicaid service. (See Appendix A for state-by-state estimates.)
Nationwide 6.6 million dual eligibles received Medicaid services or assistance
with Medicare cost-sharing in FY2002.14 Table 4 provides the estimated number of
dual eligibles who had Medicaid expenditures for selected types of services within
the broad categories of acute care, long-term care, prescription drugs and managed
care. This is not a comprehensive list of all Medicaid services but is intended to
illustrate the variation among the utilization of certain types of services. (See
Appendix B for state-by-state estimates.)
There are three caveats to keep in mind about the data presented in this section.
First, the amounts shown represent Medicaid expenditures for both Medicaid services
and Medicare co-payments and deductibles. The data source (the Medicaid
Statistical Information System, MSIS)15 does not permit a breakdown of these two
spending components. Amounts paid for Medicare premiums are not included in
MSIS. Second, the MSIS data on dual eligibles has some substantial limitations and
is not always consistently reported by states. These issues are discussed at the end
of this report. Finally, managed care expenditures cannot be broken down by service
type. Under managed care, states pay an organization a fixed, monthly payment per
enrollee to provide all the services specified under the managed care contract. Data
reported to the federal government generally show only the fixed, monthly, per
person payment amount and do not itemize expenditures for specific types of
13Expenditure data for Medicare premiums from CMS-Form 64, FY2002. Expenditure data
for Medicaid services and Medicare premiums and cost-sharing from CMS, MSIS, FY2002.
The MSIS data does not include spending for Medicare premiums. The analysis of
Medicaid spending by category of service does not include expenditures for Medicare
premiums.
14 Does not include those who only received assistance with Medicare premiums.
15The MSIS is the primary federal datasource for information on Medicaid beneficiaries.
This federal database is compiled by CMS from eligibility and claims information submitted
quarterly by the states and the District of Columbia.

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CRS-9
services. This is particularly true in states that have widespread use of managed care
such as Tennessee and Arizona.
Table 3. Estimated Medicaid Expenditures for Dual Eligibles by
Category of Service, FY2002
Medicaid
expenditures
Percentage of total
Category of service
(in billions)
expenditures
Acute care
$7.1
8.2%
Long-term care
$59.5
68.8%
Prescription drugsa
$14.9
17.2%
Managed care
$3.9
4.5%
Unknown
$1.1
1.3%
Totalb
$86.5
100%
Source: CRS analysis based on Centers for Medicare and Medicaid Services, MSIS data, FY2002.
a. The amounts shown do not reflect rebates paid to states by pharmaceutical manufacturers. In
FY2002, total Medicaid drug expenditures for all beneficiaries were offset by 20% due to
rebates.
b. Does not include $5.2 billion in expenditures for Medicare Part B premiums.
Table 4. Estimated Number of Dually Eligible Recipients for
Selected Service Types, FY2002
(in thousands)
Number of Medicaid
Percentage of total
Category of service
recipients
number of dual eligible
(in thousands)
recipients
Acute care
Inpatient hospital
1,212.0
18%
Outpatient hospital
2,537.4
39%
Physician
3,942.2
60%
Long-term care
Nursing facility
1,329.2
20%
Intermediate care facilities for
72.4
1%
individuals with mental
retardation (ICF-MR)
Personal care
512.9
8%
Prescription drugs
5,376.5
82%
Managed care
Comprehensive HMO
883.4
13%
Totala
6,577.3
100%
Source: CRS analysis based on Centers for Medicare and Medicaid Services, MSIS data, FY2002
Note: Included in the beneficiary totals are dual eligible beneficiaries receiving a service listed above
that was funded under a home and community-based program under Section 1915(c) or Section 1929
of the Social Security Act.
a. Includes all dual eligibles except those for which Medicaid paid Medicare premiums only.

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CRS-10
Long-Term Care
Dually eligible individuals often rely on Medicaid for most or all of their long-
term care services and supports because Medicare provides a very limited array of
services for individuals with long-term care needs. Of all Medicaid spending for dual
eligibles, 69% was for long-term care ($59.5 billion), primarily for nursing facilities
as shown in Table 5 below. In addition, long-term care spending for dual eligibles
represented 72% of all Medicaid long-term care spending in FY2002 ($82.5 billion).
This section describes in more detail several of the more frequently used Medicaid
long-term care services for dual eligibles. If Medicare covers a comparable benefit,
the similarities and differences are described.
It should be noted that the number of dual eligible enrollees and the
expenditures shown in Table 5 do not include long-term care services for Medicaid
beneficiaries enrolled in a Medicaid managed care program. In these cases, states
generally report the enrollees and expenditures in the managed care category of
service.
Table 5. Estimated Number of Recipients and Spending on
Medicaid Long-Term Care Services for Dual Eligibles, FY2002
Number of dual
eligible recipients
Total spending (in
Type of service
(in thousands)
billions)
Total
n/aa
$59.5
Nursing facilities
1,329
$34.4
ICF/MR
72
$6.7
Personal care
513b
$3.4
Home health services
406b
$1.6
Rehabilitation
222b
$1.0
Home- and community-based waiver services
n/ac
$9.3
Other servicesd
n/a
$2.3
Source: CRS analysis based on Centers for Medicare and Medicaid Services, MSIS data, FY2002.
Numbers may not total due to rounding.
a. The data do not allow for an unduplicated count of the number of individuals who received long-
term care services.
b. Includes individuals who may be receiving the service under a Medicaid home- and community-
based waiver program.
c. The FY2002 MSIS data do not allow for a reliable determination of the number of individuals who
are receiving home- and community-based waiver services.
d. Includes targeted case management ($.5 billion), inpatient mental health services ($.3 billion),
private duty nursing ($.1 billion), and prosthetics and eyeglasses ($2.3 billion). The data do
not allow for an unduplicated count of individuals who received services in the ‘Other’
category.
Nursing Facility Services. Nursing facility services are covered by both
Medicaid and Medicare. However, the Medicare nursing facility benefit is more
narrowly defined as a post-hospitalization, short-term benefit. The Medicaid nursing
facility benefit is much broader in scope and is often used as the long-term payer for
nursing facility services. Medicare pays for approximately 9% of all patient days in

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CRS-11
a nursing home compared to Medicaid which pays for about 65% of all days.16
Medicaid is the single largest public payer for nursing home care. The remainder
may be paid for by the individual or, to a much lesser extent, private insurance.
In general, Medicare covers nursing facility services for those individuals who
need skilled services following a hospitalization of at least three days. Medicare will
pay for up to 100 days of nursing facility services per “spell of illness.”17
Beneficiaries are not required to make co-payments for this service for the first 20
days of care, but must pay a daily co-payment for days 21 through 100 ($114 in
2005).18
Under Medicaid, states are required to offer nursing facility services to all
Medicaid beneficiaries over age 21 who require this service. As of September 2003,
all states except New Mexico also covered nursing facility services for individuals
under age 21.19 There are no limits on the number of days of services that Medicaid
will cover. Medicaid requires that a beneficiary in a nursing facility contribute all of
his or her income above a minimal allowance (generally between $30 and $60 per
month) to offset the cost of his or her care, referred to as “post-eligibility treatment
of income.”20
In FY2002, Medicaid spent $34.4 billion on nursing facility services for 1.3
million dually eligible individuals (which is 20% of all dual eligibles). The
expenditures represent 40% of all Medicaid spending for dually eligibles and 88%
of all Medicaid expenditures for nursing facilities.
Intermediate Care Facilities for Individuals with Mental
Retardation. Intermediate care facilities for individuals with mental retardation
(ICF/MR) are provided by all state Medicaid programs at their option.21 ICF/MR
facilities provide ongoing training, treatment and health and rehabilitative services
to individuals with mental retardation or a related condition who reside in that
facility. These facilities are also governed by federal certification regulations that
outline standards for participating facilities. These include the availability of
1667 Federal Register 49816, July 31, 2002.
17A spell of illness begins when a beneficiary is furnished inpatient hospital or skilled
nursing facility care and ends when the beneficiary has not been an inpatient of a hospital
or in a Medicare-covered nursing facility for 60 consecutive days. A beneficiary may have
more than one spell of illness per year.
18 See CRS Report RS21465, Medicare’s Skilled Nursing Facility Payment by Julie Stone-
Axelrad for additional information.
19 U.S. Department of Health and Human Services, Centers for Medicare and Medicaid
Services, Medicaid At-a-Glance, 2003: A Medicaid Information Source, CMS-11024-03.
(Hereafter referred to as CMS, Medicaid At-a-Glance, 2003.)
20In the case of an individual who has a spouse who is still living in the community,
Medicaid law allows a certain level of protected income and resources for that spouse so
that he or she is not impoverished.
21 States are not required to provide ICF/MR services, but it is one of the optional services
that state Medicaid programs can choose to cover.

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CRS-12
physicians, nurses, and other staff, the living environment, and food and nutrition
services among other requirements. Medicare does not cover a comparable service.
In FY2002, approximately 72,000 dually eligible beneficiaries received this
type of service. Medicaid expenditures for ICF/MR services for dual eligible
individuals totaled $6.7 billion. This amount represents 8% of all Medicaid spending
for dually eligibles and 62% of all Medicaid expenditures for ICF/MR services.
Personal Care Services. States also have the option of covering personal
care services under Medicaid. Personal care includes a range of human assistance
provided to individuals with a disability or chronic condition. This assistance
generally includes activities of daily living such as eating, bathing, dressing, toileting,
and transferring. Other supportive services may include light housework, laundry,
meal preparation, transportation, grocery shopping and medication or money
management.
As of September 2003, 36 states and the District of Columbia covered
Medicaid personal care services for at least some Medicaid beneficiaries. Many
states, however, limit the number of hours of personal care service (e.g., 20 hours per
week) or the setting (limited to services provided in the home).22
In FY2002, Medicaid spent $3.4 billion on personal care services for about
513,000 dually eligible individuals. This amount represents 4% of all Medicaid
expenditures for dual eligibles and 74% of Medicaid spending for personal care
services.
Home Health. Home health services are covered by both Medicaid and
Medicare. However, the specific eligibility requirements and covered activities differ
between the two programs.
Medicare beneficiaries are eligible for home health care if they are homebound
and need intermittent skilled nursing care, physical therapy, or speech/language
pathology services. For beneficiaries receiving at least one of these services,
Medicare also covers occupational therapy and the services of home health aides and
medical social workers. Beneficiaries may continue to receive occupational therapy
after they no longer need other skilled nursing care or therapies and may receive
home health aide or social worker services as long as they receive occupational
therapy.
Under Medicaid, states are required to provide home health services to
individuals who are entitled to nursing facility services. For other individuals,
coverage of home health services is optional. Like Medicare, home health services
are provided in the individual’s place of residence and include intermittent nursing
services, home health aides, and medical supplies and appliances for use in the home.
States may also provide therapies as part of the home health benefit (e.g., physical
therapy, speech and language therapy). Unlike Medicare, individuals are not required
to be homebound to receive home health services. Several states limit the availability
22[http://207.22.102.105/medicaidbenefits/personalcare.html].

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CRS-13
of home health services to a certain number of visits or require beneficiaries to make
nominal co-payments.
In FY2002, Medicaid spent $1.6 billion on home health services for
approximately 406,000 dually eligible individuals (which is 6% of all dual eligibles).
The expenditures represent 2% of all Medicaid spending for dual eligibles and 44%
of all Medicaid expenditures for home health services.
Rehabilitation. Rehabilitation services under Medicaid may include any
medical or remedial services recommended by a physician or other licensed
practitioner within the scope of his/her practice under state law for maximum
reduction of physical or mental disability and restoration of a recipient to his/her best
possible functional level. The definition for Medicaid rehabilitation service is broad
and may cover various Medicaid groups (i.e., elderly, individuals with disabilities,
adults, and children). Many states used this service to provide mental health services
to Medicaid beneficiaries; as of September 2003, 45 states have used this benefit to
provide mental health rehabilitation or stabilization to certain Medicaid
beneficiaries.23
In FY2002, Medicaid spent $1.0 billion on rehabilitation services for about
222,000 dually eligible individuals. This amount represents 1% of all Medicaid
expenditures for dual eligibles and 20% of Medicaid spending for rehabilitation
services.
Home- and Community-Based Waivers. States also have the option of
requesting permission from the Secretary of HHS to provide home- and community-
based services for individuals who would otherwise require the level of care provided
in a nursing home, hospital or ICF/MR. This option is referred to as a “Home- and
Community-Based (HCBS) waiver” and is authorized under Section 1915(c) of the
Social Security Act. The HCBS waiver allows states to limit the number of
individuals served and to offer the services on a less-than-statewide basis. In 2003,
there were 275 such waivers in operation in all states except Arizona.24 These
waivers may include a broad range of services such as case management services,
homemaker/home health aide services, personal care services, adult day health
services, habilitation services, respite care, home modifications, and home-delivered
meals.25
23CMS, Medicaid At-A-Glance, 2003.
24Arizona offers similar long-term care services under a Section 1115 research and
demonstration waiver.
25Adult day health services refers to a type of service that provides assistance to multiple
individuals with a disability in a group setting that generally operates during the daytime
hours. Generally, the individuals who receive services in this type of setting have a severe
cognitive or physical disability. Habilitation services means those services designed to
assist individuals in acquiring, retaining, and improving the self-help, socialization, and
adaptive skills necessary to reside successfully in home- and community-based settings.
Respite services provide temporary services to an individual with a disability to give the
normal caregiver a break from providing care. Home modifications refer to items such as
(continued...)

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CRS-14
In FY2002, Medicaid spent about $9.3 billion for dual eligibles on those home-
and community-based waiver services.26 This amount represents 11% of spending
for dual eligibles and 60% of Medicaid spending for home- and community-based
services.
Prescription Drugs and Changes Resulting from the Addition
of a Medicare Drug Benefit
After long-term care, the second largest category of Medicaid expenditures for
dual eligibles is prescription drugs. As of March 2005, all 50 states and the District
of Columbia, at their option, covered prescription drugs for at least some Medicaid
beneficiaries. State Medicaid programs are also permitted to impose nominal cost-
sharing on non-institutionalized Medicaid beneficiaries. As of March 2005, 40 states
and the District of Columbia imposed cost-sharing charges for Medicaid beneficiaries
who received prescription drugs.27 Generally, cost sharing ranged from $.50 to $3.00
per prescription.
In FY2002, Medicaid paid for prescription drugs for 82% of dually eligible
recipients totaling $14.9 billion. This represents 17% of spending for dual eligibles
and 52% of all Medicaid spending on prescription drugs. This total does not include
discounts from rebates on Medicaid prescription drugs.28, 29
As mentioned earlier, the Medicare drug benefit creates significant changes for
individuals who are dual eligibles and those who receive assistance with Medicare
cost-sharing. Starting in 2004, certain Medicare beneficiaries received discounts on
the drugs they purchased through a HHS-endorsed, privately-sponsored drug discount
card. Dual eligible beneficiaries who receive Medicaid prescription drug benefits
were ineligible for the drug discount card, their prescription drugs continued to be
25(...continued)
a ramp to a home, or bars installed in the shower that the individual can hold onto while
bathing.
26A small portion of this spending is for the home- and community-based program for the
functional disabled and elderly authorized under Section 1929 of the Social Security Act.
Only Texas offers this type of program; in FY2002, Medicaid expenditures for Texas’
program were approximately $198,000.
27[http://www.cms.hhs.gov/medicaid/drugs/pre0305.pdf].
28Medicaid law requires drug manufacturers that wish to have their drugs available for
Medicaid enrollees to enter into rebate agreements with the Secretary of HHS, on behalf of
the states. Under these agreements, manufacturers must provide state Medicaid programs
with rebates on prescription drugs used by Medicaid beneficiaries and paid for by Medicaid.
In exchange, states are required to cover all drugs offered by those manufacturers. In
addition, a few states have negotiated supplemental rebates in addition to the federal
agreements. In FY2002, drug rebates negotiated by federal and state officials reduced
Medicaid drug expenditures by 20%.
29For additional information, see CRS Report RL30726, Prescription Drug Coverage Under
Medicaid by Jean Hearne, and Pharmaceutical Benefits Under State Medical Assistance
Programs by the National Pharmaceutical Council.

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CRS-15
covered by Medicaid with little or no cost-sharing. However, individuals who only
receive assistance with Medicare premiums and cost-sharing were eligible to receive
the discount card and could receive up to $600 in both 2004 and 2005 to purchase
prescription drugs.
Starting in 2006 dual eligible individuals will no longer receive their
prescription drug benefits through Medicaid. They will be required to enroll in the
new Medicare Part D prescription drug benefit to receive coverage. Individuals will
be required to enroll in a private drug plan in their geographic region that has
received approval from HHS to offer the Part D benefit. This new prescription drug
benefit, enacted under the Medicare Prescription Drug, Improvement and
Modernization Act (MMA), will have some significant changes for the scope of
coverage and cost-sharing requirements for dual eligibles. It also has some important
implications for state Medicaid programs.
Changes to the Scope of the Prescription Drug Benefit. Medicaid
currently covers a broad range of prescription drugs. States may create lists of
preferred drugs or require advance (prior) approval for non-preferred drugs, but
statutory requirements insure that Medicaid covers a comprehensive list of drugs.
Most states limit coverage of prescription drugs through the quantity of the
prescription that can be filled at one time (e.g., 30-day supply), the number of refills,
or the number of prescriptions within a given time period.
MMA defines covered drugs as those drugs also covered by Medicaid — with
a few exceptions. However, the private drug plans that will provide the Medicare
Part D benefit will be permitted to establish a formulary as long as it includes drugs
within each therapeutic category and class of covered Part D drugs. A drug plan does
not have to cover all drugs within a category or class. The drug plan can use the list
of therapeutic categories and classes developed by United States Pharmacopeia,30 or
can propose to CMS an alternative therapeutic categorization. CMS must review and
approve the formularies of the private drug plans and is to be reviewing the extent
to which the formularies provide adequate coverage for drugs that are used to treat
particular diagnoses such as HIV/AIDS and mental illness. In June 2005, CMS
indicated that it is requiring coverage of all or substantially all of the drugs in the
antidepressant, antipsychotic, anticonvulsant, anticancer, immunosuppressant and
HIV/AIDS categories.
If a state wishes to cover other drugs in a therapeutic class or category included
under MMA, the state may not use Medicaid funding. This differs from other
benefits covered by both Medicaid and Medicare in which Medicaid can supplement
Medicare coverage.
From the individual’s perspective, it is likely that the scope of benefits will
change, but the extent of the change and the process for beneficiaries are unknown
at this time. It is unclear if all drug plans will implement formularies or what the
scope of the formularies will be. Unlike the Medicaid program, MMA will not limit
the number of prescriptions an individual can receive, but an individual may have
30Section 1860D-4(b)(3)(C) of the Social Security Act as added by P.L. 108-173.

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CRS-16
access to only certain drugs on a drug plan’s formulary. For example, a drug plan
formulary may cover a cholesterol drug that differs from the one an individual is
currently using; in this case, he or she may have to change prescriptions. MMA will
give individuals grievance and appeal rights to access a particular drug not covered
by the formulary.31
Changes to Premiums and Cost-Sharing Requirements for
Prescription Drugs. Currently, most dual eligibles do not pay a premium to enroll
in Medicaid, but they may have nominal co-payment requirements for the services
they use.32 To enroll in the Medicare drug benefit, most persons will have to pay
drug plans a premium for coverage and cost-sharing amounts when they use benefits.
MMA, however, establishes special rules for low-income individuals. All dual
eligibles will qualify for low-income subsidies for premiums and co-payments. Full
benefit dual eligibles are entitled to a premium subsidy equal to the weighted average
premium of all drug plans in the region, or if greater, the lowest premium for a plan
in the region. If a dual eligible chooses a drug plan with a higher premium than the
amount of the subsidy, he or she will be required to pay the difference.
Under MMA, cost-sharing requirements differ for dual eligibles depending
upon whether or not the individual resides in an institution such as a nursing facility.
Individuals who reside in an institution have no additional cost-sharing obligations
under MMA (e.g., deductible, co-payment for drugs).33
For dual eligibles who do not reside in an institution, the amount that they pay
for prescription drugs may change. Currently, state Medicaid programs are permitted
to impose nominal cost-sharing on non-institutionalized Medicaid beneficiaries, as
discussed above. Under MMA, the prescription drug benefit permits drug plans to
charge non-institutionalized dual eligibles (among others) co-payments for
prescription drugs.
! Dual eligibles whose income (as calculated by the Supplemental Security
Income (SSI) program) is less than 100% of the FPL can be charged up to $1
for a generic drug or a preferred drug that is considered a “multiple source”34
drug and $3 for any other drug. This co-payment amount will be adjusted
annually, beginning in 2007, based on the Consumer Price Index (CPI).
! For dual eligibles whose income is higher than 100% FPL, their co-payments
will be $2 for a generic drug or a preferred drug that is considered a “multiple
31To appeal coverage of a drug not on the formulary, the individual’s prescribing physician
must determine that all covered drugs on the formulary would not be as effective for the
individual as the non-covered drug or would have adverse effects for the individual.
32A few Medicaid eligibility groups for working individuals with a disability permit states
to charge premiums for enrollment.
33Medicaid beneficiaries residing in institutions are required to contribute most of their
income to the cost of their care (referred to as “post-eligibility treatment of income”). MMA
does not change this requirement.
34A “multiple source drug” is a drug for which there are two or more approved,
therapeutically equivalent drug products also on the market. See Section 1927(k)(7)(A)(i)
of the Social Security Act.

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CRS-17
source” drug and $5 for any other drug. These co-payment amounts will be
increased annually, beginning in 2007, based on the percentage increase in per
capita expenditures for the Medicare Part D benefit.
No co-payments apply after a beneficiary has total drug costs of $5,100 in
2006; this amount is also increased in subsequent years by the increase in Medicare
per capita drug spending. At this writing, it is unclear how cost-sharing requirements
will change for the average dual eligible beneficiary. Any changes may be magnified
over time as the cost-sharing amounts are increased each year.
Phase-Down State Contribution. States are responsible for a portion of
the funding for the new Medicare prescription drug benefit under a provision called
the “phase-down state contribution,” often referred to as the “clawback.”35 The
funding level for each state is a function of the number of persons eligible for both
full Medicaid benefits in the state and the Medicare drug benefit (the “dual
eligibles”); the state spending on prescription drugs for dual eligibles in 2003; the
state share of Medicaid funding; inflation (for prescription drugs); and a statutorily
determined annual factor. The annual factor is designed to provide a partial shifting
of prescription drug spending on dual eligibles from the states to the federal
government over time; the factor is 90% for 2006 and gradually declines to 75% for
years after 2014.
Although the program rules for covering prescription drugs for dual eligibles
under the Medicare program have been outlined through legislation, regulation and
policy guidance from CMS, questions remain about which drug plans will participate,
what types of drugs will be included in the formularies, and how this will impact dual
eligible beneficiaries.
Cost of Providing Services to Dual Eligibles
As mentioned earlier, dual eligible individuals account for a disproportionate
share of Medicaid and Medicare expenditures compared to other groups of
individuals enrolled in these programs. In 2002, dual eligibles represented 13% of
Medicaid beneficiaries, but accounted for about 41% of Medicaid expenditures
($86.5 billion).36 In Medicare, based on 2001 data (the most recent available), dual
eligibles account for 15% to 17% of Medicare beneficiaries and 22% to 26% of
Medicare spending (depending on the method used to determine dual eligibility).37
Based on the percentages above and assuming total Medicare expenditures of $212
billion in FY2001,38 Medicare spending for dual eligibles was estimated to be $47 to
$55 billion.
35States will also be responsible for covering a share of the cost of the eligibility
determinations for the low-income subsidy under Medicare Part D.
36CRS analysis of CMS, Medicaid Statistical Information Systems (MSIS), FY2002.
37MEDPAC, A Data Book: Healthcare Spending and the Medicare Program, June 2004,
[http://www.medpac.gov/publications/congressional_reports/Jun04DatabookSec2.pdf].
38[http://www.cms.hhs.gov/MCBS/CMSsrc/2001/sec4.pdf]

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CRS-18
The Congressional Budget Office (CBO) projects that under current law
federal expenditures for Medicaid will grow at 7% per year from FY2004 through
FY2015, and Medicare will grow at 8% per year from FY2005 through FY2015.39
Facing significant growth in the total program costs of Medicaid and Medicare and
the high cost of dual eligibles, some state and federal policymakers explored policy
options that would, for example, change the way services are delivered for these
individuals.
From a state perspective, rapidly increasing Medicaid spending has strained
state budgets since states are required to match federal Medicaid dollars (on average,
43% of total expenditures). Many states faced significant budget shortfalls
particularly from 2001 through 2004, and still view Medicaid’s expenditure growth
as unsustainable. In most states, the law prohibits the state from having a budget
deficit — in which the state spends more than it receives in revenue. State Medicaid
expenditures (excluding federal matching funds) accounted for 12.6% of all state
spending in state fiscal year (SFY) 2003.40 To address budget shortfalls, many states
have cut Medicaid eligibility and/or services, raised beneficiary cost-sharing, or
reduced provider payment rates.
In the past, some state governors have proposed that the federal government
assume all the costs of providing services to dual eligibles. In a 2003 letter to the
Senate Finance Committee, the governors argued that (1) providing services and
supports that target Americans age 65 and older is generally a federal responsibility
while states generally serve low-income non-elderly and working individuals; (2) the
quality of services would improve because one program would be responsible for
integrating and coordinating acute care and long-term care services; and (3) the states
no longer have the capacity to fund both education and health care.41,42 Congress has
not considered this type of proposal, and the Medicare prescription drug legislation
(P.L. 108-173), discussed earlier, has reinforced states’ financial commitment to pay
for health care services for dual eligibles.
39CRS calculations from the Congressional Budget Office, March 2005 Baseline for
Medicaid and Medicare.
40CRS Report RL31773, Medicaid and the Current State Fiscal Crisis, by Christine Scott,
updated Jan. 21, 2005.
41This approach has been advocated by some governors for several years, and a letter to the
Senate Finance Committee outlines the rationale for this approach. Letter to Senate Finance
Committee Chairman, the Honorable Charles E. Grassley and Ranking Member, Honorable
Max Baucus, from the Chairman (Governor Paul E. Patton) and Vice-Chairman (Governor
Dirk Kempthorne) of the National Governors Association, June 5, 2003,
[http://www.nga.org/nga/legislativeUpdate/letterDetailPrint/1,1421,5538,00.html].
42There are both examples of federal programs that serve the low-income non-elderly and
working individuals (such as the Temporary Assistance for Needy Families (TANF)
program), and state programs that serve individuals age 65 and older (such as state pharmacy
assistance (SPAP) programs). The letter also does not discuss individuals with disabilities.

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CRS-19
Coordinating or Integrating Medicaid
and Medicare Services
Issues in Care Coordination
Coordinating Medicare and Medicaid services for dual eligibles has been a
significant challenge for state and federal policy makers for three primary reasons (1)
the program administration and operations of Medicare and Medicaid are very
different from one another; (2) Medicaid and Medicare may cover similar, but
slightly different services; and (3) there are significant incentives to shift
beneficiaries’ care to Medicaid or Medicare even if this does not result in the highest
quality of care or the greatest continuity of care for an individual.
Program Administration and Operations. The Medicare and Medicaid
programs have a very different history and purpose which affect the program
interaction and the coordination of services. The programs are operated by different
levels of government and have different payment structures, service definitions, and
data systems. These differences can create administrative complexity for
policymakers and providers and confusion for beneficiaries.
Medicare is a federally-funded health care program in which the benefits
provided are primarily acute care and skilled care services, and benefits are uniform
nationwide. Medicare is operated by CMS which establishes program guidelines and
contracts with intermediaries and carriers who handle day-to-day operations for
Medicare within a specific geographic area.43 Using the federal guidelines, these
intermediaries and carriers pay Medicare claims, interpret CMS policy about what
services are covered, and interact with Medicare providers.
The Medicaid program, on the other hand, varies widely by state, and provides
a wide array of both health and supportive services (particularly in the area of long-
term care). Medicaid is funded through a combination of federal and state funding,
and states administer the program and set Medicaid policy within broad federal
guidelines established by CMS. In addition, many states have split up the
administration of Medicaid among different state agencies. For example, there may
be separate state agencies for determining Medicaid eligibility, administering the
general acute care program and administering Medicaid long-term care services.
Coverage of Similar Services. As mentioned earlier, Medicare and
Medicaid cover several of the same services or related services. However, these
services may differ in the scope of coverage or the eligibility requirements which can
be confusing for policymakers, providers and beneficiaries to navigate. For example,
43CMS contracts with intermediaries to administer certain Medicare Part A services such as
inpatient hospitals and with carriers to administer Medicare Part B services such as
physician services. Recent Medicare legislation (P.L. 108-173) simplified the contracting
process for selecting Medicare intermediaries and carriers. Under the new law, the
Secretary is able to competitively contract with any entity to serve as a Medicare contractor
and the distinction between intermediaries and carriers has been removed.

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CRS-20
providers may have difficulty knowing whether to bill Medicaid or Medicare for a
particular service.
For example, to be eligible for Medicare home health services, beneficiaries
must be homebound and require intermittent skilled nursing care, physical therapy,
or speech/language pathology. If a beneficiary meets these criteria, Medicare will
also cover occupational therapy and the services of home health aides and medical
social workers. Federal Medicare guidelines determine the payment rate for home
health providers. Medicaid’s home health coverage rules are similar to Medicare, but
do not include the homebound requirement.
Shifting Costs. There are also incentives and opportunities for providers
and states to shift costs from Medicaid to Medicare and vice versa. For example, if
a dual eligible, who is residing in a nursing facility that Medicaid pays for, has a
condition that worsens and he or she needs additional care, the nursing home may
have a financial incentive to transfer that individual to a hospital even if the nursing
home could meet the individual’s needs. If the nursing home transfers the individual
to the hospital, the nursing home would not be responsible for the cost of the
individual’s care while the individual was in the hospital, and the hospital stay and
the post-hospital nursing facility stay would be paid for by Medicare.
Strategies to Coordinate or Integrate Services
Several state and federal initiatives have tried to address the challenges of
coordinating care. These initiatives have generally included (1) developing a formal
structure or service that coordinates the two programs such as care coordination; (2)
integrating Medicaid and Medicare into one delivery system through managed care;
or (3) a combination of the two approaches. The purpose of these efforts is to reduce
the fragmentation and duplication of services and increase the quality of services
delivered to dual eligibles.44
Care Coordination. Care coordination can be defined broadly as a service
provided to a beneficiary in which an individual other than the service provider has
responsibility for beneficiaries’ health care services. For example, care coordinators
may have responsibility for prior authorization of services, communications with
Medicare and Medicaid service providers, beneficiary education in managing a
chronic condition, or reviewing service utilization to identify duplication or
inefficiencies.
Depending upon the type of program, the care coordinator may have different
levels of interaction with Medicare providers. Some states have developed care
coordination programs that focus on dually eligible individuals and work with
Medicare providers. One example is the Vermont Independence Project in which
44The Robert Wood Johnson Foundation has established the Medicare/Medicaid Integration
Project which provides grants and technical assistance to states to assist them in
restructuring the way they finance and deliver acute and long-term care for dual eligibles.
For additional information and a description of state programs see
[http://www.hhp.umd.edu/AGING/MMIP/].

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CRS-21
case managers (funded by Medicaid) are co-located at the offices of primary care
physicians to specifically assist with care coordination for dually eligible individuals.
Care coordination differs from managed care described below in that providers
of care coordination are not financially responsible for the services used by dually
eligible individuals, but may receive bonus payments for meeting benchmarks such
as a reduction in utilization.45 Care coordination may be more difficult in a fee-for-
service setting than in managed care, because there is no direct responsibility for the
actual services used.
Managed Care. As described previously in this report, most dual eligibles
are not enrolled in managed care (about 3% are enrolled in a Medicare HMO, and
13% are in a comprehensive Medicaid managed care program). Although there are
significant and pervasive coordination challenges for most dual eligibles enrolled in
managed care,46 a few programs have developed managed care models specifically
to enhance coordination and integration of services for dual eligibles.
Depending on the program’s goals and structure, most managed care programs
require some form of federal approval from Medicaid and/or Medicare under one of
several possible program authorities. A full discussion of each of these managed care
authorities is outside the scope of this report.47 A brief discussion, however, is
provided here to outline program options and the accompanying decisions as it
relates to managed care for dual eligibles.
Under Medicaid, managed care programs are available using the following
program authorities:
! Pre-paid health plans: These are generally used if a state wants to include
only a few services in a managed care arrangement. Enrollment in the
program must be voluntary.
! Section 1932 of the Social Security Act: A managed care option in the
Medicaid state plan; it does not require a waiver. States may not use this
option to require dually eligible individual(s) to enroll in managed care.
States may use this option to offer voluntary managed care enrollment.
45S. Bratesman and P. Saucier, Applying Managed Fee-for-Service Delivery Models to
Improve Care for Dually Eligible Beneficiaries: A Technical Assistance Paper of the Robert
Wood Johnson Foundation Medicare/Medicaid Integration Program, May 2002, Muskie
School of Public Services, University of Southern Maine.
46The Medicare and Medicaid data systems are not integrated, which delays access to current
eligibility and enrollment information, and beneficiaries have little access to information
about how their benefits are affected by their dual eligible status. See E. Walsh, et al., Case
Studies of Managed Care Arrangements for Dually Eligible Beneficiaries, RTI International,
CMS Contract No. CMS-500-95-0048, Sept. 26, 2003 for additional information.
47For additional information see RL 30813, Federal and State Efforts to Integrate Acute and
Long-Term Care: Issues & Profiles, by Edward Miller, Jan. 22. 2001.

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CRS-22
! Section 1915(b) waiver: This waiver allows states to require that dually
eligible individuals enroll in a managed care program to receive their services.
The waiver must be cost-effective48 over a two-year period.
! Section 1115 waiver: This waiver authority is very broad. In this context, it
allows states to expand Medicaid eligibility, and require dually eligible
individuals to enroll in managed care to receive services. The waiver must be
budget neutral over five years.
! Program of All-Inclusive Care for the Elderly (PACE) program: The
Medicaid component is authorized under Section 1934 of the Social Security
Act and is a Medicaid state plan option. This does not require a waiver. This
program is described in more detail below.
Under Medicare, managed care programs are available using the following
program authorities:
! Medicare Advantage: In general, the program makes monthly payments in
advance to participating private health plans for each enrolled Medicare
beneficiary in a payment area (typically a county). In exchange, the plans
agree to furnish all Medicare-covered items and services to each enrollee.
Generally, Medicare Advantage plans have been unable to limit enrollment to
only certain types of Medicare beneficiaries (such as dually eligible
individuals).49
! PACE: The Medicare component of PACE is authorized under Section 1894
of the Social Security Act and is specifically focused on dual eligibles. A
more complete description of the PACE program is provided below.
! Section 222 waiver:50 This demonstration waiver allows agencies and
organizations to develop projects that evaluate changes in methods of payment
or reimbursement. A demonstration project under this authority could enroll
only dually eligible individuals; however, dual eligibles cannot be required to
enroll in managed care. The waiver must be budget neutral, and generally will
require a lengthy federal review process.
! Special Needs Medicare Managed Care Plans: The 108th Congress
established a new type of Medicare managed care plan under Section 231 of
the Medicare Prescription Drug, Improvement and Modernization Act (MMA,
P.L. 108-173). This new type of managed care may replace the need for a
Section 222 waiver to develop managed care programs for dual eligibles.
Congress is permitting Medicare managed care plans to limit enrollment to
certain groups of Medicare beneficiaries with special needs including dual
eligibles.
48To be cost-effective, the waiver must not cost the Medicaid program more than it would
have cost without the waiver.
49Although non-dual eligibles were not prohibited from enrolling, some Medicare managed
care plans created disincentives for non-dual eligibles to enroll, for example, charging a
monthly premium to enrollees and providing no additional Medicare benefits. Dual eligibles
were also charged a premium, but the Medicaid program would cover the cost of that
premium.
50 Refers to Section 222 of P.L. 92-603.

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CRS-23
Managed care approaches to improve coordination and services for dual
eligibles have taken a variety of forms. Some states have chosen to require Medicaid
managed care programs to coordinate with Medicare (“a partially integrated model”).
Other programs have combined Medicare and Medicaid services into a single
delivery system where one agency can manage all aspects of service delivery to
provide the most efficient and highest quality services (“a fully integrated model.”)
A partially integrated managed care model for dual eligibles is one in which
a Medicaid managed care program has specific responsibilities for coordinating with
Medicare even though the two programs are still operating separately. Several states
have implemented these types of managed care programs. For example, Arizona’s
program operates under the authority of a Medicaid Section 1115 waiver which
provides all Medicaid services through private managed care plans. These managed
care plans are responsible for coordinating with Medicare services offered under
either Medicare fee-for-service or a Medicare managed care plan.
Other programs have tried to fully integrate all Medicaid and Medicare benefits
into one service delivery system (both acute and long-term care services). Some of
the challenges in developing these types of programs include reconciling the different
administrative structures, different providers and trying to make the delivery of
Medicare and Medicaid services more coherent. Because of the different rules and
regulations in Medicaid and Medicare and the federal waivers required, many of
these programs have taken a significant investment of time by states and providers.
One example is the Program of All-Inclusive Care for the Elderly (PACE).
The PACE program provides all Medicare and Medicaid services through a treatment
team that is located at a day health center. The PACE project started as a
demonstration project in the mid-1980s. In 1997, the Balanced Budget Act
established PACE as a permanent model within Medicare and as a state option under
the Medicaid state plan. A PACE provider must be a not-for-profit agency and have
an agreement with both the state Medicaid agency and the Secretary of the HHS.51
Several state Medicaid programs have also developed other fully integrated
programs such as the Minnesota Senior Health Options program and the Wisconsin
Partnership Program. Both Minnesota’s and Wisconsin’s programs provide all
Medicare and Medicaid primary, acute and long-term care services under a managed
care model.
Individuals Who Receive Assistance with Medicare
Premiums and Cost-Sharing
Dual eligibles can be eligible for all Medicaid benefits that the state provides
(as described earlier in this report) and/or eligible for assistance with Medicare
premiums and/or cost-sharing. This section describes in more detail the five groups
51For additional information see the National PACE Association web site at
[http://www.natlpaceassn.org/index.html].

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CRS-24
that can qualify for assistance with Medicare premiums or cost-sharing from
Medicaid.
Medicare beneficiaries (including dual eligibles) are required to pay a portion
of the cost of their Medicare services through premiums and cost-sharing charges, as
described in Table 6. Such charges could pose a potential hardship for some
persons, especially those who do not have supplementary protection either through
an individually purchased “Medigap” policy or employer-based retiree coverage.
Table 6. An Overview of Medicare Premiums and Cost-Sharing
Requirements, 2005
Type of Medicare premiums and
Amount
cost-sharing
Premium
Medicare Part A
Generally $0. A limited number of persons
without sufficient work in covered
employment (or whose spouse has not
worked in covered employment) pay a
monthly premium of $206 or $375 per
month.
Medicare Part B
$938.40 per year ($78.20/month)
Deductible
Medicare Part A
$912 per benefit period
Medicare Part B
$110 per year
Coinsurance
Hospital
1-60 day
$0 per day
61-90 day
$228 per day
91-150 day
$456 per day
Skilled nursing facility
1-20 day
$0 per day
21-100 day
$114 per day
Medicare Part B Services
Varies by type of service.
Sources: CMS, Medicare and You Handbook, 2005 and HHS press release, Sept 3, 2004, at
[ h t t p : / / w w w . m e d i c a r e . g o v / p u b l i c a t i o n s / p u b s / p d f / 1 0 0 5 0 . p d f ] , a n d
[http://www.hhs.gov/news/press/2004pres/20040903a.html].
Since the inception of the Medicaid program in 1965, states have had the
option of paying for the Medicare Part B premium for Medicaid beneficiaries
(referred to in this report as the “traditional Medicare buy-in”). In 1986, Congress
also permitted state Medicaid programs to pay the Medicare cost sharing charges for

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CRS-25
individuals who were not otherwise eligible for Medicaid and whose incomes were
up to 100% of the FPL.
On several occasions since 1988, Congress has required state Medicaid
programs to cover Medicare premiums and cost-sharing for four groups of low-
income Medicare beneficiaries. In addition, states continue to have the option of
paying the Medicare premiums of other Medicaid beneficiaries.
For most of these groups, the federal and state government share the cost of the
Medicare premiums, deductibles, and coinsurance based on the federal medical
assistance percentage rate (FMAP).52 On average the federal government pays 57%
of total expenditures. The federal share, which ranges from 50% to 76% is
determined according to a formula based on the state’s per capita income. Each of
the groups that qualify for Medicare premiums and cost-sharing assistance are
discussed below.
Qualified Medicare Beneficiaries (QMB). In 1988, Congress established
the Qualified Medicare Beneficiary (QMB) program (Section 301 of the Medicare
Catastrophic Coverage Act53). This bill removed the earlier criteria of the 1986
provision that the individual could not be otherwise eligible for full Medicaid
benefits and required states to cover these low-income individuals.
Qualified Medicare Beneficiaries are individuals who are elderly or who have
a disability, are entitled to Medicare Part A Hospital Insurance coverage and have
incomes at or below 100% of the FPL ($818 a month for an individual and $1,090
for a couple in 2005).54 Beneficiaries’ assets may not exceed $4,000 for an individual
and $6,000 for a couple; although, states may apply Section 1902(r)(2) of the Social
Security Act to disregard additional assets, as described later in this section. Included
in QMBs is the relatively small group of aged individuals who are not automatically
entitled to Part A coverage, but who have bought Part A protection by paying a
monthly premium.55
Under the QMB group, Medicaid covers the costs of Medicare premiums,
deductibles, and coinsurance for Medicare-covered benefits. States may charge
QMBs' nominal co-payments for Medicare services provided that they are the same
charges applied to other Medicaid beneficiaries for comparable services.
52If a state chooses to pay the Part B premiums of certain Medicaid beneficiaries whose
income is above levels that qualify them for premiums and cost-sharing assistance (certain
institutionalized or medically needy persons) which is not required by federal law, the state
must use 100% state funds. For the group of individuals categorized as Qualifying
Individuals the federal government pays 100% of the expenditures not related to
administering the program.
53Most of this act, not including this provision, was subsequently repealed by P.L. 101-234.
54References to 2005 income limits in this section include a $20 monthly income disregard
which is the standard disregard for the SSI program. The SSI methodology is used for
counting an individual’s income for the Medicare premiums and cost-sharing groups.
55A QMB must also meet the general nonfinancial eligibility requirements for Medicaid such
as providing a Social Security number and proving residency.

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CRS-26
CMS refers to individuals who qualify for both Medicare premiums and cost-
sharing assistance under QMB and who qualify for full Medicaid benefits as “QMB-
Plus.” Individuals who only qualify for Medicare premiums and cost-sharing
assistance are referred to as “QMB-only.”
Specified, Low-income Medicare Beneficiary (SLMB). In 1990,
Congress required states to cover Medicare Part B premiums for additional low-
income Medicare beneficiaries beginning in January 1993, (Section 4501(b) of
OBRA 1990, P.L. 101-508). To be eligible under the SLMB pathway, a Medicare
beneficiary’s income may not exceed 120% of the FPL ($977 a month for an
individual, $1,302 for a couple in 2005) and assets cannot exceed $4,000 for an
individual and $6,000 for a couple.
CMS refers to individuals who qualify for both Medicare premium assistance
under SLMB and who qualify for full Medicaid benefits as “SLMB-Plus.”
Individuals who only qualify for Medicare premium assistance are referred to as
“SLMB-only.”
Qualified Disabled and Working Individuals (QDWIs). Congress also
required state Medicaid programs to provide some assistance with Medicare Part A
premiums for Qualified Disabled and Working Individuals (Section 6408(d) of the
Omnibus Budget Reconciliation Act of 1989, P.L. 101-239). QDWIs are persons
who were previously entitled to Medicare on the basis of a disability, who lost their
entitlement based on earnings from work, but who continue to have a disabling
condition. These individuals are still entitled to enroll in Medicare Part A or Part B
but are responsible for the payment of premiums unless they are low-income and
receive assistance under this group.
Medicaid must pay the Medicare Part A premium for individuals whose
monthly income is below 200% of FPL ($3,275 a month for an individual and $4,363
for a couple in 2005),56 whose resources are below $4,000 for an individual and
$6,000 for a couple, and who are not otherwise eligible for Medicaid.
If the individual has income from 150% to 200% of the FPL, the state may
charge the individual a premium according to a sliding scale. The scale “must be
based on percentages increasing from 0% to 100%, in reasonable increments, as the
individual’s income increases from 150% to 200% of the FPL.”57 The state may
terminate the eligibility of a QDWI for nonpayment of the premium.
Qualifying Individual-1 (QIs). The Balanced Budget Act of 1997 (BBA97)
added another mandatory eligibility group of low-income Medicare beneficiaries who
receive assistance with Medicare premiums known as “Qualifying Individuals 1 (QI-
1)."58 The QI-1 group was originally set to expire in December 2002; however,
56Includes additional earnings disregards.
57State Medicaid Manual 3485.7.
58A second group was also added by BBA97 referred to as “Qualifying Individuals-2 (QI-
(continued...)

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CRS-27
Congress has subsequently extended the expiration date, most recently in the 108th
Congress, until September 30, 2005 (P.L. 108-448).
Individuals are eligible as a QI-1 if they are entitled to Medicare Part A and
their incomes are at least 120% of the FPL, but less than 135% ($1,097 a month for
an individual and $1,464 for a couple in 2005) whose resources are below $4,000 for
an individual and $6,000 for a couple, and who are not otherwise eligible for
Medicaid.
The Medicaid benefit for QI-1s consists of payment of the full Medicare Part
B premium. QI-1s are entitled to three months of retroactive coverage if they were
eligible during those months and the retroactive month does not fall before January
of a calendar year.
Allocation and Expenditures. To fund the QI-1 benefit, BBA97
established an annual capped allocation for each state for five years beginning in
January 1998. Due to the limited amount of funding, this program did not establish
an individual entitlement. Rather, individuals receive benefits on a first-come, first-
serve basis. A state is only required to cover the number of persons that would bring
its spending on these groups in a year up to its allocation level. The total allocation
to states for FY2005 is $400 million.
The state’s allocation is a percentage of the total federal funds available; this
percentage is calculated using the average number of Medicare beneficiaries in that
state over a three-year period who are not enrolled in Medicaid and who fall within
the income guidelines and dividing that average by the total number of Medicare
beneficiaries nationwide who are not enrolled in Medicaid and meet the income
criteria.59
In most other areas of Medicaid expenditures, both states and the federal
government contribute funds. However, 100% of the expenditures under the QI-1
program is covered by the federal government (from the Medicare Part B trust fund)
up to the state’s allocation level. However, similar to other areas of Medicaid, states
are required to fund 50% of the administrative costs.
58(...continued)
2).” The QI-2 group expired in Dec. 2002, but it is included in this section for reference.
To have been eligible as a QI-2, an individual must have been entitled to Medicare Part A
and had income of at least 135% of the FPL but less than 175% of the FPL and whose
resources were below $4,000 for an individual and $6,000 for a couple, and who was not
otherwise eligible for Medicaid. Under the QI-2 program, states were required to pay a
portion of the Medicare Part B premium consisting of a percentage of the increase in the
Medicare Part B premiums attributable to the shifting of some home health care from
Medicare Part A to Medicare Part B which occurred in 1997. The benefit was $3.91 per
month in 2002. Although the federal government covered 100% of the cost of this benefit,
this was a very unpopular benefit among states who cited the high administrative costs
relative to the size of the benefit.
59Department of Health and Human Services, “Medicaid Program; State Allotments for
Payment of Medicare Part B Premiums for Qualifying Individuals: Federal Fiscal Year
2002,” 68 Federal Register, 50790, Aug. 22, 2003.

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CRS-28
Traditional Medicare Buy-In. If a Medicaid beneficiary is eligible as a
QMB or SLMB, the state is required to cover his or her Medicare premiums and cost-
sharing charges as outlined above. However, if a Medicaid beneficiary is not eligible
for either of these groups, the state has the option of paying the Medicare Part B
premiums under a buy-in agreement60 which has been available to states since the
inception of Medicaid in 1966. Under a buy-in agreement, states may enroll dual
eligibles in Medicare Part B and pay the premium on their behalf. States may also
elect to include payment of Part A premiums under their buy-in agreements.
All states have buy-in agreements with the federal government. It is to a
state’s advantage to purchase Part B for some individuals. Federal Medicaid rules
prohibit states from receiving the federal share of Medicaid expenditures, referred to
as “federal financial participation” (FFP), for Medicaid services that are also covered
by Medicare Part B which could have been covered under Part B had the individual
been enrolled.
States must decide which groups of Medicaid beneficiaries they want to cover
in their buy-in agreement. Certain eligibility groups must be covered if the state has
a buy-in agreement; other groups are optional to cover. The state receives FFP for
the Medicare Part B premiums for only certain Medicaid beneficiaries under the buy-
in agreement. Generally these beneficiaries include individuals who are receiving
federally-funded cash benefits or who are deemed to be receiving these cash benefits.
If the state chooses to pay the Part B premium for other groups of individuals (e.g.,
certain institutionalized individuals and medically needy), the state must use 100%
state funds. In April 2004, 30 states reported payment for Part B premiums for
certain groups of individuals using 100% state funds.61
Total Number of Individuals Receiving Medicare Premium
Assistance through Medicaid. Table 7 below shows the number of individuals
who received assistance with Medicare premiums in April 2004. The totals shown
in Table 7 do not include individuals in the QDWI group who received assistance
with the Part A premium62 or those QMBs in which a state chooses a separate
payment mechanism for the Medicare Part A premiums. In addition, the data
provided is based on a single month. One would expect that an annual count of all
individuals who received premiums and cost-sharing assistance at some point during
the year would be greater than the number reported here for a single month.
60Section 1839 of the Social Security Act.
61CMS, Third Party Premium Billing File, Apr. 2004.
62CMS officials estimate that less than 50 individuals nationwide participate in the QDWI
program. This rate is not entirely surprising because very few individuals with disabilities
lose their Social Security Disability Insurance (SSDI) cash benefit as a result of earnings.

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CRS-29
Table 7. Number of Individuals Receiving Assistance with
Medicare Premiums, April 2004
State
Part A QMBs
Part B Buy-Insa
Alabama
2,081
162,817
Alaska
666
10,249
Arizona
842
93,236
Arkansas
2,441
85,674
California
137,276
965,821
Colorado
341
59,581
Connecticut
2,724
66,146
Delaware
305
15,605
District of Columbia
848
15,588
Florida
46,221
394,181
Georgia
2,898
197,044
Hawaii
3,736
22,763
Idaho
504
21,805
Illinois
2,343
186,918
Indiana
1,855
103,496
Iowa
887
57,292
Kansas
618
45,663
Kentucky
2,551
124,003
Louisiana
4,014
130,286
Maine
15
43,363
Maryland
8,698
74,301
Massachusetts
18,475
168,330
Michigan
14,184
159,862
Minnesota
5,976
76,435
Mississippi
4,868
131,658
Missouri
750
102,515
Montana
377
13,581
Nebraska
0
22,971
Nevada
1,883
26,220
New Hampshire
31
10,761
New Jersey
7,433
153,388
New Mexico
301
45,216
New York
854
441,984
North Carolina
10,635
239,435
North Dakota
0
6,575
Ohio
5,088
192,778
Oklahoma
3,258
71,989
Oregon
75
69,153

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CRS-30
State
Part A QMBs
Part B Buy-Insa
Pennsylvania
15,884
229,884
Rhode Island
353
25,268
South Carolina
1,209
118,613
South Dakota
704
13,956
Tennessee
4,786
206,198
Texas
46,137
419,010
Utah
77
19,150
Vermont
87
14,954
Virginia
3,280
121,541
Washington
8,735
108,058
West Virginia
3,010
50,445
Wisconsin
3,794
79,196
Wyoming
152
7,448
Totalb
384,263
6,222,404
Source: Centers for Medicare and Medicaid Services, Third Party Premium Billing File, Apr. 2004.
a. Part B Buy-Ins include QMBs, SLMBs, QI-1s and traditional Medicare Buy-In recipients.
b. Total does not include the five U.S. territories: American Samoa, Commonwealth of the Northern
Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin Islands.
Issues in Providing Assistance with Medicare
Premiums and Cost-Sharing
This section discusses issues that federal and state policymakers face in
providing Medicare premiums and cost-sharing assistance for the various groups
described above including:
! the counting of income and resources for determining eligibility for assistance;
! the challenges in covering premiums and cost-sharing assistance for dual
eligibles who are enrolled in Medicare managed care;
! the intersection of differing provider payments under Medicare and Medicaid
and the amount of coinsurance Medicaid is obligated to pay; and
! reaching persons who are eligible for, but not receiving, premiums and cost-
sharing assistance.
Use of More Liberal Methods of Counting Income and
Resources
When a state determines eligibility for assistance with Medicare premiums and
cost-sharing, it generally uses the same guidelines for counting income and resources

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CRS-31
as are used in the SSI program.63 However, Section 1902(r)(2) of Medicaid law
allows states to establish more generous methods for counting income and resources
through additional disregards for certain Medicaid eligibility groups. Section
1902(r)(2) can be applied to all mandatory Medicare Savings program groups except
Qualified Working Disabled Individuals (i.e., QMB, SLMB and QI-1).64
Table 8 below describes the extent to which states have applied additional
disregards for these groups. A few examples of additional income disregards include
a deduction for children and irregular or infrequent income. Examples of additional
resource disregards include additional amounts for burial expenses, the value of a life
insurance policy under a certain level and income producing property. A few states
disregard all resources for purposes of determining eligibility for Medicare premiums
and cost-sharing.65 States may disregard all resources because the administrative
requirements for collecting the paperwork documenting a person’s resources may be
burdensome for both the state and the individual and may not result in a significant
number of individuals becoming ineligible for the program.
Table 8. States Using Less Restrictive Income or Resource
Methodology for Determining Eligibility for QMB and SLMB in
2001
Uses less restrictive methods Uses less restrictive methods for
State
for counting income
counting resources
Alabama
X
X - excludes all resources.
Alaska
X
Arizona
X
X- excludes all resources.
Arkansas
X
California
X
X
Colorado
Connecticut
X
X- excludes all resources for QI-1.
Delaware
X
X- excludes all resources.
District of Columbia
63The SSI guidelines are generally used for Medicaid eligibility pathways relating to
individuals who are elderly or have a disability. However, there are 11 states that use more
restrictive methods for counting income or resources than those used in the SSI program
(referred to as “209(b) states”). Congress has prohibited states from applying these more
restrictive standards to determine whether an individual is eligible for Medicare premiums
and cost-sharing assistance.
64Section 1902(r)(2) does not specifically apply to individuals who receive premium
assistance through a traditional Medicare buy-in, because the traditional Medicare buy-in
is not a separate Medicaid eligibility group.
65The 108th Congress enacted the Social Security Protection Act of 2003 (P.L. 108-203)
which includes provisions to exclude additional types of income and resources in SSI
eligibility determinations such as certain types of infrequent or irregular income and certain
interest or dividend income. These new provisions also apply to eligibility determinations
for QMB and SLMB, and QI-1 and may render a few states’ previously established
1902(r)(2) provisions unnecessary.

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CRS-32
Uses less restrictive methods Uses less restrictive methods for
State
for counting income
counting resources
Florida
X
X
Georgia
X
X
Hawaii
X
Idaho
X
Illinois
X
X
Indiana
X
Iowa
Kansas
X
X
Kentucky
Louisiana
Maine X
X
Maryland
Massachusetts
Michigan
Minnesota
X
X
Mississippi
X
X- excludes all resources.
Missouri
X
Montana
X
North Carolina
North Dakota
Nebraska
New Hampshire
New Jersey
New Mexico
Nevada
New York
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
X
South Carolina
X
South Dakota
X
Tennessee
X
X
Texas
Utah
Vermont
X
X
Virginia
X
Washington
X
Wisconsin
West Virginia
Wyoming
X
Source: National Association of State Medicaid Directors, Aged, Blind and Disabled Survey, 2001,
at [http://www.nasmd.org/eligibility/introduction.asp].

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CRS-33
Coverage of Medicare Managed Care Premiums and Cost-
Sharing
The Medicare Advantage program (previously known as the Medicare +
Choice program) is a voluntary Medicare managed care program for Medicare
beneficiaries (including those who are dually eligible). Generally, dually eligible
individuals have had low enrollment in Medicare managed care. The General
Accounting Office (GAO) estimated that 3% of dual eligibles received their
Medicare benefits through Medicare managed care.66
For those dually eligible individuals who are eligible as a QMB and enrolled
in Medicare managed care, states must cover the coinsurance and deductibles those
plans charge enrollees. These are in lieu of the Medicare coinsurance and deductibles
which would be paid if the individual were not enrolled in managed care and instead
were in the traditional fee-for-service program.67 The requirement to pay coinsurance
and deductibles has been difficult for states and Medicare managed care plans to
implement because (1) most states do not have reliable ways of knowing which dual
eligibles are enrolled in a Medicare managed care plan, and (2) many managed care
plans do not have reliable information on dual eligible status. A 1999 report found
that fewer than half of the states that have Medicare managed care plans pay dual
eligible individuals’ co-payments for services provided.68 As a result, dual eligible
beneficiaries may be inappropriately charged for co-payments that Medicaid should
cover.
Amount of Medicaid Coinsurance for QMBs
State Medicaid programs frequently have payment rates that are lower than
those used by Medicare for comparable services. Federal program guidelines permit
states to limit Medicare cost-sharing for QMBs to the difference between what
Medicare has already paid the provider and the rate that Medicaid would have paid
for that service. For example, if the recognized payment amount for a Medicare
physician visit is $100, Medicare would reimburse the provider 80% of the amount
of that Part B service ($80). If the state’s Medicaid rate for a similar service was $85,
the state would only be required to pay the Medicare provider an additional $5. This
is $15 less than the Medicare provider would receive if the beneficiary did not
receive cost-sharing assistance from Medicaid and had been liable to the provider for
the $20 coinsurance.
66General Accounting Office (GAO), Medicare and Medicaid: Implementing State
Demonstrations for Dual Eligibles Has Proven Challenging, GAO/HEHS-00-94, Report to
U.S. Senate, Special Committee on Aging, Aug. 2000.
67States at their option may also pay any additional enrollment premiums that may be
charged to dual eligibles for participating in the managed care plan.
68P. Nemore, Variations in State Medicaid Buy-In Practices for Low-Income Medicare
Beneficiaries: A 1999 Update, National Senior Citizens Law Center, Dec. 1999. (Hereafter
referred to as Nemore, 1999 Buy-In Practices)

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CRS-34
In 1997, a state survey reported that 12 states had a policy of not reimbursing
providers the full Medicare coinsurance amount.69 Several providers sued states to
try to receive the full Medicare amount. In response to these lawsuits, Congress
specified in BBA97 that states are not required to pay Medicare cost-sharing to the
extent that the payment would exceed the rate that Medicaid would have paid. A
follow-up survey in 1999 found that the number of states that had instituted a policy
reimbursing providers only what Medicaid would have paid (less than the full
Medicare coinsurance rate) had grown to 30.70
Congress was concerned that this reduction in Medicaid payments to Medicare
providers would affect Medicare beneficiaries’ access to services and requested a
review of this issue in 2000 by the HHS.71 HHS found “a statistically significant
correlation” between the reductions in states’ payments to Medicare providers for
cost-sharing and beneficiary service utilization. Specifically, the study found that for
every 10% decrease in Medicaid payment of Medicare cost-sharing, there was a 1%
reduction in the probability of a Medicare outpatient physician visit occurring and a
3% reduction in the probability of a Medicare outpatient mental health visit
occurring. The study concluded that the impact on utilization was “relatively small”
and “the effect on health outcomes is unknown.”72 The study did not propose a
specific cause for the decrease in service utilization.
Outreach for Medicare Premiums and Cost-Sharing
Assistance
The final issue discussed in this section is the number of participants who are
currently receiving assistance with Medicare premiums and cost-sharing versus the
number of individuals who would be eligible for these programs. Estimates of
individuals who actually participate in QMB or SLMB compared to the number who
are eligible to participate range from 47% to 57%.73 Although the estimated
participation rate of eligibles for QMB and SLMB together is about one-half, other
studies have found significant differences in participation between the QMB and
69 P. Nemore, Variations in State Buy-In Practices for Low-Income Medicare Beneficiaries,
National Senior Citizens Law Center, Nov. 1997.
70Nemore, 1999 Buy-In Practices.
71Section 125 of the Medicare, Medicaid and SCHIP Benefits Improvement an Protection
Act of 2000 (BIPA).
72HHS, Report to Congress: State Payment Limitations for Medicare Cost Sharing, 2003.
73GAO, Low-Income Medicare Beneficiaries: Further Outreach and Administrative
Simplification Could Increase Enrollment, Apr. 1999 GAO/HEHS-99-61; Actuarial
Research Corporation, Estimating the Universe of Medicare Beneficiaries Potentially
Eligible for Medicaid Buy-In, Feb. 1999; and The Barents Group LLC, A Profile of QMB-
Eligible and SLMB-Eligible Medicare Beneficiaries, Apr. 1999.

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CRS-35
SLMB groups. The estimated participation rate for QMBs was 78%, and the
participation rate for SLMBs was 16%.74
A survey of states found several possible reasons for the low enrollment of
eligible QMBs and SLMBs including a lack of understanding about the programs,
language and/or cultural barriers, the physical accessibility or lack of familiarity with
the county Medicaid office where they may have to go to apply the complex
enrollment process including the documentation of income and assets, and the
welfare stigma which may be associated with applying for assistance at a county
office.75 The estate recovery provisions of some states may also deter participation
among some beneficiaries.
A study by the Barents Group found that those Medicare beneficiaries who
were more likely to seek assistance with Medicare premiums and cost-sharing may
have had greater contact with the local human service system, may be able to access
program information and enrollment assistance, or may not be deterred by the
application process or applying for the assistance at a county office.
Those who were less likely to enroll in the Medicare Savings program fell into
two categories. The first category was those who were considered “hard-to-reach.”
Individuals in this category tended to be very elderly, Hispanic-Latino beneficiaries,
and beneficiaries who used fewer services and had less contact with the health care
systems. The second group of individuals were those who had somewhat more
income and assets than the first group but still met the income and asset guidelines
for the program. These individuals tended to be married, had relatively high levels
of formal education, were homeowners, were in relatively good health, and had
private supplemental insurance.76
In 1999, CMS made a concerted effort to raise the number of eligible Medicare
beneficiaries. This was in response to the Government Performance Review and
Accountability Act (GPRA) measure to “Improve Access to Care for Elderly and
Disabled Medicare Beneficiaries Who Do Not Have Public or Private Supplemental
Insurance.” CMS established state specific goals, conducted a series of regional
seminars, developed outreach materials, awarded grants to states, sponsored
conferences, and engaged in other efforts to raise awareness of the assistance
available to low-income Medicare beneficiaries.77 The Social Security
Administration (SSA) is also required to conduct outreach mailings to potential
QMBs, SLMBs, and QI-1s. These efforts have increased participation in the
programs by a few percentage points, but the number of individuals who are
receiving assistance with premiums and cost-sharing continues to fall well below the
number who are considered eligible based on population estimates of this group.
74M. Moon, et al., “Options for Aiding Low-income Medicare Beneficiaries,” Inquiry —
Blue Cross and Blue Shield Association; fall 1998, pp. 346-356.
75H. Shaner, Dual Eligible Outreach and Enrollment: A View from the States, Mar. 1999.
76The Barents Group LLC, A Profile of QMB-Eligible and SLMB Eligible, Apr. 1999.
77For additional information on CMS activities to increase participation see: State Medicaid
Director Letter dated Jan. 13, 2000 at [http://www.cms.hhs.gov/states/letters/smd/
11300.asp]

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CRS-36
Many policymakers believe that the addition of a new Medicare prescription
drug benefit in 2006 will increase participation in the QMB and SLMB programs.
Under the legislation, states are required to screen individuals for eligibility in QMB
and SLMB if the individual applies for financial assistance with premiums and cost-
sharing for the Medicare prescription drug benefit.
Summary of Premiums and Cost-Sharing Assistance Groups
Table 9 summarizes Medicare premiums and cost-sharing assistance for the
groups of beneficiaries discussed in this section. It outlines the various types of
Medicare premiums and cost-sharing charges and describes who is responsible for
covering each of these components.

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CRS-37
Table 9. Summary of Medicare Premiums and Cost-sharing Coverage by Assistance Group
Type of Medicare premiums and cost-sharing
Medicare fee-for-service
Medicare managed care
Part B
Part A deductible,
deductible,
Additional
Category
coinsurance, co-
coinsurance, co-
enrollment fee (if
Coinsurance,
(income criteria)
Part A premium
payments
Part B premium
payments
applicable)
deductible
Generally, no cost to
State required to
State required to
beneficiary or state. But if
cover the cost up to
cover the cost up to
State option to
QMB
required, state must cover
equivalent
State required to cover
equivalent Medicaid cover. Otherwise
State required to cover
(at or below 100% FPL)
the cost.
Medicaid rate.
the cost.
rate.
individual pays.
the cost.
Generally, no cost to
beneficiary or state. But if
State option to
SLMB
required, the individual
Individual covers
State required to cover
Individual covers
cover. Otherwise
Individual covers the
(below 120% FPL)
must cover the cost.
the cost.
the cost.
the cost.
individual pays.
cost.
State required to cover if
individual’s income is
below 200% FPL, but may
require that the individual
pay part of the premium if
QDWI
his/her income is between
Individual covers
Individual covers the
Individual covers
Individual covers
Individual covers the
(below 200% FPL)
150% and 200% FPL.
the cost.
cost.
the cost.
the cost.
cost.
Generally, no cost to
State covers the cost
beneficiary or state. But if
through 100% federal
State option to
QI-1
required, the individual
Individual covers
dollars up to state
Individual covers
cover. Otherwise
Individual covers the
(below 135% FPL)
must cover the cost.
the cost.
allotment.
the cost.
individual pays.
cost.
States choosing the
Generally, no cost to
buy-in option, must
beneficiary or state. But if
cover the costs for some
State option to
Traditional Medicare Buy-In
required, the state has the
Individual covers
groups and have the
Individual covers
cover. Otherwise
Individual covers the
(determined by the state)
option to cover.
the cost.
option for other groups. the cost.
individual pays.
cost.

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CRS-38
Administration and Data Issues
for Dual Eligible Programs
Administering claims for Medicaid services and assistance with Medicare
premiums and cost-sharing for dually eligible individuals as described in this report
is complex. State Medicaid programs must develop systems to determine what bills
Medicare has paid and the amount that should be paid to providers. States must also
determine who is eligible for assistance with Medicare premiums and cost-sharing.
This section discusses the administration of dual eligible programs and some of the
complexity involved in this process.
Administration of Claims Payment for Dual Eligibles
State Medicaid agencies must “cost avoid” or reject any claims that may be
paid by a third party, including Medicare. For those dual eligibles for whom a
service may be paid for by Medicare, the provider first submits the bill for services
to Medicare. If Medicare accepts the claim, the Medicaid agency would only be
required to pay the beneficiary cost-sharing charges. In billing the Medicaid agency
for the cost-sharing charges, either the Medicare fiscal intermediary or carrier would
send a bill to the state Medicaid agency, or the Medicare provider would be required
to bill the state Medicaid agency for the cost-sharing amount.
If Medicaid pays a claim and the state subsequently becomes aware that it
could have been paid by a third party such as Medicare, then the state must seek
recovery from that third party (referred to as “pay and chase”). To help ensure that
Medicaid only pays when it’s appropriate, states may educate providers to explain
when Medicare is billed versus Medicaid, review paid claims to check for potential
third-party payment sources, resubmit selected cases to Medicare for payment, or, in
a few cases, appeal denied Medicare claims.78
Administration of Medicare Premium Assistance
To enable the administration of Medicare premium assistance, there are several
contractual and data-related agreements among states, SSA and CMS. One of the
contractual agreements (discussed previously) is the traditional Medicare buy-in
between states and CMS. Under the buy-in agreement, dually eligible individuals are
automatically enrolled in Medicare. This system can include not only the traditional
Medicare buy-in group, but also QMB and SLMB. Beneficiaries who are covered
under the buy-in agreement are not subject to the traditional restrictions on when an
78W. Anderson, et al., “Adoption of Retrospective Medicare Maximization Billing Practices
by State Medicaid Home Care Programs,” Journal of Health Politics, Policy and Law, vol.
28, no. 5, Oct. 2003.

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CRS-39
individual can enroll in Medicare Part B, thus avoiding penalties for late
enrollment.79
Most states have also entered into contractual agreements with the SSA under
Section 1634 of the Social Security Act to automate part of the Medicare premium
and cost-sharing process. The 32 states which have entered into a "1634 agreement"
automatically consider SSI-eligible individuals to be eligible for a Medicare Part B
buy-in. SSA sends a monthly list to CMS of individuals who should receive
Medicare premium and cost-sharing assistance based on their SSI status. CMS
verifies the information, automatically enrolls these individuals in Medicare Part B,
and bills the states via a data file for the Medicare premiums.
For all individuals who reside in states without a 1634 agreement and for those
individuals who reside in a state with a 1634 agreement but who are not eligible for
SSI, the state Medicaid agency determines eligibility for Medicare Savings Programs
and transmits that information to CMS. CMS then combines the data received from
SSA with the state determinations and bills the states on a monthly basis for the
Medicare premiums attributable to those beneficiaries. This data file is referred to
as the “Third Party Premium Billing File.”
Certain individuals are not included in the Third Party Premium Billing File.
All QDWIs and QMBs in certain states must enroll themselves in Medicare and may
be subject to enrollment restrictions and penalties. Unlike other groups, these
individuals are not automatically enrolled in Medicare. After the individual enrolls
in Medicare Part A and the state Medicaid program verifies that the individual is
eligible for cost-sharing assistance, CMS bills the states on a monthly basis for the
Part A premiums. These individuals are included in the “group payer” category and
are not included in national data on the number of individuals receiving assistance
with Medicare premiums.
Data Issues
Gathering reliable and consistent federal data on dual eligibles is a challenge
because there is no common definition of dual eligibles or reliable method of
estimating enrollment of dual eligibles, particularly the number of individuals in
specific subcategories (e.g., QMBs, SLMBs). Some policymakers include
individuals who only receive assistance with Medicare cost-sharing in the definition
of dual eligibles, others define dual eligibles as only those who are receiving full
Medicaid benefits.
In addition, individuals may be enrolled in more than one Medicaid group
which is not always reflected in the data that states send to the federal government
on the Medicaid Statistical Information System (MSIS). For example, an individual
may be receiving assistance with Medicare cost-sharing as a QMB and may be
receiving full Medicaid benefits due to the receipt of SSI cash benefits. Often, states
will report the eligibility code to the federal government as SSI. The individual’s
79L. Carpenter, “Evolution of Medicaid Coverage of Medicare Cost Sharing,” Health Care
Financing Review, winter 1998, pp. 11-18.

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CRS-40
QMB status is not included. Therefore, the number of individuals reported on MSIS
as QMB may under count the number of individuals who actually receive assistance
through this category.
For example, based on documentation of FY2002 MSIS data, 18 states could
not identify the dual eligible status of 15% or more of Medicaid enrollees or had
another problem that made their dual eligibility reporting unreliable. Even when
states are able to identify an enrollee as a dual eligible, they may not be able to
identify a specific category of dual eligibility (QMB/SLMB only, QMB/SLMB with
full benefits, QDWI, etc.). In FY2002, 17 states could not identify a category of
eligibility for 25% or more of the dual eligibles, and nine could not identify a
category for 50% or more of the dual eligibles. These data issues make it difficult
to fully understand the role of Medicaid in providing services to dual eligibles and
create challenges in the implementation of the new Medicare drug benefit or other
policy changes that may affect this group of individuals.
Conclusion
Dual eligibles represent a small share of Medicare and Medicaid beneficiaries,
but these individuals have significant health and long-term care needs that are served
by two very different and very complex programs. Significant challenges remain to
ensure that beneficiaries can access a coordinated, understandable package of
Medicare and Medicaid services and low-income assistance, and that program
administrators and providers can easily navigate the administration and operations
of these two programs.

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CRS-41
Appendix A. Estimated Medicaid Expenditures for
Dual Eligibles by State and Category of Service,
FY2002
(in millions)
Acute
Long-Term
Prescription
Managed
Other/
State
Total
care
care
drugsa
care
unknown
Alabama
1,180.13
110.69
828.18
213.99
6.72
20.55
Alaska
172.73
19.19
112.83
35.53
0.00
5.18
Arizona
767.23
25.56
17.11
1.10
717.90
5.56
Arkansas
1,017.37
237.97
597.45
165.77
3.27
12.91
California
8,798.91
681.91
5,217.46
1,970.53
820.19
108.81
Colorado
930.78
45.66
658.80
129.05
78.32
18.95
Connecticut
1,990.43
79.59
1,659.68
244.94
0.55
5.67
Delaware
242.34
15.06
189.62
29.47
2.99
5.19
District of Columbia
263.97
37.85
185.86
32.96
0.96
6.35
Florida
3,701.42
217.50
2,293.41
948.06
129.31
113.14
Georgia
1,531.51
198.02
998.04
309.86
2.39
23.21
Hawaii
238.32
19.09
171.27
45.90
0.54
1.52
Idaho
158.39
16.66
104.21
34.03
0.17
3.31
Illinois
2,990.72
217.26
2,143.72
577.79
2.94
49.01
Indiana
1,734.20
139.90
1,219.41
345.47
0.23
29.20
Iowa
900.19
68.21
658.53
157.84
12.27
3.33
Kansas
747.15
38.32
571.70
129.27
0.08
7.79
Kentucky
1,182.11
127.81
732.35
265.63
36.57
19.75
Louisiana
1,154.16
92.63
763.98
281.45
0.01
16.08
Maine
640.44
42.11
451.69
138.25
0.01
8.38
Maryland
1,300.64
113.24
949.79
205.22
19.90
12.49
Massachusetts
3,326.58
203.87
2,490.97
524.77
52.08
54.89
Michigan
1,800.73
68.60
1,217.37
473.27
28.64
12.86
Minnesota
2,210.82
100.58
1,686.78
170.37
225.37
27.73
Mississippi
1,117.46
159.28
590.77
338.19
0.00
29.23
Missouri
1,836.67
168.52
1,184.61
459.39
3.83
20.32
Montana
208.73
19.13
148.21
40.62
0.01
0.75
Nebraska
576.18
47.25
420.74
104.29
0.80
3.11
Nevada
211.38
23.62
142.59
41.99
0.11
3.08
New Hampshire
399.41
46.72
293.63
56.89
0.02
2.16
New Jersey
2,757.64
214.45
1,996.03
468.01
31.67
47.49
New Mexico
125.28
12.19
92.81
14.59
3.42
2.27
New York
14,637.75
1,798.34
10,822.88
1,466.63
355.47
194.43
North Carolina
2,585.93
283.53
1,674.11
603.24
1.69
23.37
North Dakota
259.84
9.74
216.60
32.05
0.00
1.45
Ohio
4,296.47
266.93
3,331.78
621.97
2.33
73.47
Oklahoma
948.09
77.99
694.69
168.66
5.46
1.29
Oregon
791.35
23.23
444.43
156.75
155.30
11.64
Pennsylvania
3,862.92
69.01
2,743.48
445.00
604.88
0.54

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CRS-42
Acute
Long-Term
Prescription
Managed
Other/
State
Total
care
care
drugsa
care
unknown
Rhode Island
592.22
21.01
487.46
80.91
1.84
1.00
South Carolina
1,024.20
238.64
556.80
210.82
10.63
7.32
South Dakota
217.82
14.81
165.53
35.54
0.94
1.00
Tennessee
1,663.42
106.82
985.91
265.85
290.93
13.89
Texas
4,019.32
183.44
2,974.00
724.13
72.45
65.30
Utah
256.46
9.28
147.54
56.22
40.45
2.98
Vermont
240.73
17.65
154.81
65.37
0.02
2.89
Virginia
1,336.60
119.32
915.35
286.68
7.35
7.90
Washington
876.62
89.41
491.06
285.37
3.89
6.88
West Virginia
576.88
33.06
435.40
98.97
0.03
9.42
Wisconsin
1,973.75
98.43
1,380.39
301.14
171.79
22.00
Wyoming
121.99
6.71
97.30
17.84
0.00
0.15
Totalb
86,496.37
7,075.78
$59,509b
14,877.58
3,906.75
1,127.18
Source: CRS analysis based on Centers for Medicare and Medicaid Services, MSIS data, FY2002.
a. The amounts shown do not reflect rebates paid to states by pharmaceutical manufacturers. In FY2002, total
Medicaid drug expenditures for all beneficiaries were offset by 20% due to rebates.
b. Does not include $5.2 billion in expenditures for Medicare Part B premiums.

---

CRS-43
Appendix B. Estimated Number of Dually Eligible Recipients
for Selected Service Types by State, FY2002
(in thousands)
Total
Selected managed care
number of
Selected acute care services
Selected long-term care
program
dual
Inpatient
Outpatient
Nursing
Personal
Prescription
State
eligibles
hospital
hospital
Physician
facility
ICF-MR
care
drugs
Comprehensive HMO
Alabama
126.5
32.0
12.5
96.6
23.8
0.4
0.0
96.4
0.0
Alaska
9.9
2.0
6.4
7.5
0.6
0.0
1.9
9.1
0.0
Arizona
68.8
1.8
6.9
2.3
0.6
0.0
0.7
1.4
62.2
Arkansas
109.5
26.6
57.2
89.7
18.1
1.1
16.0
83.1
0.0
California
946.2
95.6
288.1
527.9
94.5
5.1
188.9
721.9
136.5
Colorado
63.0
7.5
22.9
14.0
14.2
0.1
0.0
43.2
11.5
Connecticut
77.5
16.3
43.1
50.3
26.7
1.1
10.5
69.7
0.5
Delaware
13.2
2.4
6.0
10.6
3.0
0.2
0.0
9.3
1.2
Dist. of Columbia
23.7
5.6
7.4
6.0
4.1
0.6
0.1
18.5
0.4
Florida
357.6
91.9
165.5
161.6
68.5
2.1
0.0
314.9
29.7
Georgia
178.4
39.1
110.2
156.6
34.1
0.8
0.0
134.4
0.0
Hawaii
22.9
0.6
1.0
20.1
9.3
0.1
0.0
21.3
0.5
Idaho
12.4
2.8
7.1
10.7
1.2
0.2
2.6
9.9
0.0
Illinois
210.3
20.3
90.7
140.3
62.1
6.7
7.8
189.1
0.4
Indiana
107.2
25.8
61.6
80.8
35.6
3.6
0.0
94.3
0.2
Iowa
60.9
13.3
32.7
43.9
19.0
1.3
0.0
53.6
0.1
Kansas
42.5
5.9
14.2
27.2
12.8
0.6
13.7
38.0
0.1
Kentucky
122.1
30.2
63.2
94.8
24.2
0.5
0.0
83.9
12.4
Louisiana
117.0
71.7
7.5
93.8
27.1
3.1
0.1
93.4
0.0
Maine
76.6
0.7
5.9
34.1
7.6
0.2
1.2
74.6
0.0
Maryland
80.2
19.2
37.3
63.6
18.9
0.3
3.6
71.9
5.1
Massachusetts
194.6
17.1
118.3
141.8
47.8
1.1
2.8
181.3
1.8
Michigan
190.8
14.6
64.9
95.9
40.3
0.1
7.7
178.9
11.7
Minnesota
98.8
16.9
45.0
55.9
31.4
2.4
15.7
61.2
43.6
Mississippi
136.3
38.6
85.0
121.2
17.7
1.4
0.0
131.6
0.0
Missouri
146.3
30.8
90.1
89.8
34.7
0.9
34.2
134.1
0.7
Montana
15.8
3.3
8.3
12.0
4.3
0.1
2.0
14.3
0.0
Nebraska
34.3
7.2
19.0
25.6
10.5
0.5
0.9
32.5
0.2

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CRS-44
Total
Selected managed care
number of
Selected acute care services
Selected long-term care
program
dual
Inpatient
Outpatient
Nursing
Personal
Prescription
State
eligibles
hospital
hospital
Physician
facility
ICF-MR
care
drugs
Comprehensive HMO
Nevada
21.9
2.6
8.7
0.0
3.8
0.1
2.0
15.8
0.1
New Hampshire
18.7
1.5
10.3
10.9
6.7
0.0
0.1
17.4
0.0
New Jersey
146.9
33.5
74.0
67.2
37.1
2.5
16.7
135.1
9.0
New Mexico
32.3
11.4
2.8
20.5
4.3
0.2
0.1
20.7
1.9
New York
558.5
134.8
307.5
410.5
132.2
6.7
83.3
451.6
30.4
North Carolina
234.9
37.9
137.0
207.2
38.8
2.7
39.0
220.0
0.2
North Dakota
12.9
2.4
5.6
0.4
4.9
0.4
0.0
11.3
0.0
Ohio
206.4
55.9
119.7
174.6
68.9
5.4
0.0
185.1
1.5
Oklahoma
82.1
22.2
32.5
61.9
21.2
1.3
10.3
75.8
2.3
Oregon
76.4
1.5
16.8
27.5
9.7
0.0
9.7
59.2
32.2
Pennsylvania
272.7
25.6
12.1
76.2
68.8
3.2
4.3
147.4
144.2
Rhode Island
29.6
5.6
14.5
14.3
9.6
0.0
1.2
27.1
1.0
South Carolina
116.9
38.6
42.2
87.4
15.8
1.3
13.3
104.6
0.1
South Dakota
17.9
3.2
6.7
11.3
5.4
0.1
1.6
11.9
0.0
Tennessee
288.6
28.8
33.2
189.4
33.0
1.0
0.0
200.5
287.9
Texas
357.3
90.1
8.9
38.5
79.3
8.0
0.8
324.1
32.9
Utah
18.3
1.1
3.7
6.2
4.4
0.4
0.3
16.5
9.9
Vermont
26.8
3.0
10.0
14.0
3.2
0.0
0.0
25.9
0.0
Virginia
120.2
32.1
71.5
90.3
24.2
1.4
8.1
96.7
2.8
Washington
102.5
11.3
49.9
66.2
19.2
0.0
0.0
94.2
3.7
West Virginia
50.8
5.9
27.9
41.1
9.7
0.3
3.2
40.0
0.0
Wisconsin
134.5
22.1
59.8
46.5
33.6
2.3
8.5
124.2
4.4
Wyoming
7.1
1.5
4.1
5.6
2.2
0.1
0.0
5.6
0.0
Totala
6,577.3
1,212.1
2,537.4
3,942.2
1,329.2
72.4
512.9
5,376.5
883.4
Percentage of total number of
dual eligibles
18%
39%
60%
20%
1%
8%
82%
13%
Source: CRS analysis based on Centers for Medicare and Medicaid Services, MSIS data, FY2002
Note: Included in the beneficiary totals are dual eligible beneficiaries receiving a service listed above that was funded under a home- and community-based program under Section
1915(c) or Section 1929 of the Social Security Act.
a. Includes all dual eligibles except those for whom Medicaid paid for Medicare premiums only.

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