What Obama Giveth, Douglas Taketh Away? 

** Updated Below **

Vermont's two U.S. senators and a top aide to Pres. Barack Obama are urging Gov. Jim Douglas to back off plans to have Vermont seniors turn over nearly $600,000 in federal prescription drug rebates.

As I noted on Twitter, a story on Politico called attention to the Douglas administration's attempt to intercept the rebate checks. A story in the Times Argus on Thursday noted a similar tact by the administration, just without the national implications.

Late Friday, Heath and Human Services Secretary Kathleen Sebelius, the former governor of Kansas, wrote a terse letter to Douglas urging his administration to back off its plan to pocket a total of $600,000 in federal Medicare reimbursement checks being sent to nearly 3000 Vermont seniors.

She joined Sens. Patrick Leahy (D-VT) and Bernie Sanders (I-VT) who also called on Douglas to back off of his plan to make off with the seniors' rebate checks.

Why is Douglas asking seniors to hand over $250 rebate checks to the state?

Simple. Vermont runs a state-funded prescription drug program for seniors — dubbed VPharm — which covers the cost of prescription drugs that aren't paid for by Medicare Part D. That's the federal pharmaceutical program.

Under Medicare Part D, seniors have to pay for their drugs out of pocket after they've incurred a certain amount of claims. The out-of-pocket expenses can run into the thousands of dollars, and it's known as the  "doughnut hole" because once seniors reach their limit out-of-pocket, Medicare coverage kicks in again.

The out-of-pocket portion is the "hole" in otherwise seamless, complete coverage.

Starting this week, thousands of federal checks are being issued to Vermonters, and seniors around the country, to help cover the out-of-pocket expenses incurred as they moved through the "doughnut hole."

It's estimated that 9000 seniors will receive the $250 checks. Of those, about 2800 seniors used VPharm to help cover the cost of their drugs when they hit the "doughnut hole." So, the state wants to recoup their $250 to keep the program alive. VPharm is almost completely funded with state dollars, and Vermont is one of only a few states that have such a program, said Susan Besio, director of the state's Office of Vermont Health Access.

But, if you think this is just the Douglas administration going rogue, think again.

The legislature stuck language into the budget bill during the final days of the session giving OVHA the authority to put in place special rules to snag this money from seniors as it flowed into the state, said Besio.

"It is the only completely state-funded program we have left and given the resource crunch we're facing, we want to keep it, and the money we can recoup from this will help us keep the program up and running for the seniors who need it," said Besio.

OVHA is sending out a letter next week describing this situation and giving VPharm beneficiaries a toll-free number to if they have questions.
 
Beyond that letter, Besio said caseworkers will talk individually with seniors about how best to recoup the $250 over time, and perhaps through changing VPharm deductibles and other ways to ease the impact on the program.

Aside from annual deductibles, VPharm participants can pay monthly premiums ranging from $15 to $50.

If VPharm beneficiaries do not contact OVHA, the legislative has given the administration the power to  recover the funds paid by OVHA on behalf of the beneficiaries by requiring that they incur $250 out-of-pocket expenses for their drugs before the state resumes covering their costs, said Besio.

An administrative rule giving OVHA that authority will be debated by the Legislative Committee on Administrative Rules at its July 1 meeting at the State House in Montpelier.

The Vermont Chapter of the American Association of Retired Persons and the Coalition of Vermont Elders opposed OVHA's rule to take the federal funds.

"It's going to be confusing and scary for seniors. We also don't think there will be much savings to the state once you figure in the cost of finding the thousand or so seniors that fall into this category and then trying to take the $250 rebate from them," said Philene Taormina, AARP's director of advocacy. "And the drama will all likely play out in the pharmacy where the poor pharmacists will have to tell the senior, 'Sorry, your benefits have been suspended until the state gets your Medicare Part D rebate check.'"

Sens. Patrick Leahy (D-VT) and Bernie Sanders (I-VT) issued a joint statement this afternoon, also urging the Douglas administration to rethink its plan.

“At a time when Vermont seniors are hurting, the state should reconsider its plans to ask many low-income seniors to return this much-needed help," read the statement. "The state’s rebate recall also would add confusion and new layers of complexity for seniors and for the state. Vermont seniors who are struggling enough already to pay for the medicine they need can use all the help they can get."

* * Update * *

The governor's office just released a letter dated Friday today telling HHS Secretary Kathleen Sebelius the state is backing off its plan to recoup the $250 Medicare checks from about 3000 seniors. The move, which was approved by the legislature, drew fire from Vermont's two U.S. senators.

Douglas said he was disappointed with the lack of cooperation from the federal government to help states that had designed programs to help seniors pay for prescription drugs recoup some of those costs.

In essence, Douglas argued, the seniors were being paid twice for the same benefit.

A portion of the letter reads:

At this point, due to the lack of cooperation from HHS, it appears that it is going to be administratively burdensome and also confusing to our beneficiaries to implement this effort as planned.  While we will not be pursuing recovery of $250 rebates at this time, we have communicated with legislative leaders and we will be working with our General Assembly during the next legislative session to develop a remedy to this negative financial impact on Vermont taxpayers.

It is important to note that the Patient Protection and Affordable Care Act will actually cost Vermont taxpayers at least $6.8 million over the next two years – a financially difficult burden for the state at a challenging time.  We will continue to work with legislators and our congressional delegation to address the broader financial impact of federal health reform on our state budget.

I certainly hope this is not indicative of what lies ahead for collaboration between HHS and states that have taken the lead on health care reform.  While some states are suing the federal government, Vermont has committed – in good faith – to implementing and continuing to lead on health care reform.  You have repeatedly said in words and writing that your Agency will implement reform by working in partnership with states.  I sincerely hope that this rebate check experience is a one-time event.

U.S. Sen. Patrick Leahy quickly praised Douglas' decision:

“This direct help with the high cost of prescription drugs is the first of many tangible benefits that Vermonters will see under the new health insurance reform law," said Leahy in a statement issued by his office. "This is a fair and practical outcome, and I commend Governor Douglas and our legislative leaders for reconsidering the rebate issue. I will continue to work closely with them on our efforts to improve and widen access to health care in Vermont.”

Here is the full text of Douglas' letter:

June 14, 2010

The Honorable Kathleen Sebelius

Secretary

U.S. Department of Health and Human Services

Washington, DC 20201Dear Secretary Sebelius:

I am in receipt of your letter of June 11, 2010 regarding VPharm, Vermont’s state-only program that provides pharmaceutical coverage to low-income Medicare beneficiaries, and our plans to use the $250 rebates being sent to VPharm beneficiaries to help sustain this valuable program.

As you are aware, we have led the nation in state health care reform and have worked very collaboratively with the Obama administration as federal reform has been enacted.  I appreciate your recognition that Vermont is a national leader in supporting our low-income seniors to cover their pharmacy costs.

However, I think it is important that I explain the full extent of the support that we provide to beneficiaries in this program.  Annually, our VPharm program has 12,500 beneficiaries across three benefit plans: VPharm1 (up to 150% FPL), VPharm 2 (up to 175% FPL), and VPharm 3 (up to 225% FPL).  For all three populations, we use state only funds to pay their Medicare Part D premiums (up to the regional benchmark of $34.57 per month) and all cost-sharing for all maintenance drugs that are covered by Medicare Part D.  In addition, we use state only funds to pay the cost-sharing for all drugs (including non-maintenance medications) for VPharm1 enrollees.  In total, the State of Vermont spends $1.7 million for Part D premiums and $9.6 million for these beneficiaries’ pharmacy cost-sharing, minus approximately $3.8 million we receive from manufacturers in the form of rebates.   In addition, we pay for the costs of all drugs excluded in the Medicare Part D plans for all three VPharm plans, and receive federal assistance for this coverage.  In return, beneficiaries pay a monthly premium of $15, $20 or $50, respectively, and a very modest co-pay of $1 or $2 per prescription, depending on the cost of the medication.  In sum, this is a very generous program that defrays almost all costs of Medicare Part D prescription drug coverage for enrollees.

Of the 12,500 total VPharm enrollees, we estimate that 2,800 will enter the Medicare Part D donut hole this year.  As such, we were hopeful that HHS would work collaboratively with us to develop a method to capture the $250 rebates directly, since we are using state taxpayer dollars to pay for the donut hole prescription costs for these beneficiaries, and without capturing the rebates, beneficiaries would essentially be receiving twice the benefit.  In fact, this was a component of our budget deliberations with our legislature this year, and we were all counting on the estimated $590,000 from this recovery to help sustain this valuable program for Vermont elders. Contrary to your assertion, we were not reducing benefits to relieve budget constraints; we were trying to sustain a very valuable program that provides significant financial benefits to Vermonters that the federal government is not covering, and our recently approved state budget reflected that commitment.

Unfortunately, HHS was unwilling to work collaboratively with Vermont and other states that have these cost-sharing programs.  Hence, we have been placed in the untenable position of having to develop a plan to access these funds directly from elders after they receive the checks.

At this point, due to the lack of cooperation from HHS, it appears that it is going to be administratively burdensome and also confusing to our beneficiaries to implement this effort as planned.  While we will not be pursuing recovery of $250 rebates at this time, we have communicated with legislative leaders and we will be working with our General Assembly during the next legislative session to develop a remedy to this negative financial impact on Vermont taxpayers.

It is important to note that the Patient Protection and Affordable Care Act will actually cost Vermont taxpayers at least $6.8 million over the next two years – a financially difficult burden for the state at a challenging time.  We will continue to work with legislators and our congressional delegation to address the broader financial impact of federal health reform on our state budget.

I certainly hope this is not indicative of what lies ahead for collaboration between HHS and states that have taken the lead on health care reform.  While some states are suing the federal government, Vermont has committed – in good faith – to implementing and continuing to lead on health care reform.  You have repeatedly said in words and writing that your Agency will implement reform by working in partnership with states.  I sincerely hope that this rebate check experience is a one-time event.

Sincerely,
 
 
James H. Douglas
Governor
 
JHD/pht
cc: The Honorable Patrick J. Leahy
The Honorable Bernie Sanders