News Release

States Approved for Drug Reimbursement Demonstration to Complete Medicare Transition

Many States Reporting Limited Numbers of Claims

Forty-four states and the District of Columbia will participate in a program that will limit their costs and support the transition to Medicare drug coverage for certain people who are also in Medicaid, HHS Secretary Mike Leavitt announced today. In most states, the program�s costs will be very limited because few claims need to be processed.

Under the program, Medicare will reimburse states by reconciling drug payments with prescription drug plans, and by paying any differential between the drug plan reimbursement and Medicaid costs, as well as state administrative costs.

�The governors of these states have worked closely with us, making them strong partners in helping to make sure that every beneficiary who enrolled in a drug plan gets their coverage,� Secretary Leavitt said. �These 45 demonstrations for reimbursement will help complete the transition to the new Medicare prescription drug program and are a sign that the system is improving.�

States in the waiver program that are meeting the terms of the demonstration program can continue to use their state billing system while they work with Medicare and state pharmacists to complete the transition to Medicare coverage for remaining beneficiaries.

But many of the states approved for the demonstration actually have either none or very few claims, including Florida, which so far has had less than 100. Other states with significant Medicare populations -- South Carolina, Michigan and Iowa -- decided not to apply for the demonstration project at all.

�Many states are not using their payment systems or using them in a very limited way at this point,� said Centers for Medicare & Medicaid Services Administrator Mark B. McClellan, M.D., Ph.D. �We are paying for the administrative costs of states that take steps with Medicare and pharmacists to use Medicare�s billing systems, and this is paying off in low state billing and more use of Medicare coverage.�

Dr. McClellan noted that most states using their own payment systems are averaging, at most, one or two prescriptions a day for each pharmacy in the state -- accounting for only a small share of Medicaid beneficiaries. The reimbursement program includes steps that lead to minimizing the use of state billing systems, such as assisting pharmacies with using Medicare billing systems and assuring proper plan identification for a beneficiary.

The states approved for the demonstration project are: Alabama; Alaska; Arizona; Arkansas; California; Colorado; Connecticut; Delaware; District of Columbia; Florida; Georgia; Hawaii; Illinois; Kansas; Kentucky; Louisiana; Maine; Maryland; Massachusetts; Minnesota; Missouri; Mississippi; Montana; Nevada; New Hampshire; New Jersey; New Mexico; New York; North Carolina; North Dakota; Ohio; Oklahoma; Oregon; Pennsylvania; Rhode Island; South Dakota; Tennessee; Texas; Utah; Vermont; Virginia; Washington; West Virginia; Wisconsin; and Wyoming.

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Last revised: February 17, 2006