Title of Regulation: 12VAC30-50. Amount, Duration, and Scope of Medical and Remedial Care Services (amending 12VAC30-50-35, 12VAC30-50-75).

Statutory Authority: § 32.1-325 of the Code of Virginia; 42 USC § 1396 et seq.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: December 18, 2013.

Effective Date: January 2, 2014.

Agency Contact: Brian McCormick, Regulatory Supervisor, Department of Medical Assistance Services, 600 East Broad Street, Suite 1300, Richmond, VA 23219, telephone (804) 371-8856, FAX (804) 786-1680, or email brian.mccormick@dmas.virginia.gov.

Basis: Section 32.1-325 of the Code of Virginia grants to the Board of Medical Assistance Services the authority to administer and amend the Plan for Medical Assistance. Section 32.1-324 of the Code of Virginia authorizes the Director of the Department of Medical Assistance Services (DMAS) to administer and amend the Plan for Medical Assistance according to the board's requirements. The Medicaid authority, as established by § 1902(a) of the Social Security Act (42 USC § 1396a), provides governing authority for payments for services.

Section 175 of the Medicare Improvement for Patients and Providers Act of 2008 (Public Law 110-275) amended § 1869D-2(e)(2)(A) of the Social Security Act to include barbiturates (when used for the treatment of epilepsy, cancer, or a chronic mental health disorder) and benzodiazepines in Part D drug coverage as of January 1, 2013. With this new coverage under Medicare Part D for these dual eligible persons, Medicaid no longer needs to offer this benefit.

Purpose: The proposed amendments eliminate redundant coverage of two classes of drugs (barbiturates when used for the treatment of epilepsy, cancer, or a chronic mental health disorder and benzodiazepines) that were previously excluded for Medicare beneficiaries, including full benefit dual eligibles, under their Medicare Part D drug benefit. This amendment will not prevent full benefit dual eligibles from receiving these drugs; however, the coverage will be provided by their Medicare Part D pharmacy benefit provider, not the fee for service Medicaid program. DMAS will continue to provide coverage for all other drugs enumerated in 12VAC30-50-35 and 12VAC30-50-75 that will continue to be excluded from Medicare Part D coverage in accordance with existing Medicaid policy.

An analysis of benzodiazepine and barbiturate drug utilization by full benefit dual eligibles in fiscal year 2012 indicated that the elimination of these two classes of drugs will significantly reduce current non-Medicare Part D covered drug expenditures for approximately 109,000 full benefit dual eligibles by approximately $ 2.2 million per year (state and federal funds). Pursuant to § 2.2-4007.05 of the Code of Virginia DMAS does not anticipate any impact upon the public health, safety, or welfare.

Rationale for Using Fast-Track Process: DMAS is utilizing the fast-track rulemaking process because the agency does not anticipate any objections to these changes. Full benefit dual eligibles will continue to have the same access to all of the classes of drugs they previously had and for the same conditions. This change is anticipated by the provider community because the expanded Medicare Part D drug coverage for benzodiazepines and barbiturates will be a national change that all Medicare Part D pharmacy benefit plans are implementing. These plans are required by the federal Centers for Medicare & Medicaid Services to inform their enrollees of these changes.

Substance: Currently, the State Plan for Medical Assistance provides drug coverage for certain drug classes not provided for under Medicare Part D, including the drug classes of benzodiazepines and barbiturates. This regulatory action discontinues Medicaid coverage of benzodiazepines for all conditions and barbiturates for epilepsy, cancer, and chronic mental health disorders for approximately 109,000 categorically needy and medically needy full benefit dual eligibles. These categories of drugs are covered by their chosen Medicare Part D pharmacy benefit plan effective January 1, 2013.

Issues: The primary advantage of this proposed amendment to the general public and private citizens is the cost savings associated with the implementation of this change. Recent analysis of benzodiazepine and barbiturate utilization by full benefit dual eligibles suggests that DMAS will save approximately $ 2.2 million annually in total dollars. With the implementation of this change, the cost of these drugs will be borne by the Medicare Part D plan of the enrollee, not by the Virginia Medicaid program. There are no disadvantages to the general public or private citizens.

The primary advantage to the agency and the Commonwealth is the transfer of coverage for benzodiazepines and barbiturates to the federally funded Medicare Part D plans, which will save the Commonwealth approximately $ 1.1 million in general funds.

Medicaid enrolled pharmacies that provide coverage to full benefit dual eligibles also participate in the Medicare Part D plans that will be providing this additional coverage. It is anticipated that the transition to a different payor for these classes of drugs from the Virginia Medicaid program to Medicare Part D plans should cause no disruption in coverage. There are no perceived disadvantages to the Commonwealth as a result of this proposed regulatory change.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The proposed regulations will eliminate Medicaid coverage for some drugs for some recipients that will be covered under Medicare Part D drug benefit effective January 1, 2013.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. The proposed regulations will eliminate Medicaid coverage for benzodiazepines for all conditions and barbiturates, for patients with diagnoses of epilepsy, cancer or a chronic mental health disorder for full benefits dual eligibles (Medicaid recipients who are also eligible for Medicare benefits). Effective January 1, 2013, these drugs will be covered for full benefit dual eligibles under their Medicare Part D drug benefit. This additional Medicare Part D coverage is being provided as a result of the passage of Section 175 of the Medicare Improvement for Patients and Providers Act of 2008, which amended section 1860D-2(e)(2)(A) of the Act to include barbiturates used in the treatment of epilepsy, cancer, or a chronic mental health disorder and benzodiazepines for all conditions in their existing Medicare Part D coverage. Because of this additional Part D drug coverage, Virginia Medicaid will no longer provide these classes of drugs to full benefit dual eligibles.

According to Department of Medical Assistance Services (DMAS), there were 25,607 dual eligible recipients who received one of these drugs from Medicaid at a cost of approximately $2.2 million in total funds in fiscal year 2012. Since Medicare Part D, a 100% federally funded program, will start paying for these drugs at the beginning of 2013, Virginia Medicaid expenditures are anticipated to decrease by $2.2 million per year. Of this amount, $1.1 million will be savings in state funds and the rest will be savings in federal funds. As a result, the proposed change will save the Commonwealth approximately $1.1 million annually and increase the influx of federal funds coming to Virginia by the same amount. An increased influx of federal funds is likely to have an expansionary economic effect on the Commonwealth's economy.

DMAS plans to notify approximately 1,000 Medicaid enrolled pharmacies of this coverage change. In addition, DMAS reports that the Part D plans have informed patients of their expanded coverage. Moreover, Medicaid enrolled pharmacies that provide coverage to full benefit dual eligibles also participate in the Medicare Part D plans that will be providing this additional coverage. Thus, DMAS anticipates no disruption in coverage while recipients transition to a different payor for these drugs. In short, no significant economic effect is expected on affected recipients and pharmacies.

Businesses and Entities Affected. There are approximately 25,607 dual eligible recipients who received one of these drugs from Medicaid in fiscal year 2012 and there are approximately 1,000 enrolled pharmacies in the Medicaid program.

Localities Particularly Affected. The proposed changes apply throughout the Commonwealth.

Projected Impact on Employment. The expected $1.1 million increase in the influx of federal funds coming into Virginia should have an expansionary economic impact on the state's economy and help increase employment.

Effects on the Use and Value of Private Property. No significant economic effect is expected on the use and value of private property.

Small Businesses: Costs and Other Effects. No significant costs and other effects are expected on small businesses.

Small Businesses: Alternative Method that Minimizes Adverse Impact. The proposed regulations are not anticipated to have a significant adverse impact on small businesses.

Real Estate Development Costs. No effect on real estate development costs is expected.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 14 (10). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

Agency's Response to Economic Impact Analysis: The agency has reviewed the economic impact analysis prepared by the Department of Planning and Budget and concurs with this analysis.

Summary:

The amendments eliminate Medicaid coverage of two classes of drugs--benzodiazepines for all conditions and barbiturates for patients with a diagnosis of epilepsy, cancer, or a chronic mental health disorder--for Medicaid recipients covered under the Medicare Part D drug benefit.

12VAC30-50-35. Requirements relating to payment for covered outpatient drugs for the categorically needy.

A. Effective January 1, 2006, the Medicaid agency will not cover any Part D drug for full-benefit dual eligible individuals who are entitled to receive Medicare benefits under Part A or Part B. 1. The Medicaid agency provides coverage for the following excluded or otherwise restricted drugs or classes of drugs, or their medical uses to all Medicaid recipients, including full benefit dual eligible beneficiaries under the Medicare Prescription Drug Benefit-Part D. The following excluded drugs are covered:

a. 1. Agents when used for anorexia, weight loss, weight gain (see specific drug categories in subsection B of this section);

b. 2. Agents when used for the symptomatic relief cough and colds (see specific drug categories in subsection B of this section);

c. 3. Prescription vitamins and mineral products, except prenatal vitamins and fluoride (see specific drug categories in subsection B of this section);

d. 4. Nonprescription drugs (see specific drug categories in subsection B of this section);

e. 5. Barbiturates, except for dual eligible individuals when used in the treatment of epilepsy, cancer, or a chronic mental health disorder (see specific drug categories in subsection B of this section); and

f. 6. Benzodiazepines, except for dual eligible individuals as Part D will provide coverage for all conditions (see specific drug categories in subsection B of this section).

B. Coverage of specific categories of excluded drugs will be in accordance with existing Medicaid policy as described in 12VAC30-50-520.

12VAC30-50-75. Requirements relating to payment for covered outpatient drugs for the medically needy.

A. Effective January 1, 2006, the Medicaid agency will not cover any Part D drug for full-benefit dual eligible individuals who are entitled to receive Medicare benefits under Part A or Part B. 1. The Medicaid agency provides coverage for the following excluded or otherwise restricted drugs or classes of drugs, or their medical uses to all Medicaid recipients, including full benefit dual eligible beneficiaries under the Medicare Prescription Drug Benefit Part D. The following excluded drugs are covered:

a. 1. Agents when used for anorexia, weight loss, weight gain (see specific drug categories in subsection B of this section);

b. 2. Agents when used for the symptomatic relief cough and colds (see specific drug categories in subsection B of this section);

c. 3. Prescription vitamins and mineral products, except prenatal vitamins and fluoride (see specific drug categories in subsection B of this section);

d. 4. Nonprescription drugs (see specific drug categories in subsection B of this section);

e. 5. Barbiturates, except for dual eligible individuals when used in the treatment of epilepsy, cancer, or a chronic mental health disorder (see specific drug categories in subsection B of this section); and

f. 6. Benzodiazepines, except for dual eligible individuals as Part D will provide coverage for all conditions (see specific drug categories in subsection B of this section).

B. Coverage of specific categories of excluded drugs will be in accordance with existing Medicaid policy as described in 12VAC30-50-520.