OTHER ACCOUNTS

C.

Improvements to Medicaid Drug Rebate Program

Under this proposal, the basis for calculating the rebates from drug
manufacturers to Medicaid would change from the difference between the
manufacturer's best price (best price) and the average manufacturers price
(AMP), to the difference between the best price and average wholesale price
(AWP). Under current law, the rebate reflects the difference between the best
retail price (best price) and the average price of the drug from manufacturers to
the retail class of trade. States, when reimbursing pharmacies for Medicaid
outpatient drugs, generally use AWP discounted by around 10 percent. States
cannot use AMP, which is a more accurate reflection of the true retail cost of
the drug, because AMP is confidential and cannot be released publicly. Since
most States base their Medicaid drug reimbursement on AWP, the current
rebate has little connection to the prices States actually pay for Medicaid drugs.
Average Wholesale Prices that are published in various drug compendia are
generally higher than AMP so rebate amounts should increase, lowering total
Medicaid drug spending.

Five-year budget impact: -$5,450 million

Ten-year budget impact: -$17,640 million

D.

Extension of Expiring SCHIP Funding - Medicaid Impact

E.

This legislative proposal would extend the availability of FY 1998, FY 1999
and FY 2000 SCHIP funds until FY 2006. See SCHIP section for further detail.

The budget includes a SSA disability proposal and an ACF child support
enforcement proposal that are expected to generate Medicaid savings.

The SSA proposal would improve the management of the SSI disability determination process by establishing a review of at least 50 percent of favorable eligibility determinations for new applicants. The provision will help ensure that only individuals who are disabled will receive SSI disability benefits and related Medicaid coverage.

F.

OTHER ACCOUNTS

The ACF proposal would improve child support collection efforts and increase parent-sponsored medical coverage for TANF children by ensuring that States review and update TANF child support orders every 3 years.

Five-year budget impact: -$122 million

Ten-year budget impact: -$851 million

Legislative Proposals Funded By Offsetting Collections from Medicare
Low-Income Prescription Drug Benefit

Starting in 2003, the President's Budget proposes to expand drug coverage for
low-income beneficiaries. States would be allowed to expand drug-only
coverage to Medicare beneficiaries up to 100 percent of poverty at current
Medicaid matching rates. For individuals between 100 and 150 percent of
poverty, Medicare would pay 90 percent of the costs of the benefit and States
would be responsible for the remaining 10 percent. This policy would
eventually expand drug coverage to up to 3 million beneficiaries currently
without prescription drug assistance.

"In addition to this benefit, the Administration is proposing to allow States to apply for model waivers to expand drug-only coverage to low-income Medicare beneficiaries. The waivers are designed to provide an immediate first step for coverage, and are designed to complement and not replace other initiatives such as the low-income drug benefit described above and the Medicare-endorsed drug discount card.

Five-year budget impact: $20.7 billion
Ten-year budget impact: $77.1 billion

These budget impacts are shown as offsetting collections from Medicare.

One-Year Extension of QI-1 Program

States are required to subsidize Medicare premiums for low-incom Medicare
beneficiaries, whose incomes are 120 to 175 percent of poverty (also known as
"Qualified Individuals (QIs)"). This provision is scheduled to expire on
September 30, 2002. This proposal would continue the current Medicaid
coverage of full Part B premium costs for QI-1's, whose incomes are 120 to
135 percent of poverty. Without this support, many low-income elderly would
have to start paying nearly six percent of their entire incomes in order to receive

G.

OTHER ACCOUNTS

physician and other services under Medicare Part B. The proposal allows the coverage for QI-2 to sunset on schedule. The benefit for QI-2's (with incomes 135 to 175 percent of poverty) is about $3 per month, and very few people have enrolled in that program since its creation in 1997.

Five-year budget impact: +$80 million
Ten-year budget impact: +$80 million

These budget impacts are shown as offsetting collections from Medicare.

Tax Credit for Health Insurance Coverage

As part of the Administration's effort to reduce the number of uninsured and encourage private health insurance coverage, the FY 2003 budget proposes a refundable health insurance tax credit for low and moderate-income individuals and families who are neither covered by an employer plan nor enrolled in a public program. The tax credit could be used for the purchase of insurance in the non-group market or in some circumstances through private purchasing groups, State-sponsored insurance purchasing pools, and State high-risk pools.

In order to improve the tax credit's purchasing power, the Administration also proposes a health insurance tax credit buy-in. At State option, beginning in FY 2004 the tax credit would allow individuals and families not otherwise eligible for public health insurance programs to buy into private plans offered through a State's Medicaid or SCHIP program, or State government employee programs. States would be allowed under limited circumstances to provide an additional contribution for the buy-in. This proposal is intended to increase private coverage options for tax credit recipients by reducing administrative costs and providing access to plans that may offer a more comprehensive benefit package.

Five-year budget impact: +$80 million
Ten-year budget impact: +$180 million

OTHER ACCOUNTS

Payments to the Health Care Trust Funds

Appropriation Language

For payment to the Federal Hospital Insurance and the Federal Supplementary Medical Insurance Trust Funds, as provided under section 1844 of the Social Security Act, sections 103(c) and 111(d) of the Social Security Amendments of 1965, section 278(d) of Public Law 97-248, and for administrative expenses incurred pursuant to section 201(g) of the Social Security Act, [$81,979,200,000] $81,471,216,000 (Department of Health and Human Services Appropriations Act, 2002.)