MEDICARE: Tackling Prescription Drug Benefits
As President Clinton and the bipartisan Medicare commission wrestle with the idea of instituting Medicare prescription drug coverage, policymakers ponder the logistics of implementation and the pharmaceutical industry gears up for a fight. Growing interest in improving access to prescription drugs is fueled by demand -- 90% of Medicare beneficiaries use prescription drugs --and skyrocketing costs (Alliance for Health Reform/Commonwealth Fund release, 1/15). While more than half of Medicare beneficiaries purchase supplemental policies to offset their drug costs, 65% of fee-for-service beneficiaries in 1997 incurred some out-of-pocket drug costs. According to the American Association of Retired Persons, even seniors with supplemental insurance policies are not insulated from hefty out-of-pocket drug expenditures, as such plans often have steep deductibles and caps (AARP release).
'Ripe for Reform'
Calling the Medicare market "ripe for reform," John Rother, the AARP's director of legislation and public policy, said yesterday at a conference sponsored by the Alliance for Health Reform and the Commonwealth Fund, "You can't have a pretense of adequate health care in the 21st century without prescription drug coverage." He noted, however, that implementation of such a policy would be tricky. He said that seniors with benefits will likely balk if asked to shoulder the financial impact of expanding coverage to lower income beneficiaries. Referring to a recent Kaiser Family Foundation/Harvard School of Public Health poll indicating that 70% of respondents would opt to expand Medicare to include drug benefits even if it meant higher costs for the program, Rother said the question becomes how much of the financial burden seniors will swallow to foot the bill for lower income beneficiaries.
Tug of War
Judith Bello, executive vice president for policy and strategic affairs at the Pharmaceutical Research and Manufacturers of America, said that any changes to Medicare drug coverage must work through the private sector, rather than through fee-for- service Medicare. She said that efforts to impose price controls on drugs deter high-risk investments by pharmaceutical companies -- only 30% of drugs on the market meet or exceed their development costs -- and that government-imposed price controls would have "a chilling effect on innovation." In addition, Bello warned that any efforts to expand Medicare must not discourage private sources of coverage, as many beneficiaries turn to HMOs or receive benefits from their employers.
Although 40% of Medicare HMOs don't have drug caps, the plans are only accessible to one-third of Medicare beneficiaries, explained Barbara Cook, a health care economist at Mathmatica. In addition, she noted that only three out of the 10 Medigap plans offer drug policies, and two cap benefits at $500. The current system leaves those most at risk for out-of-pocket expenditures, the oldest and lowest income beneficiaries, out in the cold, said Rother. "Clearly," he asserted, a move to offer seniors expanded choices "is not a real one without the prescription drug coverage" (Allison Morgan, American Health Line, 1/25). See no. 10 for the op/ed debate over expanding Medicare to include drug benefits.