State Officials Wary About Effect of Medicare Legislation on State Prescription Drug Assistance Programs
Officials in states with prescription drug assistance programs say it remains unclear how the new Medicare law (HR 1) will affect prescription drug costs for the elderly, the New York Times reports. Thirty states offer 1.5 million people help with their prescription drug costs, and Illinois, New York, New Jersey and Pennsylvania account for more than 50% of the total number of people enrolled in state pharmaceutical assistance programs. State legislators, who are scheduled to return in January, are facing questions over how the new Medicare prescription drug benefit will mesh with existing state prescription drug programs and whether they will need to take action to ensure that Medicare beneficiaries are not "worse off as a result of the federal law," according to the Times. Legislators must address whether to keep local prescription drug programs intact, eliminate them or revise them to cover gaps in the Medicare drug benefit and the different costs of such approaches. Supporters of the Medicare drug benefit said it provides a "significant advantage over state programs" because it is a "permanent benefit" that fills in holes that local programs contain, the Times reports. The Times reports that the new law also encourages federal officials to coordinate the Medicare drug benefit with state drug assistance programs and "explicitly recognizes that eligibility and benefits are 'more generous' under some state programs." Some state officials, including Matthew Barrett, a spokesperson for the Connecticut Department of Social Services, said the Medicare drug benefit could save the state "millions," according to the Times. But other officials worry that low-income people could see their coverage reduced under the Medicare program because the private plans that will administer the drug benefit could cover fewer drugs than some existing state programs. "The Medicare benefit is so inadequate for many seniors, we will have to continue our state program as an alternative, not just a supplement," Massachusetts state Sen. Mark Montigny (D) said.
State officials also said that they are concerned that beneficiaries will become confused by the changes in the legislation (Hernandez/Pear, New York Times, 1/4). As beneficiaries try to "navigate the complexities of the new [prescription drug] benefit," many details of the new law have yet to be worked out by CMS and the ultimate effect of some of the bill's provisions remains unknown, the Atlanta Journal-Constitution reports. For example, Tricia Neuman, a Kaiser Family Foundation vice president, said the amount of savings that the prescription drug discount card will bring will vary by beneficiary (Miller, Atlanta Journal-Constitution, 1/4). Some lawmakers and seniors' advocates say that Medicare beneficiaries are expressing a number of concerns about the bill, including the possibility that their medications will not be covered, insurers can change coverage after a beneficiary signs up for a particular plan and costs could "vary widely" by plan and region, according to the Boston Globe (Milligan, Boston Globe, 12/29/03). A recent Gallup Poll showed that 44% of seniors disapprove of the changes to Medicare. According to the Fort Lauderdale Sun-Sentinel, beneficiaries' dissatisfaction stems largely from the legislation's "failure to curb rising drug costs" (Gibson, Fort Lauderdale Sun-Sentinel, 12/28/03). Bill Novelli, executive director of AARP, predicted that Medicare beneficiaries ultimately will "warm to the package," according to the Globe. Both critics and advocates of the bill and its benefit are launching media campaigns in hopes of persuading the public. Meanwhile, Leslie Norwalk, acting deputy administrator of CMS, said she expects that many of the details of the drug benefit will "be worked out when regulations for the law are written," according to the Globe (Boston Globe, 12/29/03).
Although pharmaceutical industry lobbyists succeeded in keeping language out of the Medicare legislation that would have allowed U.S. residents to purchase medications from Canada without requiring HHS to certify the safety of the practice, the issue of prescription drug costs will "rage into 2004," the AP/Philadelphia Inquirer reports. Dee Mahan, a senior policy analyst with Families USA, said the prescription drug benefit and discount cards will not provide "real savings." Other health policy experts say allowing individuals to purchase U.S.-made drugs from Canada, where they are often cheaper, would offer more substantial reductions in prescription drug spending. As a result, some drug companies have begun "tightening up on supplies to Canada, trying to squelch the increase in purchases of Canadian drugs by Americans," according to the AP/Inquirer (Agovino, AP/Philadelphia Inquirer, 12/26/03).
Officials in the pharmaceutical industry have expressed concern over two provisions in the Medicare legislation that could limit the discounts on medications that pharmacy benefit managers and health plans can obtain from drug makers, the New York Times reports. The first provision allows doctors to prescribe to beneficiaries any prescription medication that they deem "medically necessary," even if it is not included on the health plan's preferred drug list. The other provision requires administrators of the drug benefit to provide at least two comparable drugs in every treatment category. Industry officials say the two provisions could hamper insurers' and PBMs' abilities to negotiate discounts, thus driving up monthly drug benefit premiums, which could make beneficiaries more likely to not participate in the drug benefit. Peter Ashkenaz, a spokesperson for CMS, said the provision regarding medically necessary drugs is part of a larger appeals process and should not "undercut providers' formularies," the Times reports. He added that the impact of the provisions will "likely depend on regulations" being drafted by CMS that will not be completed for a year, according to the Times. John Rother, policy director for AARP, said the provisions could affect PBMs' and health plans' ability to negotiate discounts, but he added that he is confident that the "details could be worked out," the Times reports (Harris, New York Times, 12/24/03).
The Wall Street Journal on Tuesday examined a provision in the Medicare legislation that implements a risk-adjustment system designed to stop private health plans participating in Medicare from cherry-picking healthy patients. Beginning in January, Medicare will pay private insurers more for covering people with chronic diseases, such as diabetes. Instead of basing payments on age and sex, as the old system did, the new system will base payments on 65 common diseases that experts say can predict about half of the actual variability among people. The percentage of payments that will be risk-adjusted will be about 30% in January 2004 and will rise to 100% by 2007. Federal officials hope the enhanced payments will encourage private health plans to cover more of the sickest Medicare beneficiaries and cut costs by managing their diseases better. Henry Aaron, an economist at the Brookings Institution, said that risk adjustment is "a critically important problem that has to be solved if any of the market-based solutions are to have a prayer of working." However, some experts criticized a provision in the legislation giving private plans an additional payment in 2004 if the average person enrolled in a private Medicare plan is healthier than the average person in traditional, fee-for-service Medicare. Robert Berenson, a fellow at the Urban Institute and a former CMS official under the Clinton administration, called the payment a "giveaway to private insurers that subverts the purpose of risk adjustment," according to the Journal (Landers, Wall Street Journal, 12/30/03).
National Journal on Saturday interviewed Medicare beneficiaries to discuss the new Medicare drug benefit. Using cvs.com to determine drug retail prices and a drug cost calculator created by the Kaiser Family Foundation, National Journal compared beneficiaries' current out-of-pocket costs with projected out-of-pocket costs if they enroll in the new Medicare drug benefit (Werber Serafini, National Journal, 1/3).
- NPR's "Morning Edition" on Thursday reported on the provision in the Medicare legislation that would permit individuals to have health savings accounts. The segment includes comments from economist Tom Miller and Gail Shearer, director of health policy analysis for Consumers Union (Rovner, "Morning Edition," NPR, 1/1). The complete segment is available online in RealPlayer.