States Question Bush’s Rx Drug Benefit Plan

State lawmakers and policy experts are expressing "skepticism" over President Bush's proposal to add a prescription drug benefit to Medicare, sayng that the plan "could prove ineffective and place an unfair burden on states." The Washington Post reports that many state policymakers are questioning Bush's "Immediate Helping Hand" plan, which would allot states about $48 billion in block grants over the next four years to provide drug coverage for low-income seniors (Goldstein, Washington Post, 2/26). The funding would provide full drug coverage for seniors earning incomes up to 135% of the federal poverty level ($11,600 for individuals, $15,700 for couples) and partial coverage for those earning incomes up to 175% of poverty ($15,000 for individuals, and $15,700 to $20,300 for couples). In addition, the plan would offer "catastrophic coverage" for seniors spending more than $6,000 per year on out-of-pocket prescription costs (California Healthline, 1/30). The Post reports that some states fear "inheriting enormous drug expenses" when the grants end, while others say the plan "defies a decades-old tradition" in which the federal government provides health care to senior citizens. "Poor" states are afraid that the plan would "burden" them with administrative costs that they cannot afford. In September, the National Governors' Association adopted a policy stating that if Congress decides to provide a prescription drug benefit to seniors, it "should not shift that responsibility or its costs to the states." The Post reports that it currently "remains unclear" whether the association will "soften its stance" on the issue, as former governors now occupy both the White House and the position of HHS secretary.

States' success in implementing Bush's plan "hinges largely" on whether they have already created a prescription drug benefit package, the Post reports. The states with the largest prescription drug programs "would be in the position to gain the most" under Bush's proposal, according to Bruce Stuart, a professor at the University of Maryland's School of Pharmacy. Christine Grant, Commissioner of New Jersey's Department of Health and Senior Services, added that states with existing programs "could simply substitute the federal aid instead of [their] own [money]," which would allow them to use their funds to provide coverage for seniors with higher incomes. States without existing programs, however, say that they will encounter problems creating and implementing the plan within the four-year period. Joan Henneberry, director of health policy for the governors' association, said that many states will have a "lag time" between launching the program and reaching enrollment and spending goals. She said this gap is "particularly problematic" with Bush's proposal because his plan is designed to be short-term, adding, "By the time you ... were actually reaching the eligible people, it could be over with. And that's a big investment for states to make for something that will only be temporary." However, the Post reports that some states without existing programs, such as Arizona, are "eager" to receive federal aid for a prescription drug program and have lent their support to Bush's proposal.

Some state lawmakers have expressed concern that unless the federal government enacts broader Medicare reforms, they will not be able to subsidize a prescription drug benefit after the federal grants stop. But states' fears that Medicare reforms will not be enacted by the end of the four-year period are "unwarranted," according to administration officials. One White House adviser said, "This is an administration that has a lot of concern for not imposing undue burdens on states and ... does not commit states to new responsibility without providing the resources. I don't think there's any way this administration really would let the states be left holding the bag on this" (Washington Post, 2/26).

In related news, the Congressional Budget Office reported to congressional aides last Thursday and Friday "sharply increased" estimates for prescription drug spending for seniors over the next decade, which will "make it more difficult" for lawmakers to provide a drug benefit under Medicare, the New York Times reports. According to the CBO, prescription drug spending for seniors would total about $1.5 trillion from 2002 to 2011, up about 33% from estimates last May, when the budget office predicted that drug spending for seniors would total $1.1 trillion from 2001 to 2010. In addition, the CBO reported that drug spending in 2001 for those enrolled in Medicare will tally $70.6 billion, 7% more than earlier estimates, while the new estimate for 2010 -- $205 billion -- would top previous projections by 23%. The gap between "old and new estimates," which resulted from new information about medicines that will likely reach the market in the next decade, "widens each year," the Times reports. Last year, the CBO predicted that drug spending for seniors would rise at an average of 11% per year over the next decade, but the budget office now estimates that growth will average about 12% to 13% per year. According to the Times, the estimates have "major implications" for lawmakers' efforts to provide a prescription drug benefit for Medicare patients. While lawmakers could charge beneficiaries additional premiums and co-payments for coverage "deemed adequate" by seniors, as premiums rise, economists predict that fewer individuals -- those with high drug expenses -- would enroll in the program (Pear, New York Times, 2/24).