Government Faces Huge Challenge Making Drug Plans Work

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Government Faces Huge Challenge Making Drug Plans Work

The new Medicare drug legislation presents the government with a huge challenge turning the complex legislation into a practical drug benefit. Many health policy experts warn that some provisions of the legislation are untested, and no one is really sure how, or if, the legislation will work. TSCL is meeting with Members of Congress, and seeking support for changes in the new law that would strengthen the drug benefit and cut drug and other beneficiary out-of-pocket costs. Here are some of the issues TSCL is working on:

Cutting drug costs. The new law expressly prohibits the federal government from negotiating deep discounts on behalf of consumers, but relies instead on private health plans to do this. According to an account in The New York Times, health insurers recently complained that the law appears to limit the discounts they will be able to negotiate as well. Health policy analysts say that large numbers of private plans representing smaller numbers of Medicare beneficiaries will not have the same negotiating clout that the federal government would have, and predict that drug costs will continue to climb at double-digit rates.

TSCL believes the government has a responsibility to both beneficiaries and taxpayers to provide careful oversight of scarce revenues and should negotiate lower drug prices like the Veterans’ Administration does now.

Drug “re-importation.” The new law essentially keeps the ban on the “re-importation” of less costly drugs from Canada in place, thus forcing Americans to continue paying the highest drug prices in the world. In recent months, in defiance of the ban, many states and municipalities have announced plans to import drugs from Canada. Numerous TSCL supporters tell us they are angered at high drug prices and are therefore resorting to purchasing their medicines from Canada.

TSCL is lobbying hard for legislation that would allow the importation of less costly drugs from Canada. The Congressional Budget Office has projected that savings, for all payers of prescription drugs, could total $40 billion over 10 years under H.R. 2427. This bill, supported by TSCL, would allow expanded “re-importation” of prescription drugs. Testifying at a Senate hearing last November, TSCL asked the Senators to consider which was more dangerous—importing drugs from Canada, or going without them altogether because a senior can’t afford them. In 2004, TSCL will lobby for support in the Senate of S. 1781, a companion measure to H.R. 2427.

Repeal of provision to prohibit MediGap coverage for out-of-pocket drug costs. Although the new drug benefit covers only a small portion of drug costs, another provision in the new law prohibits beneficiaries from buying private “MediGap” insurance to cover out-of-pocket expenses and the big gap in coverage known as the “doughnut hole.” Except for lowest-income beneficiaries, millions of seniors will face large out-of-pocket costs, up to $3,600 the first year not counting premiums, before “catastrophic” coverage would begin. Many analysts, including TSCL, are concerned that lower and middle-income seniors may not be able to afford the new insurance. TSCL believes the government should “close the doughnut hole” and allow seniors to purchase insurance to cover out-of-pocket drug costs.
Prevent retired employee loss of coverage or shifting of costs. Although Congress provided extra subsidies to encourage more employers to retain prescription drug coverage for retired employees, The Wall Street Journal reports that “it does nothing to halt the current rush by some employers to shift more of the costs to retirees.” Companies are entitled to the subsidy regardless of how much of the cost they pick up themselves. The Journal reports that benefit consultants are busy “designing new plans to save companies more money by unloading the costs on former workers without losing out on the new subsidy.”

TSCL continues to monitor the effect the legislation is having on corporate employers and the shifting of costs to retirees or the dropping of coverage altogether.

To learn more about TSCL’s efforts to strengthen Medicare and cut senior costs, call the Washington Weekly Hotline at (800) 333-8725 or visit us online at http://www.tscl.org/WeeklyUpdates.asp.

Sources: “Medicare Law Might Limit Drug Discounts for Insurers,” Gardiner Harris, The New York Times, December 24, 2003. “U.S. Drug Subsidy Benefits Employers,” Ellen E. Schultz and Theo Francis, The Wall Street Journal, January 8, 2004. “Medicare Prescription Drugs, Conference Committee Agreement, Too High a Price for Modest Benefit,” Gail Shearer, Consumers Union, November 17, 2003.

April 2004