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Congressional Testimony
February 16, 2000
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2107 words
HEADLINE:
TESTIMONY February 16, 2000 MS. CAROL MCCALL EXECUTIVE VICE PRESIDENT MANAGED
CARE AND CLINICAL INFORMATICS ALL SCRIPTS, INC. HOUSE COMMERCE
HEALTH AND ENVIRONMENT MEDICARE DRUG BENEFIT
BODY:
Oversight Hearing Seniors' Access to Affordable Prescription Drugs: Models
for Reform Subcommittee on Health & Environment February 16, 2000 Prepared
Statement of Ms. Carol McCall Executive Vice President, Managed Care and
Clinical Informatics All Scripts, Inc. Good morning Chairman Bilirakis and
members of the Subcommittee. My name is Carol McCall and I am the Executive Vice
President, Managed Care for Allscripts. Prior to this role, I served as Vice
President, Pharmacy Management for Humana, Inc., a managed care organization
that provides pharmacy coverage for approximately 450,000 seniors through the
Medicare+Choice program. I am a fellow of the Society of Actuaries and a member
of the American Academy of Actuaries. I also serve as a member of the Academy's
Medicare Reform Task Force that is studying a number of issues involving
proposed changes to Medicare. Among these changes under study is adding a
prescription drug benefit to the current Medicare coverage. I appreciate the
opportunity to appear before you today to testify regarding ways to provide
seniors with coverage for prescription drugs. I would like to note that although
I am a member of the American Academy of Actuaries' Medicare Reform Task Force,
I am testifying today in my private capacity and not on behalf of the Academy.
Prescription drug costs represent a significant part of health care expenses,
and those costs have been rapidly rising over the past few years. The cost of
prescription drugs can have a major impact on seniors, many of whom are on fixed
incomes. Since Medicare is the primary source of health
insurance coverage for seniors (almost 98 percent of the population in
this country age 65 years or older is covered by Medicare), one possible
approach to this issue is to expand the current Medicare coverage to include
some level of payment for prescription drugs. I would like to outline some of
the issues that should be considered when designing a prescription drug benefit
provided through an insurance mechanism. However, I would first like to
emphasize one very important factor - - prescription drug coverage should not be
added to Medicare in the absence of overall reform to the financing structure of
the Medicare program. As you are aware, the Trustees of the Medicare trust funds
have indicated that expenditures from the Federal Hospital Insurance (HI) Trust
Fund (Medicare Part A) are expected to equal income into the fund as early as
2006, and costs are projected to exceed income after that point. In fact, if
income earned from interest on the assets in the HI trust fund is excluded, the
fund currently pays out more in claims that it receives from payroll taxes and
premiums paid by beneficiaries. The Supplementary Medical Insurance Trust Fund
(Medicare Part B), which is financed primarily by general tax revenues, faces
increasing financial pressure due to rising health care costs and a growing
population of beneficiaries over the next decade. Adding a prescription drug
benefit to either of these programs will only exacerbate the financial problems
confronting Medicare. There are a number of health insurance
plans today that provide prescription drug coverage for their members. There are
practical considerations that should be kept in mind when designing a
prescription drug benefit: - Is providing a prescription drug benefit through
Medicare the best option? -Many of the current proposals start with the
assumption that the drug benefit will be delivered to seniors through Medicare.
Is this the most cost-effective way to help seniors meet their medical needs? Do
other options exist - such as tax credits or using private
insurance - that would work? - How will a Medicare prescription drug benefit
impact other existing programs? - It is also important to evaluate the impact of
a Medicare prescription drug benefit on other payers for medical care for
seniors. Currently, three Medicare Supplement insurance plans pay for drug
coverage. In addition, some employers offer retiree health benefits that include
prescription drug coverage and there are a limited number of Medicare+Choice
health plans with a prescription drug benefit. You need to consider how a
Medicare drug benefit will impact those programs. - What drugs will be covered?
- Is it intended that all drugs will be covered by the plan or only those
prescriptions most utilized by seniors? Will so-called "life style" drugs be
covered, and who gets to determine which prescriptions are included or excluded
from coverage? To what extent will experimental treatments be provided? Each of
these issues can have a major impact on the cost of the benefit. - How will the
benefit be managed? Most plans offering a drug benefit try to impose some form
of utilization controls. These utilization management strategies are designed to
make sure the drugs prescribed are appropriate for the particular medical
condition of the patient. One consideration in providing a drug benefit through
Medicare is the extent to which utilization management will be allowed both in
the Medicare fee-for-service (FFS) program and in Medicare+Choice health plans.
- To what extent will private health plans be involved in the program? -
Currently, prescription drug coverage is available for seniors who enroll in one
of the Medicare Supplement plans offering such benefits and for those members of
a Medicare+Choice health plan that provides drug benefits. Will Medicare+Choice
health plans be required to offer the benefit (it is now an option)? If a drug
benefit is offered through Medicare, how will the three Medicare Supplement
insurance plans currently providing drug benefits be treated? Will pharmacy
benefit management companies (PBMs) be used by Medicare FFS to help administer
the prescription drug benefit for their beneficiaries? What would be the role of
pharmacy benefit management companies in this process? Would they serve as the
administrators of the program or will they take some of the risk for their role
they play in containing costs? - Will any of the cost of providing the
prescription drug coverage be subsidized? - There is some concern that Medicare
beneficiaries below a certain level of income will not be able to afford a
prescription drug benefit that is supported by premium payments and/or
co-payments and deductibles. What will be the level of government subsidy for
those enrollees and who will qualify for that support? How will Medicaid
eligible seniors be covered? - How will co-payments or deductibles be
structured? - If you have to pay for something, you will generally take more
notice of how much it costs. One important part of a health benefits design is
how much participants are required to pay "out-of-pocket." If seniors pay for a
portion of the cost, they may be more likely to compare competing drug
therapies, including any generic prescription drug options. - To what extent
will drug formularies be permitted? - Formularies are one mechanism that PBMs,
insurance companies and managed care plans use to contain the cost of
prescription drugs. There are a number of different ways in which formularies
can be used, but all of them involve creating a list of preferred medicines
whose costs are less than their therapeutic equivalents. Will this mechanism for
containing costs be allowed? If so, what will be the methods for choosing which
drugs are on a formulary? Can different options and plans for providing coverage
have different formularies? I would like to return to something I said at the
start of my testimony regarding this issue. If Medicare is the vehicle chosen to
provide prescription drug coverage for seniors, then Congress must act on the
overall financial issues facing the Medicare program. It may be necessary to cut
benefits, raise premiums or increase the contributions from the federal budget
in order to maintain the solvency of the Medicare trust funds. Adding an
additional (and potentially costly) benefit to Medicare will place a further
strain on the Medicare program. Congress should not let this opportunity pass
without a serious discussion on how to deal with the long-range financial
solvency of Medicare.
LOAD-DATE: February 18, 2000
