Copyright 2002 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
May 1, 2002 Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 3384 words
COMMITTEE:
HOUSE ENERGY AND COMMERCE
SUBCOMMITTEE: HEALTH
HEADLINE:
PRESCRIPTION DRUG BENEFIT
TESTIMONY-BY: MS. JEANNE
LAMBREW PH.D., ASSOCIATE PROFESSOR
AFFILIATION: GEORGE
WASHINGTON UNIVERSITY
BODY: Testimony The Committee
on House Energy and Commerce W.J. "Billy" Tauzin, Chairman
Creating a
Medicare Prescription Drug Benefit: Assessing Efforts to Help
America's Low-Income Seniors Subcommittee on Health
April 17, 2002
Ms. Jeanne Lambrew Ph.D. Associate Professor George Washington
University
Chairman Bilirakis, Congressman Brown, and distinguished
Subcommittee Members, thank you for the opportunity to offer my views on a
prescription drug benefit for Medicare beneficiaries. I am an Associate
Professor at the George Washington University. I worked for the previous
Administration as the Principal Associate Director for Health, Personnel and
Veterans at the Office of Management and Budget and at the White House National
Economic Council. My past policy experience and current research include the
study of how to best provide a prescription drug benefit to Medicare
beneficiaries.
SUMMARY
In this testimony, I would like to make
two points. First, the quickest and most effective way to provide prescription
drug coverage for the nation's low-income seniors -- as well as middle- class
beneficiaries who also need such coverage -- is to enact a
Medicare
prescription drug benefit. Evidence and analysis suggest that a new
low-income prescription drug program neither provides immediate relief to all
eligible low-income seniors nor prepares states for their role in supplementing
a
Medicare prescription drug benefit. These seniors would
receive better, more accessible and, in some states, more immediate prescription
drug coverage through Medicare. Second, if adding a prescription drug benefit to
Medicare is inevitable, now is the time to do it. A
Medicare
prescription drug benefit enacted this year would provide all
beneficiaries, including low-income seniors, with prescription drug coverage by
2005. The budget outlook, while weaker than in recent years, remains
sufficiently strong to finance a meaningful
Medicare prescription
drug benefit, defined as one that ensures continuous insurance
coverage, extra protection for financially vulnerable beneficiaries, and an
affordable monthly premium. With a $
2.3 trillion surplus over
the next 10 years, there is no budgetary reason to provide a drug benefit only
to low-income beneficiaries or to skimp on a drug benefit for all beneficiaries.
Moreover, it is probably more affordable to implement and improve a prescription
drug benefit in this decade before Medicare is confronted with the challenges of
the retirement of the baby boom generation. Finally, while other Medicare
reforms are needed, none are as compelling or as difficult as adding a
prescription drug benefit to Medicare. I urge this Committee and this Congress
to make enacting a
Medicare prescription drug benefit its first
priority and its lasting legacy.
HELPING LOW-INCOME BENEFICIARIES ACCESS
PRESCRIPTION DRUGS
There is no question that low-income Medicare
beneficiaries need extra assistance in affording prescription drugs. About 40
percent of Medicare beneficiaries with income below $
20,000
lack coverage for prescription drugs.[i] The average Medicare beneficiary is
projected to spend $
2,440 for prescription drugs in 2003[ii];
even a fraction of this amount would consume a large proportion of a low-income
beneficiary's income. All legislative proposals to add a prescription drug
benefit to Medicare have, to different degrees, provided extra assistance to
make Medicare drug coverage affordable for low-income beneficiaries.
As
such, the question is not whether to help low-income beneficiaries, it is
whether Congress should create a new low- income prescription drug program to
provide relief before the implementation of a Medicare drug benefit. The
President has proposed to do this. His budget includes a proposal that allows
states to:
Extend prescription drug coverage (as a stand-alone benefit)
to Medicare beneficiaries with income up to 100 percent of poverty, with the
Federal government matching state costs at the regular Medicaid matching rate
(which averages a 57 percent Federal contribution); and Extend prescription drug
coverage to beneficiaries with income from 100 to 150 percent of poverty, with a
90 percent Federal matching rate.[iii]
Since this new benefit does not
appear to be part of Medicaid, states could provide a less generous prescription
drug benefit than Medicaid's (e.g., limit the amount of assistance) or cap
enrollment. This Federal funding could also be used by states to refinance
existing state pharmacy assistance program spending.[iv] The President's budget
estimates that this proposal costs $
77 billion over 10 years,
40 percent of its $
190 billion allocation for
Medicare
and prescription drugs. The Congressional Budget Office (CBO) estimates
that the same proposal costs $
57 billion over 10 years.[v]
While some low-income seniors in some states would likely benefit from a
state-based low-income drug policy prior to implementation of a Medicare
benefit, evidence and arguments suggest that:
Not all states will
participate, since many want neither the responsibility nor the costs of a
prescription drug benefit for seniors (CBO assumes that states with 35 percent
of eligible low- income beneficiaries would not participate in the President's
proposal);
Not all eligible individuals in participating states will
enroll (CBO assumes that 40 percent of eligible low-income beneficiaries would
not participate the President's proposal);
Lack of benefit standards
could result in access problems and defining benefit standards would likely
cause delays in enacting and implementing legislation, given experience with the
State Children's Health Insurance Program (CHIP); and
Medicare could
implement a prescription drug benefit faster than could 50 states, and would be
more effective at assisting all low- income beneficiaries (CBO assumes that a
Medicare benefit with low-income protections would provide 100% of
Medicare beneficiaries with drug coverage by 2005[vi] while a state-based low
income benefit would provide 18% of low-income beneficiaries and 6% of all
beneficiaries with drug coverage by 2007).
These points are described in
greater detail below.
Low-income seniors in some states will not be
eligible. States are strong and essential partners in providing needed health
care to those low-income and disadvantaged populations who have no other health
insurance options. Today, Medicaid covers as many people today as does Medicare;
30 percent of Medicaid beneficiaries are eligible at states' discretion.[vii]
Recent experience with CHIP proves that policies to give states additional
funding and flexibility -- when there is bipartisan and Federal-state agreement
on the goal -- can successfully expand coverage and reduce the number of
uninsured. In 2001, nearly 5 million children were helped by CHIP[viii] and the
number of uninsured children in the United States fell in 1999 and 2000.[ix]
However, recent arguments and evidence suggest that, even with the
increased funding and flexibility, some states will not voluntarily extend
prescription drug coverage to Medicare beneficiaries. Most governors and the
National Governors' Association (NGA) have argued for years that the Federal
government, not states, should bear responsibility for Medicare
beneficiaries.[x] States have expressed strong concerns about the sustainability
of financing services not covered by Medicare and its premiums and cost sharing
for low-income beneficiaries. These concerns extend to prescription drugs.
Prescription drug costs are named by 48 states as a major factor in Medicaid
cost growth.[xi] In 2002, Medicaid will pay an estimated $
28
billion for prescription drugs - nearly 20 percent of the nation's total
prescription drug spending.[xii] This helps explain the official position of the
NGA: "If Congress decides to expand prescription drug coverage to seniors, it
should not shift that responsibility or its costs to the states and
territories."[xiii]
Reflecting these concerns, states' efforts to extend
prescription drug coverage, to date, have been limited. Only 15 states and the
District of Columbia have elected to extend Medicaid coverage, including
prescription drugs, to all poor seniors and people with disabilities. [xiv] Ten
of these states plus 14 others have implemented non-Medicaid state pharmacy
assistance programs that provide partial or full coverage for certain low-income
Medicare beneficiaries. An additional 5 states offer discounts (rather than
coverage) for prescription drugs for certain low-income elderly. [xv] While the
majority of states are involved in such activities, their combined impact is
relatively small. Self- reported data suggest that states spend about
$
1.7 billion on non- Medicaid prescription drug coverage[xvi ],
less than 2 percent of CBO's 2002 baseline for Medicare beneficiaries'
prescription drug spending.
States' reaction to the President's proposal
to provide incentives to extend drug coverage to Medicare beneficiaries is
likely to be mixed. States with existing programs would probably participate in
the President's proposal, since they could receive Federal matching payments for
their existing programs. However, states with no or limited programs must
balance the increased Federal contribution with the risk of rising drug costs,
unmet need, and limited state budgets. This calculation is complicated by the
temporary nature of a low-income drug program: it would stop providing primary
prescription drug coverage when a Medicare benefit is implemented. All proposals
would shift primary coverage for prescription drugs to Medicare, leaving states
with the much-simpler job of providing additional assistance with premiums and
cost sharing, as they do today for Medicare's current benefits. As such, even
those states that are willing to take on an extension of prescription drug
coverage may find that the start-up costs for a temporary program outweigh the
benefits of this time-limited assistance. One of CHIP's lessons is that
considerable time and investment are required to set up a new health insurance
program, especially if it is not a simple extension of Medicaid.
Probably reflecting some of these issues, CBO did not assume that all
states would participate in the President's low-income prescription drug
proposal.[xvii] States where 65 percent of eligible low-income beneficiaries
live are assumed to participate. In other words, an estimated one in three
low-income Medicare beneficiaries would not be eligible for assistance under the
proposal.
Low-income programs often miss many eligible seniors. A
problem that has plagued Medicaid and other state-based programs for Medicare
beneficiaries is low participation. Since the early 1990s, Medicaid has been
authorized to pay Medicare's premiums and most cost sharing for poor
beneficiaries.[2] Nearly one in four Medicare beneficiaries is eligible for some
type of Medicaid assistance, yet only about 45 to 55 percent of eligible
beneficiaries are estimated to enroll in such programs.[xviii] Some of this may
be explained by the lower priority that states give to this population versus
others, like children. For example, one study found that only 24 states used a
simplified application, 12 states had outreach materials about eligibility in
other languages, and about one-third of states made eligibility screening tools
available to outside agencies (e.g., clinics, senior centers rather than welfare
offices) [xix] - all strategies used my most states in CHIP. Lack of
information, misperceptions about eligibility, and reluctance to ask for help
appear to be equally important barriers to enrollment. A focus- group study
found that being "in the right place at the right time" had a greater impact on
enrollment than official outreach efforts.[xx] Some state prescription drug
programs have experienced similar problems. Several of the major state programs
(e.g., Massachusetts and New York) found that they had to change and increase
their outreach efforts due to low enrollment and that, even with changes,
enrollment has been lower than expected.[xxi]
CBO assumed that, within
states that extend coverage through the President's proposal, 60 percent of
eligible low-income beneficiaries would participate when state programs are
fully implemented, in 2007. This participation rate drops to 39 percent when
compared to the low-income beneficiaries who would be eligible if their states
participated; 18 percent when compared to all low-income beneficiaries
(including those covered by Medicaid); and 6 percent when compared to all
Medicare beneficiaries regardless of income.
Lack of a standard
prescription drug benefit could cause access and other problems. Even the
minority of low-income beneficiaries that would be helped by this proposal may
find that this help is limited. It appears that states have full discretion
under the President's proposal to determine the nature of the drug coverage
offered to low-income beneficiaries. Under Medicaid rules, states may limit the
number of prescriptions filled per month, but cannot charge significant cost
sharing, place dollar limits on the amount of coverage, use restrictive
formularies, or limit enrollment through caps. Such practices are common in
state pharmacy assistance programs: several states require a
$
500 deductible for some or all participants (e.g., AZ, NY, PA,
SC); some states cap the annual amount of assistance a beneficiary may receive
(e.g., IN, MO, WI, NC, OR); and a smaller number of states limit the type of
drugs that are covered (e.g., KS covers only maintenance drugs).[xxii] Thus,
what low-income Medicare beneficiaries would get under a state-based program
would depend on there they live.
Research suggests that practices like
high cost sharing or enrollment caps could defeat the goal of improving access
to prescription drugs for low-income seniors. A recent study found that
one-third of non-elderly Medicaid beneficiaries in states with aggressive
cost-control methods (e.g., restricting the number of covered prescriptions,
imposing cost sharing) could not get a prescription drug due to cost.[xxiii]
Experience with CHIP shows that enrollment caps could make the already-difficult
challenge of encouraging low-income seniors to enroll even more daunting. When
North Carolina capped its enrollment of children at 72,000, actual enrollment
fell by over 20,000 children, in part due to a loss of trust in the program. A
local official stated, "We think we're going to have to put more energy in
because this program hasn't delivered. It was shut down for nine months; now we
have to build people's support and confidence that this is a real program that's
going to be continuing."[xxiv]
Congress could and probably would limit
the potential health and financial consequences of unrestricted benefit
flexibility through standards - especially since the proposed Federal investment
exceeds that of CHIP. Yet, the process of developing those standards would take
time and is not without controversy. It took months for the House, Senate and
White House to come to agreement over the minimum benefit standards for children
in CHIP and, in fact, these standards were among the last issues resolved in the
entire Balanced Budget Act of 1997. It is not safe to assume that achieving a
bipartisan consensus on standards for a new low-income prescription drug program
will be easier than it was in CHIP -- or less contentious than the process of
developing a
Medicare prescription drug benefit itself.
Medicare would be more effective at quickly providing a meaningful drug
benefit to all low-income beneficiaries. If Congress is seeking the most
effective way to provide prescription drug coverage to low-income Medicare
beneficiaries, it should look to Medicare. Experts agree that all Medicare
beneficiaries, including those with low income, would be eligible for and
receive prescription drug coverage under proposals that include adequate Federal
assistance.[3] All major proposals charge no prescription drug premium for
beneficiaries with income below 150 percent of poverty, and most proposals
subsidize cost sharing for those with income below 135 percent of poverty.[4] As
such, Congress has already come close to consensus on providing a meaningful
prescription drug benefit for low-income beneficiaries. This benefit may be
accessible more quickly for many (if not most) low-income seniors through
Medicare than through a state-based low-income program. If enacted this year, a
Medicare benefit could be implemented in 2005, two years before CBO assumes that
states that opt for the President's plan would fully implement their programs
(see Exhibit 1). While 2005 may seem too long to wait, consider that if Congress
had passed a drug benefit in 1999, when the current debate over a prescription
drug benefit began, Medicare would be providing prescription drug coverage
today.
IMPORTANCE OF ENACTING A PRESCRIPTION DRUG BENEFIT THIS YEAR
Providing relief to low-income beneficiaries is one of several reasons
why Congress should pass a
Medicare prescription drug benefit
this year. While weakened, the budget outlook is strong enough to pass a
meaningful prescription drug benefit. In March, CBO projected a Federal budget
surplus totaling $
2.3 trillion over the next decade.[xxv]
Medicare was created during a time of budget deficits, and all subsequent health
reforms have been enacted during periods with far fewer Federal resources. An
$
750 billion investment, which could buy a decent prescription
drug benefit with an affordable premium, would represent about one- third
percent of the projected surplus and would equal the amount in the President's
budget for Medicare and tax cuts combined.[5] Thus, different policy priorities
are what drive discussions of rationing or scaling back on a meaningful
prescription drug benefit, not real budget constraints.
Not only can
this nation afford a prescription drug benefit; we may not be able to afford to
wait. In the next decade, not only will Medicare enrollment surge as the baby
boom begins to retire, but the first round of genetically engineered drugs may
begin entering the market.[xxvi] It seems inevitable that Medicare will cover
these prescription drugs for this population, but waiting to implement a new
benefit until that point is probably more expensive than implementing it now.
This is because operating a Medicare drug benefit in the next several years
without the cost pressures of the baby boomers would allow for learning from
early mistakes and making mid-course corrections. These same mistakes committed
in the next decade would probably be many times more expensive.
Finally,
Medicare faces no equally compelling problem in 2002. Its cost growth is under
control and its Hospital Insurance Trust Fund is solvent through 2030.
Medicare's provider payment rates may need adjustments, per the recommendations
of the Medicare Payment Assessment Commission[xxvii], but these adjustments are
minor relative to the cost and need for a drug benefit. Supplemental coverage,
through private sources and Medicare managed care, is deteriorating, but the
fact remains that 3 times as many beneficiaries lack prescription drug coverage
as lack supplemental coverage (37.7 versus 12.5 percent in 1999).[xxviii] In
contrast, developing a bipartisan
Medicare prescription drug
benefit is a major undertaking that I would argue should be put ahead of all
other Medicare reforms as well as legislative efforts to provide stop-gap and
interim prescription drug coverage. Each year, a greater number of Medicare
beneficiaries lose their prescription drug coverage, causing problems in
accessing needed drugs.[xxix] Prescription drug costs are crippling not only for
low-income beneficiaries but also for the millions of middle-income
beneficiaries whose limited savings are being eroded by the costs of needed
medications. The time is right to make the necessary investment and enact the
single Medicare reform that has eluded so many Congresses: the addition of a
meaningful prescription drug benefit to Medicare.
LOAD-DATE: May 8, 2002