By Patricia Barry
January 2002

	Gloria Hoffman's Vanishing Rx Coverage Join the Discussion: Medicare Reform

The prescription drug crisis in America shows every sign of deepening this year as costs rise and coverage shrinks—not only for most Medicare beneficiaries enrolled in Medicare HMOs but also for many employees and retirees covered by work-based health plans.

In this gloomy climate, AARP is intensifying its campaign for a Medicare drug benefit, calling on President Bush to revisit the issue in his State of the Union address on Jan. 29 and to include adequate funding for a benefit in his new budget.

Just a year after Bush came to office promising to make prescription drugs more affordable for older Americans, the issue has taken on a new urgency.

Tax cuts, the vanished surplus and the war on terrorism have all slashed the money available for a drug benefit. At the same time, the problems are getting worse in many segments of society.

As of Jan. 1, when health plans changed their rates, millions of enrollees are paying a lot more out of pocket for health care.

	AARP's 'Rx in Medicare Now' Campaign AARP frequently asks its members what they want from a Medicare prescription drug benefit. This is a consensus of their answers: • Every beneficiary must have the option of affordable drug coverage under Medicare. • Those with the lowest incomes or highest need for medications should get help right away. • Those who like their present coverage must be able to keep it. • Congress must act urgently on this issue—doing what it can in 2002 and building up to an affordable benefit as soon as possible. See www.aarp.org/prescriptiondrugs for more information.

Sticker shock has hit not only Medicare beneficiaries but also government workers, private-sector employees and companies whose bottom line is being radically affected by the cost of providing health benefits.

"Employers can't continue to absorb record health care premium increases and remain competitive amid the current economic slowdown," said Kate Sullivan, health policy director of the U.S. Chamber of Commerce, last September.

Increasingly, it isn't only consumer groups like AARP that would welcome a Medicare Rx benefit. So too would some of the nation's employers who see it as one way of relieving the pressure of escalating health care inflation.

As vice president of AON Consulting in Wellesley, Mass., Randy Vogenburg advises companies on their prescription drug plans. "What I'm hearing from employers," he says, "is that Medicare drug coverage would certainly help them avoid the difficult decisions they're having to make right now on whether to reduce or eliminate benefits for their own retirees."

Some companies' drug costs remain huge even after cost-saving measures. In January 1993, for example, General Motors ceased providing direct retiree health benefits for anyone who joined the company after that time. Yet GM still pays out $4 billion a year in health coverage for 500,000 current employees and 700,000 retirees who were working for it before 1993. In 2001—largely because more retirees than active workers are on its health plan—GM spent more than $1 billion of that total on prescription drugs.

"Health care is one of the highest costs in car making," says Robert Minton, GM's health care spokesman.

To sharpen the point, he adds that if any company had $4 billion a year in revenue (instead of health care expenses) it would automatically gain a place on the Fortune 500 list of top-earning companies. "That gives a sense of the magnitude of it," he says.

"This whole health issue—primarily prescription drugs because they contribute to cost increases more than any single thing—is becoming a competitive issue for manufacturers here in the United States," he adds. "It's really affecting our ability to compete on a global basis."

EMPLOYER COVERAGE DIMINISHES
About one-third of Medicare beneficiaries rely on employer-sponsored health plans for drugs.

At present, many of them say that no Medicare proposal yet advanced offers as good a deal as the plan they already have. And they often fear that they may lose retiree Rx benefits if Medicare starts offering one.