By Patricia Barry
February 2002

After Congress' failure last year to pass a Medicare prescription drug benefit, many older Americans are beginning to fear that such help—long promised by both political parties—may turn out to be another Washington fantasy.

Not so, answers Medicare boss Tom Scully. "I know the president is going to press hard for it," he says. "I think it's inevitable something's going to happen." But, he warns, "the politics are so tough."

He also cautions that even if every skeptic is proved wrong and a benefit is enacted this spring, it wouldn't actually start before 2004 or 2005. His agency, he says, has "no experience" with implementing a complicated drug program and it would take "a major scrambling effort to figure out the mechanics of running one."

THE CASE FOR DISCOUNT CARDS
That's one reason why Scully is so keen to start the Medicare drug discount card program, which would use private pharmacy benefit managers (PBMs) to negotiate lower drug prices for large pools of beneficiaries. The proposal has been held up by court action since September.

Photograph By Robert Trippett

The cards have been criticized as a "fig leaf" for a full drug benefit, but Scully says the system's real importance is that it would help lay down an administrative "pipeline" on which a future benefit could be based.

Speaking to the AARP Bulletin, Scully explains that an uninsured beneficiary using the discount card might pay, say, $110 a month for a drug instead of $150. That obviously isn't as good as buying it for a $15 insurance copayment, he points out.

"But once you get the structure set up, it's easier for Congress to turn it into a real insurance program." The PBM would still purchase the drug for $110 but if the government adds on a generous enough insurance subsidy, "the senior will pay 15 bucks instead of $110," like most others who are insured.

That at least is the theory. In fact, no congressional bill has proposed copays as low as $15. Details apart, legislators can't even agree on whether to add drug insurance onto Medicare as a new benefit (most Democrats' view) or to give beneficiaries a subsidy to help buy drug coverage privately (the preference of most Republicans). And with the surplus gone, the economy dicey and a war being fought, there is far less money than there was a year ago.

As federal funds tighten and health costs soar, Medicare faces other problems too. So the job of running the complex $375-billion-a-year agency known as the Centers for Medicare and Medicaid Services becomes ever more challenging.

Appointed by President Bush, Scully, 44, has occupied this hot seat since last May. A lawyer by training, he brought to it wide experience in public and private health care, most recently as head of a national hospitals trade group. He has the reputation of being a smart, energetic, ideas-into-action administrator with the ability to win bipartisan respect.

In his office a stone's throw from the Capitol, Scully laments the "huge philosophical divide" between the parties that always bedevils efforts to fix glaring gaps in American health care.

At the same time, it's perfectly clear which side he's on. Like the president and most Republicans, Scully would prefer Medicare to be driven more by market forces than it is now. "Capitalism works!" he often says. The discount card plan, run by private negotiators, would move in that direction—although, according to a recent General Accounting Office study for Congress, the discounts obtained that way are likely to be small.