AMNews: May 6, 2002. GOP may tap private sector for Medicare drug benefits ... American Medical News

GOP may tap private sector for Medicare drug benefits

Lawmakers believe competition among drug plans to sign up beneficiaries would keep costs down.

By Markian Hawryluk, AMNews staff. May 6, 2002. Additional information

Washington -- With prescription drug prices on the rise, House Republicans and the Bush administration are turning to private-sector approaches in an effort to make a Medicare prescription drug benefit affordable.

At an April hearing, Ways and Means Committee Chair Bill Thomas (R, Calif.) spelled out his principles to establish prescription drug coverage for Medicare beneficiaries.

"We really should rely on the private-sector innovation in delivering the drug benefit," Thomas said. "The Congressional Budget Office has certified that the private-sector approach on controlling drug prices really delivers the most savings per prescription."

Thomas said he planned to rely on private-market competition under which competing drug plans would be required to provide actuarially equivalent coverage. The benefit would presumably include significant cost sharing for most beneficiaries but is expected to provide some sort of stop-loss coverage. Beneficiaries would be able to choose whether they wanted to enroll in the plan.

Additionally, there seems to be a consensus among lawmakers that low-income beneficiaries should be provided additional assistance to ensure that the drug benefit is affordable. But while the government has allowed states to provide drug benefits to low-income seniors through Medicaid waivers and other programs in the past, Thomas said the new drug benefit should be national in scope and not rely on states' willingness to cover low-income seniors.

Thomas is also interested in placing limits on direct-to-consumer drug advertising, which he believes is fueling the rise in spending on prescription drugs. One proposal circulated on Capitol Hill would provide higher reimbursements for those drugs that were not marketed to consumers.

The Bush administration is also banking that competing drug plans would lower and stabilize drug prices. The president has set aside $190 billion over 10 years for Medicare reform including a prescription drug benefit. But Bush envisions ramping up to a full prescription drug plan by providing low-income subsidies and a prescription drug discount card in the initial years of the program.

At the Ways and Means hearing, Health and Human Services Secretary Tommy Thompson said the administration would not be opposed to the number set aside by the House budget. "While we feel we can provide this benefit for less than the $350 billion proposed by the House, ... we are committed to the principle of a prescription drug benefit rather than to a specific figure," Thompson said.

Democrats, however, fear a private-sector approach would repeat mistakes made in the Medicare+Choice program. There, plans dropped beneficiaries or benefits when reimbursement levels dropped. Democrats have expressed greater support in a government-run program, perhaps modeled after some of the successful state-run programs.

Despite the measures meant to limit the cost of a Medicare drug benefit, Democrats still believe the $350 billion over 10 years set aside in the House budget resolution is insufficient to provide a meaningful benefit. Democrats have charged Republicans with underfunding the drug benefit to make permanent the tax cuts passed last year. They also accuse Republicans of holding the drug benefit hostage to "privatize" Medicare.

Some Democrats have hinted they would favor giving the Centers for Medicare & Medicaid Services the authority to negotiate drug prices with manufacturers on behalf of consumers, much like the Veterans' Administration now does.

At the hearing, however, Thompson expressed concerns about the impact a buyer the size of Medicare would have on the pharmaceutical market. "We are such a huge purchaser ... that we would more than likely distort the market if we negotiated directly with the pharmaceutical company on the purchase of drugs."

Both the Ways and Means and Energy and Commerce committees, which share responsibility for the Medicare program, plan to take up a prescription drug bill in May. Committee leaders have agreed to spar over the details of the plan behind closed doors and bring a single consensus bill before both committees. While the GOP may not need House Democrat support to pass the bill, they hope public pressure will force the passage of a Medicare reform and prescription drug bill this year.

GOVERNMENT & MEDICINE

GOP may tap private sector for Medicare drug benefits

Lawmakers believe competition among drug plans to sign up beneficiaries would keep costs down.

Additional information