States step up to the plate to cover drug costs for elderly, disabled, poor
Some states are exploring price controls
A modest drug benefit is "something we plainly would provide if we were creating Medicare for the first time today," President Clinton recently told attendees at the National Governors Association annual meeting. But until the federal government accepts that challenge, a growing number of states are taking on the responsibility.
Massachusetts appears ready to ease eligibility and expand benefits of an existing program that pays for seniors’ prescription drugs. Maine and Delaware have initiated new programs, and Missouri is turning to tax credits to offset drugs costs among the elderly. (See chart for state-by-state description of drug benefit programs, p. 8.)
The generosity is tempered by the realization that open-ended or overly generous benefits offer no real changes and probably are unsustainable for states in the long run.
"What do we do for a long-term solution?" asks David Martin, chief of staff for Massachusetts state Sen. William Moore (D-Worcester). For that, Massachusetts and Vermont are considering proposals that would use the regulatory and purchasing power of the state to restructure the prescription drug market and, in effect, institute a system of pharmaceutical price controls.
In the meantime, several states are inching toward expanding access to pharmaceuticals:
• The Massachusetts legislature, at press time, appears ready to raise the income eligibility for the state’s drug program from 150% of poverty to 200%, and double the benefit cap to $1,500 annually. Expected expenditures for the expansion are between $20 million and $30 million annually. At the same time, legislators were considering a variety of proposals to leverage rebates or discounts into expanded access for low-income residents.
• Delaware hopes to serve about 5,000 persons annually in its Prescription Drug Payment Assistance Program, which takes effect Jan. 1, 2000. The program is open to those who are 65 or older or disabled, and have incomes below 200% of the federal poverty level.
The Delaware law imposes an "enrollment fee" of no more than $20 to defray administrative costs of the program and a copayment of at least $5 up to 25% of the acquisition cost of the prescription. In any given year, benefits are limited to $2,500.
The new program is designed to supplement seniors’ drug coverage below 200% of poverty not addressed by Medicaid or Nemours Health Clinic Pharmaceutical Assistance Program, which provides prescription drugs at 20% of cost. The assistance program’s family income threshold picks up where Nemours leaves off, at $12,500 for a single person and $17,125 for a married couple. Benefits top out at an annual income of $16,480 for an individual and $22,120 for married seniors. The allowable income range is broader for disabled residents.
In addition to prescriptions, "cost-effective" over-the-counter drugs prescribed by a physician are covered, as are necessary diabetic supplies not covered by Medicare.
• In Missouri, the governor has signed a bill giving a state income tax credit of up to $200 to residents at least 65 years old for the costs incurred for prescription drugs. Benefits under the program top out for those with incomes of $15,000 or less, and are reduced by $2 for every $100 dollars of income above the threshold.
The credit is considered a tax overpayment, and is refunded even if the amount of the credit exceeds an individual’s tax liability.
• Maine’s voluntary program, passed in the most recent legislative session, relies on enticing manufacturers to provide rebates in return for publicity about the companies’ participation in the program. The subsidy must be comparable to that offered to the Medicaid program.
The only eligibility requirement is that someone be a Maine resident and without "significant" drug insurance coverage. Because Maine already has a drug assistance program for the elderly, the new initiative is likely to target working-age residents. Exact numbers are difficult to find, but there are potentially 220,000 Maine residents with inadequate or no insurance coverage for pharmacy, says Bob Carroll, pharmacy program supervisor in the state’s Bureau of Medical Services.
The state anticipates distributing $2.5 million in rebates during the first year of operation and $10 million in the second year. One measure of the controversy surrounding the program is that rules for implementation must come back to the legislature for approval during the session that starts in January.
Maine’s strategy rests on the assumption that companies participating in the program will increase their market share and reap generous profits from relatively modest boosts in their production costs. Boston University researchers Alan Sager, PhD, and Deborah Socolar, MPH, outlined this approach in a presentation to the U.S. House of Representatives Prescription Drug Task Force in late July. They estimated that a combination of discounts and rebates in a proposal then under consideration in Massachusetts would provide about twice as much in benefits to state residents as it cost manufacturers.
The benefit-to-cost ratio could be as high as 4:1 or 6:1, depending upon whether the state would absorb certain costs in the program and what assumptions are used regarding the price elasticity of prescriptions, Mr. Sager says.
"What we need to do is find an arrangement to allow suffering people get what they need," he says.
One problem with typical state pharmacy assistance programs, says a representative of the Pharmaceutical Research and Manufacturers of America (PhRMA), is that they are not integrated either clinically or financially into the rest of patient’s health care. "I—as the payer—shouldn’t have an incentive to skimp on your drugs because somebody else pays for your hospital costs if you don’t get the drug you need," says PhRMA assistant general counsel Marjorie Powell.
PhRMA does not have a specific position on how pharmacy programs should be developed, but the association’s wish list for a Medicare drug benefit is generally applicable, says Ms. Powell.
In addition to advocating the integration of drug and other medical benefits, PhRMA supports drug benefit proposals that maintain competition among health plans, gives the choice of pharmaceutical to the patient and physician, improve access for those in need, and "protect America’s system for research and development," she says.
Contact Mr. Carroll at (207) 287-2674, Mr. Martin at (617) 722-1494, Mr. Sager at (617) 638-4664, and Ms. Powell at (202) 835-3400.
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