[R.sub.X] for Seniors.

Congress is focusing on several proposals that could provide prescription-drug coverage to millions of Medicare beneficiaries.

Each month, many seniors spend $100 or more in out-of-pocket expenses for daily medications. Because nearly one-third of the nation's 40 million Medicare beneficiaries lack outpatient prescription-drug coverage, many seniors are struggling to pay for necessary drugs.

Seniors account for 13% of the nation's population. Chronic illnesses--such as Alzheimer's disease, cancer, diabetes and heart disease--are quickly making the older generation one of the largest sectors of prescription-drug users, accounting for one-third of all drug spending. Nearly 85% of seniors use at least one prescription medication each year. "The average senior takes more than four prescriptions daily and fills an average of 18 prescriptions a year," said Ann Curry, legislative analyst with the Academy of Managed Care Pharmacy, a national professional society focused on pharmaceutical care in managed healthcare environments.

The lack of drug benefits for Medicare beneficiaries, however, is forcing many seniors to forgo filling necessary prescriptions. In fact, Medicare beneficiaries without drug coverage fill an average of five fewer prescriptions per year than those with coverage, according to The Henry J. Kaiser Family Foundation, an independent philanthropic organization focused on health-care issues. Among those in poor health, beneficiaries without coverage filled an average of 11 fewer medications than their insured counterparts.

Many organizations have deemed the lack of prescription-drug cover age a major shortcoming of the Medicare program. According to Sen.

John Breaux, DLa., the program "is still a 1965 healthcare delivery system trying to keep pace with 21st-century medicine." Changing times have shifted the focus on health-care coverages. In 1965, Medicare was created to provide coverage on the then-central tenet of health-care treatment--hospital inpatient, invasive procedures. However, the advent of several hundred new medicines over the past few years has changed the focus of modern medicine to rely more on pharmaceuticals to treat and prevent illnesses.

The purchase of prescription drugs has become a major portion of America's health-care spending, far outpacing that of any other health expenditure. New and costlier drug treatments, a broader use of medications by a greater number of people and lower cost-sharing requirements by private health plans all have contributed to maintaining a double-digit rate of increase in prescription-drug spending since the mid-1990s.

According to the Congressional Budget Office, U.S. seniors will spend an estimated $1.5 trillion for prescription drugs over the next 10 years. The Health Care Financing Administration predicts that prescription-drug expenses will increase from 9.4% of personal health spending to 16% by 2010, resulting in the fastest rise of any medical category. But as the number of Medicare beneficiaries with no prescription drug coverage is expected to grow to 47 million by 2011, an even greater number of seniors will be forced to pay for necessary medications out of their own pocket.

Legislating a Solution

Recognizing this need, legislators have made drug coverage for seniors the No. 1 health issue this year, according to Republican pollster Bill McInturff. While universal prescription-drug coverage has been a burning issue for the last several years, it gained much attention during the most recent presidential campaign. Since taking office, President Bush has proposed a $48 billion four-year temporary plan that would involve grants to states to run drug-subsidy programs for low-income seniors.

Several other legislative proposals centered on adding prescription-drug coverage to Medicare have been introduced in the House and Senate. (See "Consider the Possibilities," page 81.) The issue, however, remains a two-sided debate, with some organizations flavoring the passage of such a bill and others fearful of the added financial burden to the Medicare program.

While organizations are keeping a watchful eye on which, if any, of the proposals may become law in the near future, many groups are not supporting any one particular bill. "We haven't come out and supported any [proposals] this year. We have criteria we hope a bill will meet, and we are now in the process of reviewing the proposals on how they stand up with what we are hoping to see," said the Academy of Managed Care Pharmacy's Curry.

The plans differ in the benefit they would provide to seniors, Curry said. "However, some of the more ambitious bills might have to be scaled back a bit with hope of being passed," she said.

Like the academy, the National Committee to Preserve Social Security and Medicare, an advocacy and education organization for seniors, hasn't seen a single piece of legislation that fits its ideas about prescription-drug benefits. But the defined benefit and 50-50 copay proposed by former President Clinton and Sen. Thomas Daschle last year most closely fit the type of legislation the National Committee supports. "This is the type of proposal that could work. It is financially feasible for both the government and beneficiaries, and it has some of the favorable principles we are advocating for," said Priscilla Chatman, senior legislative representative.

Breaux-Frist I and II, two proposals introduced by Breaux and Sen. Bill Frist, R-Tenn., lack a required defined benefit and 50-50 copay. So, the National Committee opposes both proposals, Chatman said. The National Committee has made prescription-drug coverage a top legislative priorities for the 107th Congress.

The Health Insurance Association of America also has raised concerns about Breaux-Frist II. The association worries that a private prescription drug stand-alone plan, such as S.B. 358, would be too expensive for individual beneficiaries, resulting in insurers having to charge exorbitant fees. "If private insurers and the ones who are to offer the plan are telling us it won't work, that should be the first and last indication that such a plan will not be beneficial," Chatman said.

Drug Costs

With the addition of a Medicare drug benefit, the demand for prescription drugs is likely to increase substantially. But supporters hold across-the board views as to how a new coverage would affect prescription-drug costs.

"Given current trending, it is that pharmacy costs will exceed hospitalization costs for Medicare members during the next several years," said Maureen Hanrahan, director of government programs at Kaiser Permanente, the country's largest not-for-profit health maintenance organization. Recognizing the importance of pharmacy coverage in providing good quality care, Kaiser Permanente has built prescription-drug coverage into its products.

It won't be known how a new benefit will affect drug costs until Congress passes a bill, Curry said. Several of the proposals that center on discounting drugs are likely to have some effect on pharmaceutical manufacturers' prices. "A purely discount plan would not be an overhaul of the Medicare program," she said. Some of the proposals out there are fee-for-service plans, others are strictly discount plans and some would involve managed-care plans administering the Medicare prescription-drug benefit.

"It's unclear about what the government is going to do about this. I think pharmaceutical companies' biggest fear is that the government will eventually establish a price control," said Alissa Fox, Blue Cross Blue Shield Association executive director of policy. Blue Cross Blue Shield does not support price controls, Fox added.

But Blue Cross Blue Shield does support competitive drug prices. "Right now, you have patent extensions and pharmaceutical companies with special protections. We think Congress should look at these issues, because in some instances, generics are precluded from getting to the market, which if they did would help make the market more competitive," Fox said.

The Academy of Managed Care Pharmacy supports "allowing the free-market system to determine pharmaceutical prices," Curry said. Government-imposed price controls, regardless of their structure, would have an overall negative impact on consumer cost, quality and access to health-care benefits, the academy says in its position statement on anti-competitive drug pricing.

"We are hoping that through using market competition, the free marketplace and the bulk purchasing power of Medicare beneficiaries-that is bringing 39 million Medicare beneficiaries to the table--the out-of-pocket costs to the beneficiary should eventually go down," the National Committee to Preserve Social Security and Medicare's Chatman said, adding that costs should be analogous to what private insurance companies pay for employee coverage. The National Committee is not asking for federal price controls. "We want the same thing that employees get through employer-provided private insurance and what they have in the free marketplace, which is negotiating and bulk purchasing power that private companies use," she said.

New Coverage vs. Existing Plans

While several Medicare+Choice, Medigap and prescription-drug discount card plans offer prescription-drug coverage to their members, Medicare has not kept pace with this trend. It remains unclear how a new benefit to Medicare would differ from programs that already provide such coverage to its seniors.

Kaiser Permanente offers a variety of plans to its members, each with different levels of pharmacy coverage. As an integrated system, Kaiser has its own pharmacies within its facilities and offers necessary resources dedicated to helping physicians make good decisions when writing prescriptions and helping members look at available generic alternatives. "We manage pharmacy for our members very closely, and it is not clear how this type of management might happen in other settings if a benefit is added to Medicare," Hanrahan said.

While hopeful that a new benefit would result in a positive change for the Medicare program, Hanrahan believes the U.S. government is going to have to think through how it will affect those who already receive such coverage. "There are groups of retirees who already have pharmacy benefits purchased by their retiree group. Are we going to want to replace these private dollars with public dollars? I think that discussion needs to happen so you aren't driving out the group plans that have historically bought pharmacy for Medicare retirees," Hanrahan said.

One of the concerns expressed by Blue Cross Blue Shield centers on drug-only coverage proposals. Medigap currently offers several such proposals. "We have significant concerns with a proposal like this, because we don't think you can do it in a way that is affordable for people," Fox said.

Blue Cross Blue Shield, which has provided Medicare benefits to beneficiaries since the program's inception 35 years ago, believes the result of a drug-only benefit enactment will be adverse selection, where people will look at drug costs to determine whether costs will exceed premium amounts. "If they don't use that many drugs, they will tend not to buy the plan, and we think this will make coverage unaffordable for older people who want the coverage," Fox said.

A Teetering Seesaw 

"Everybody supports adding prescription-drug coverage to Medicare both intrinsically and politically. However, the rubber meets the road in how broad the benefit is and how much it is going to cost," said Janet Newport, senior vice president of public policy at PacifiCare. Those closely tied to the issue have varying views as to what financial impact it will have on Medicare--a program that is projected to become insolvent by 2028.

"This is the most critical and hardest issue to resolve," Fox said. While many drug-industry officials argue that Medicare will save money overall by preventing hospital and emergency-department visits through the appropriate use of drugs, other groups, such as the Congressional Budget Office, believe it is impossible to provide a generous drug benefit to all Medicare recipients at a low cost.

The Congressional Budget Office recently laid out its assumptions on the issue, indicating a growth rate of 10% a year in drug utilization and costs. "They are showing it is extraordinarily expensive to fund drugs," Fox said. Several questions arise in looking at financial implications, including where the money will come from, whether people will have to pay more money for it and, if so, how many will buy it.

Dan Crippen, director of the Congressional Budget Office, recently testified before the House Committee on Ways and Means and Subcommittee on Health on this issue. While the Congressional Budget Office recognizes the need to add a prescription-drug benefit to Medicare's very limited coverage for outpatient medications, adding a drug benefit would significantly increase Medicare's costs, and "unless it is fully financed by enrollees' premiums, it would exacerbate the imbalance between the program's projected spending and its dedicated revenues," Crippen said in his testimony.

The Congressional Budget Office estimates that drug spending for Medicare recipients will grow to nearly $70.6 billion this year. To combat these rising costs, the organization believes that either the U.S. government will have to increase the allocation amounts for any Medicare prescription-drug coverage plan or raise premiums being charged to beneficiaries who are to be covered under the plan.

HIAA also is concerned about how such a law might drive up drug costs. "We are concerned about a proposal, because simply adding on a prescription-drug program to the current Medicare structure would just add a lot more cost to the program," said Richard Coorsh, vice president of communications, adding that it could potentially further undermine the financial underpinnings of the Medicare program.

The National Committee is more optimistic. "Medicare is doing great. Part A has a huge surplus, somewhere between $350 billion and $550 billion. So, we think a prescription-drug benefit will not harm Medicare; it will make it better," Chatman said.

Examining today's economy may best predict what effect drug coverage will have on Medicare. "The fact that the economy is in a more fragile state makes it somewhat more difficult to pay for this. A more robust economy would give both the administration and the Hill the ability to be more comfortable about financing the benefit," Newport said. She believes Medicare reform will be an ongoing issue, with the outcome depending on both the status of the country's economy and future tax cuts.

What Lies Ahead

The future of prescription-drug coverage in the Medicare program remains anyone's guess. However, the recognition of its need and strong support by the president and Congress is likely to keep it a burning issue in upcoming months.

Many supporters believe that legislative activity needs to occur before August, or the issue may be tossed aside. Sen. Charles Grassley, R-Iowa, chair of the Senate Finance Commit tee, and Rep. Nancy Johnson, R-Conn., chair of the House Ways and Means Subcommittee on Health, have said they hope to move a Medicare-reform package through their panels before the August recess." If there is not an all-out push by that time, it is less likely that something will happen, because Congress will be focusing on re-elections when they return after the sum mer break," Chatman said.

But most supporters are confident that Congress' interest in the issue will produce results in the near future. "The demand for a prescription-drug benefit for Medicare is so strong. I think something is bound to pass sometime soon," Curry said. "I just don't think we can go much longer without having something, and now more than ever those in the House and Senate are really showing a lot of support for this issue."

A Few More Suggestions

While organizations vary in their views about the proposals currently before Congress, some believe additional provisions and components should be incorporated into legislation to provide the best benefit coverage for Medicare beneficiaries.

The Academy of Managed Care Pharmacy, which believes a Medicare prescription-drug benefit can maximize the quality of care available to all beneficiaries, recommends four elements be included in the benefit to make it a feasible alternative:

* Financial sustainability. The academy proposes the addition of financial sustainability to identify the source of continued funding for necessary prescriptions. The association supports several alternative-funding methods, such as a new tax initiative, proceeds from successful federal litigation against the tobacco industry and use of a designated portion of the budget surplus, which the Congressional Budget Office projects to reach nearly $1 trillion over the next 10 years.

* Use of prudent management tools. Affordable, proven managed-care pharmacy tools should be incorporated to deliver a Medicare benefit. These tools include formularies, pharmaceutical care, clinical guidelines and step therapy, disease-state management, drug use evaluation, use of generic drugs, copayment or coinsurance and academic detailing.

* Ability to meet the covered population's needs. The legislation should meet the needs of all Medicare beneficiaries, particularly seniors over age 65. It is crucial that prescription-drug benefits meet the needs of older individuals, including a substantially greater use of pharmaceuticals, corresponding need for proper drug management, clear communication. of the benefit and the granting of flexibility to contractors to be innovative in ways in which the benefit is delivered.

* Coordination of drug therapy with other dimensions of care. Another element is assuring that a beneficiary's drug therapy be managed through an interdisciplinary approach to patient care, "incorporating the collaborative efforts of a patient's pharmacist, physician, nurses and other health-care professionals." The academy suggests that this be accomplished with the use of tools by managed health-care systems to improve the quality of care, quality of life and therapeutic out comes of individual patient populations, while conserving scarce health-care resources.

The Health Insurance Association of America favors providing short-term help to seniors who need assistance paying for prescription drugs and believes that long-term Medicare reform should be addressed prior to enacting a law that would add drug coverage for Medicare beneficiaries. "We feel there needs to be a long-range reform of the Medicare program before lawmakers should consider adding a prescription-drug benefit," said Richard Coorsh, vice president of communications. "We favor a federal block grant to states to allow them to maintain or set up drug-purchasing assistance programs for low-income seniors," he said. The HIAA's call for a block-grant approach parallels President Bush's "Immediate Helping Hand" plan proposed to Congress earlier this year. Several states already offer such grants to aid seniors.

Along the lines of federal block grants, the Blue Cross Blue Shield Association supports the inclusion of a tiered copay system into any Medicare pharmacy program. "We want to ensure that all the tools we are using on the private sector can be used to manage a drug benefit," said Alissa Fox, executive director of policy. It is critical that Medicare or private payers use such things as financial incentives to buy less expensive yet efficient drugs and to have various, targeted incentives to certain pharmacies, she said.

Many organizations believe an indication about how the benefit would be administered must be clearly spelled out prior to its enactment. "For our sector of health-care plans, we hope that a Medicare prescription drug program will not cause us to have to go through a complicated government bureaucracy in order to administer the benefit," said Janet Newport, senior vice president of public policy at PacifiCare. "The provision should call for the benefit to be paid for adequately and allow plans to use all the efficient techniques we now use to administer the benefit."

Consider the Possibilities

A handful of bills that place drug benefits within the wider framework of Medicare reform are currently before the House and Senate, with others in the pipeline. Which proposal will pass the tightly divided Congress remains a mystery, however. Organizations and insurers are turning their attention to several proposals, which could be voted on in the Legislature in the coming months.

Sliding Scales 

* Breaux-Frist I. In 1999, Sens. John Breaux, D-La., and Bill Frist, R-Tenn., introduced their idea to revamp Medicare by allowing seniors to choose a private insurance plan or a package sponsored by the Health Care Financing Administration for traditional benefits. President Bush recently announced his support for the proposal, calling it the starting point for the Medicare overhaul.

Under Breaux-Frist I (S.B.357), prescription-drug coverage would be subsidized on a sliding scale, based on income. It would provide full drug coverage for seniors enrolled in high-option plans earning incomes up to 135% of the federal poverty level. Those earning between 135% and 150% of the federal poverty level would pay a premium based on their incomes. Seniors earning more than 150% would pay a $200 premium.

* Immediate Helping Hand. On Jan. 29, Bush sent Congress a plan called "Immediate Helping Hand," which focused on helping Medicare patients pay for prescription drugs.

"Immediate Helping Hand" was designed to provide $48 billion of direct support to states over four years to cover the full costs of drugs for low-income seniors. The support will allow states to aid seniors earning incomes up to 135% of the federal poverty level--$11,600 for individuals and $15,700 for couples--and partial coverage for those earning incomes up to 175% of the federal poverty level--$15,000 for individuals and $20,300 for couples--issued through block grants to states. The proposal would also covert catastrophic Medicare expenses in excess of $6,000 a year for out-of-pocket prescription costs.

"It's not intended as a long-term solution, and it would sunset upon the adoption of a full-scale Medicare reform, or in four years, whichever comes first," said Ann Curry, legislative analyst with the Academy of Managed Care Pharmacy, a national professional society focused on pharmaceutical care in managed health-care environments.

Political Debate

In March, Bush's proposal of $153 billion to provide block grants to states to aid low-income seniors met with opposition in Congress. The following month, the Senate voted to devote up to $300 billion in the budget to cover the cost of a prescription-drug bill. Democrats argued, however, that $300 billion would cover only a small portion of prescription-drug costs.

* Medicare Prescription Drug Coverage Act of 2001. Introduced by Sen. Tom Daschle, D-S.D., in January, the Daschle/Baucus/Kennedy bill (S.B. 10) calls for the addition of a new Part D (Outpatient Prescription Drug Benefit Program) of the Medicare program to provide coverage for certain outpatient prescription drugs and biological products for individuals entitled to benefits under Medicare Part A (Hospital Insurance) or enrolled under Medicare Part B (Supplementary Medical Insurance).

The legislation outlines premiums and cost-sharing provisions, including a $250 deductible waivable for generic drugs, as well as coinsurance provisions. The proposal calls for a sliding-scale copayment of 50% of the cost of the drugs up to $3,500, followed by a copay of 25% up to $4,000 and no copay for drug costs above that line.

Incremental Steps

* Breaux-Frist II. While Breaux-Frist I would fully overhaul the Medicare program, the senators' 2000 proposal--also referred to as the "Medicare Prescription Drug and Modernization Act of 2001"--would take more incremental steps to reform the program.

Breaux-Frist II would allow Medicare beneficiaries to enroll in an outpatient prescription-drug plan beginning in 2003. All Medicare beneficiaries would have access to an outpatient prescription-drug benefit meeting a minimum actuarial value. The coverage would be offered by private insurers through either a "Medicare Prescription Plan Plus," for seniors wishing to continue with the traditional Medicare program or through an updated Medicare+Choice Plan.

The bill differs from Daschle's bill in that it would establish a separate agency to administer Medicare prescription drug and supplemental benefits. "An additional provision would amend Social Security to require states to make Medicare prescription-drug eligibility determinations for low-income individuals and conditions for receiving federal financial assistance for Medicaid," said Richard Coorsh, vice president of communications for the Health Insurance Association of America.

The Medicare Prescription Drug Coverage Act of 2001 and Breaux-Frist I and II--both modeled after the Federal Employees Health Benefit Plan that gives all Congressional members and 9 million other federal employees a choice of a range of health-care plans that best suit their families' needs--were all sent to the Senate Committee on Finance in February.