The Facts about Medicare “Wider Choices in Drug Benefits"

Thu, June 16, 2005

The New York Times reports: “The expansion of Medicare to cover prescription drugs is President Bush’s most significant achievement in domestic policy. He plans to emphasize it at two events this week, on Thursday in Washington and on Friday in Minnesota, where he will begin a public education campaign.”

The accompanying graphic ‘graphically’ reveals who the true beneficiaries of the Medicare prescription drug program are:

“An Array of Choices” lists 6 approvabe classes of drugs

First named class: Antidepressants …..such as, Zoloft, Paxil
Second named class: Antipsychotics…..such as, Zyprexa, Seroquel
Third named class: Anticovulsants…….such as, Neurontin, Depakote

“The potential costs of the new program have been a political issue for some time. When Congress passed the Medicare bill late in 2003, the Congressional Budget Office estimated that it would cost $395 billion over 10 years. Lawmakers were startled when, in January 2004, the Bush administration put the cost at $534 billion. The Congressional budget agency recently increased its estimate a bit more and cited the federal formulary requirements as one factor. ”

AARP should be encouraged to sponsor a study that will tally up the death from suicide, stroke, and cardiac arrest in senior citizens who were prescribed these six drugs.

Better yet, the Government Accountability Office or the Congressional Research Service should conduct that study and report to Congress and the public.

Let the facts inform taxpayers what their hard earned money is paying for.

Contact: Vera Hassner Sharav
212-595-8974

The New York Times
June 15, 2005
Medicare Officials Insisting on Wider Choices in Drug Benefits
By ROBERT PEAR

WASHINGTON, June 14 – As companies devise insurance policies for the new Medicare drug program, federal officials are pressing them to offer a surprisingly generous array of prescription drug choices, according to industry executives.

As a result, experts say, the Medicare drug benefit, which begins in January, is shaping up to give beneficiaries access to a larger number and a wider variety of prescription drugs than are now available to many workers and retirees with private employer-sponsored health insurance.

Medicare will rely on private health plans to deliver drug benefits to the elderly and the disabled. Insurers worry that Medicare officials’ insistence on a robust drug benefit will make it hard for them to control the costs of the program. But the officials say their policies will ensure that all 41 million beneficiaries have affordable access to the drugs they need.

“Medicare officials are flexing their muscles,” said John K. Gorman, a former Medicare official who is now a consultant to many insurers. “They are requiring prescription drug plans to cover more drugs than anyone expected. They are establishing a gold standard for access to drugs in a number of therapeutic classes.”

The core of each prescription drug plan is a list of preferred drugs, known as a formulary. Insurers were required to file their proposed lists by mid-April. Since then, many have made changes to win federal approval. Medicare officials said on Tuesday that they had approved most of the formularies, but were still negotiating with some companies.

In the negotiations with insurers, which were confidential, the government has been insisting that they cover not just one or two drugs to treat each disease, but most or substantially all the drugs available for certain conditions.

In a directive issued last Friday, the Medicare agency reiterated its position that insurers must cover “all or substantially all” of the drugs in six classes that are often prescribed for Medicare beneficiaries: antidepressants like Zoloft and Paxil; antipsychotics like Zyprexa, for schizophrenia and severe bipolar disorder; anticonvulsants like Neurontin, to treat epilepsy and pain; H.I.V. drugs; cancer medications; and immunosuppressants, to prevent the body from rejecting transplanted organs.

Judith A. Cahill, executive director of the Academy of Managed Care Pharmacy, which represents pharmacists who work for health plans, said the federal requirements would increase costs and put “upward pressure on premiums.”

The Bush administration denies that the requirements would drive up costs. Gary R. Karr, a spokesman for the Centers for Medicare and Medicaid Services, said insurers could hold down costs by using the same techniques they used to control drug spending in the private sector.

Insurers with approved plans can begin marketing them in the fall, with voluntary enrollment to start Nov. 15. The law guarantees Medicare beneficiaries a choice of at least two plans, but many more are likely to be available in some regions.

The potential costs of the new program have been a political issue for some time. When Congress passed the Medicare bill late in 2003, the Congressional Budget Office estimated that it would cost $395 billion over 10 years. Lawmakers were startled when, in January 2004, the Bush administration put the cost at $534 billion. The Congressional budget agency recently increased its estimate a bit more and cited the federal formulary requirements as one factor.

The expansion of Medicare to cover prescription drugs is President Bush’s most significant achievement in domestic policy. He plans to emphasize it at two events this week, on Thursday in Washington and on Friday in Minnesota, where he will begin a public education campaign.

Coverage for a wide range of prescription drugs could make the new benefit more attractive to retirees so that more will sign up, potentially helping insurers reduce costs through volume discounts. Dr. Mark B. McClellan, the administrator of the Centers for Medicare and Medicaid Services, said, “Beneficiaries will have access to a broad range of medically appropriate drugs to treat all disease states.”

Hundreds of insurers – more than initially expected – have filed applications with the government to provide Medicare drug coverage, which they see as a potentially profitable new line of business. With so many companies seeking a piece of this potentially vast market, Medicare officials can be more aggressive in setting terms and conditions to prevent discrimination against sick people with high drug costs.

In requiring coverage for a wide range of drugs, officials said, they are following “best practices” used in the private sector and for Medicaid and the Federal Employees Health Benefits Program. And they noted that under the 2003 Medicare law, formularies cannot discriminate against any beneficiaries.

Premiums for the Medicare drug benefit will vary among plans, but are expected to average $37 a month next year. Under the standard benefit defined by Congress, the beneficiary will be responsible, as well, for a $250 annual deductible and 25 percent of drug costs from $251 to $2,250.

In a still controversial wrinkle of the law, the patient is responsible for paying all of the next $2,850 in drug costs. Beyond that level – $5,100 a year and more – Medicare will pay about 95 percent.

Some members of Congress worry that the new benefit will cost the Treasury still more – much more than now forecast. But if the program succeeds and most Medicare beneficiaries sign up, it would vindicate the Bush administration’s contention that a private-sector approach is the best way to provide Medicare drug insurance.

In reviewing prescription drug plans, federal officials have been lobbied from all sides. Beneficiaries generally want as many drugs as possible on each formulary, and the drug companies stand to benefit if more of their products are covered.

But insurers and pharmacy benefit managers typically want to limit the number and types of drugs, so they can obtain large-volume discounts from manufacturers. The challenge for Medicare officials is to balance these competing goals.

Babette S. Edgar, a senior pharmacist at the Centers for Medicare and Medicaid Services, said the formularies of Medicare drug plans “look a little bit different than you normally see in the commercial population.” One reason, she said, is that Medicare serves a diverse population, including people who are in nursing homes or receiving home health care.

Dr. McClellan, the Medicare administrator, noted: “We have a unique situation with the drug benefit this year. A lot of patients with serious illnesses have been stabilized on certain combinations of drugs and will transition into Medicare for their drug coverage. We want to give them access to all medically necessary treatments.”

Andrew Sperling, a lobbyist at the National Alliance for the Mentally Ill, an advocacy group, welcomed the government’s decision to require coverage for many important psychiatric medications – a goal he has sought in 15 meetings with federal officials over the last year.

“These drugs are not interchangeable,” Mr. Sperling said. “They have significantly different effects in different individuals.”

Dr. Joel Owerbach, chief pharmacy officer at Excellus BlueCross BlueShield in Rochester, said Medicare beneficiaries would have access to 15 to 20 antidepressants, while many people with private insurance might have access to 10 such drugs under a typical formulary.

Beckie A. Fenrick, a vice president of Innoviant, a prescription benefit administrator based in Wausau, Wis., said, “The government told us that our formulary was fine in the commercial market, but would not fly in the Medicare program.” Medicare officials, she said, contended that the co-payments for certain drugs were too high.

Dr. Fenrick said the government review was “very detailed” and extended beyond the six high-priority categories. For example, she said, “the government told us that we did not have enough oral contraceptives on our Medicare formulary.” (The pills might be prescribed for younger beneficiaries who qualify for Medicare because they are disabled.)

The Bush administration has examined not only the drugs covered by Medicare drug plans, but also the techniques used to control access to those drugs. Insurers can require patients to obtain “prior authorization” for a drug, or to try an older, less expensive drug before using a newer, more costly one.

James E. Hartert, chief medical officer of Prime Therapeutics, a benefit manager owned by nine Blue Cross and Blue Shield plans, said Medicare was allowing less use of those expense-management techniques than was common in the private insurance market. “There will be a cost to that,” he said, “but we have not quantified it.”

Douglas J. Holtz-Eakin, director of the Congressional Budget Office, said the agency had originally assumed that Medicare drug plans could use “restrictive formularies” to help control spending. In fact, he said, the administration has required broader drug lists. As a result, he said, the budget office “now expects that prescription drug plans will be slightly less effective at controlling drug spending than we had previously assumed.”

Studies by insurers, accountants and the Congressional Budget Office suggest that formularies, co-payments and other cost-management tools can reduce drug spending in an insurance program by 15 percent to 30 percent. But the higher savings often require greater restrictions on patients’ choices.

In December, the Bush administration cited Kaiser Permanente’s commercial formulary as a model for Medicare plans. But Anthony A. Barrueta, Kaiser’s vice president for government relations, said the company was still haggling with Medicare officials who wanted Kaiser to include additional products on its drug list for Medicare beneficiaries.

Insurers are eagerly anticipating the Medicare market. The Medicare Drug Gold Rush is the title of a conference for health care executives being held this month in New York.

AARP, the lobby for older Americans, announced last week that it was joining with UnitedHealth Group, one of the nation’s largest insurers, to offer a prescription drug plan to Medicare beneficiaries. Its drug benefit will be managed by a unit of the Walgreen Company.

In another strategic alliance, PharmaCare, a drug benefit manager owned by CVS, has joined a big insurance company, the Universal American Financial Corporation, to offer Medicare drug coverage.

Such alliances could ease the qualms of insurers who have little experience with insurance products that cover prescription drugs and nothing else. John Wardle, senior vice president of PharmaCare, said his company would “assume some of the risk” normally borne by insurers.

Copyright 2005 The New York Times Company

FAIR USE NOTICE: This may contain copyrighted (© ) material the use of which has not always been specifically authorized by the copyright owner. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. It is believed that this constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. This material is distributed without profit.