Consumers Union Reaction to President Bush's Immediate Helping Hand

Consumers Union Reaction to
President Bush's Immediate Helping Hand

While Consumers Union commends the Bush Administration for recognizing the urgent need for an expansion of prescription drug coverage for seniors and the disabled, the Administration's proposal falls short of providing the relief that all Medicare beneficiaries need from spiraling prescription drug prices.

Consumers Union's Concerns About the Bush Prescription Drug Proposal

The proposal will not sufficiently curb the increase in prescription drug prices paid by Medicare beneficiaries.
The proposal does not ensure that all Medicare beneficiaries can receive prescription drug coverage as part of the benefit package.
The proposal fails to provide assistance to the millions of Americans of moderate income just above the income limit, many of whom spend hundreds or thousands of dollars on their prescription drugs.
The proposal relies on states for administration of the programs, when states have had only modest success to date with existing programs.
This is a complicated program, both difficult for seniors to understand and too complex for states to administer.

Summary of Bush Prescription Drug Proposal
"Offering an Immediate Helping Hand" January 29, 2001

The Bush "Immediate Helping Hand" proposal provides:

Full prescription drug coverage for singles (not eligible for other programs) with income up to $11,600 (135% of poverty, couples to $15,700). No premium, nominal co-payments.
At least 50% premium subsidy for singles with income up to $15,000 and couples with income up to $20,300 (175% of poverty).
Eligibility for state program, with no premium if drug expenditures exceed $6,000.
Based on campaign materials (but not the 1/29/2001 proposal) the proposal is expected to cost $48 billion over 4 years.

Consumers Union Analysis of "Immediate Helping Hand"

The proposal will not sufficiently curb the increase in prescription drug prices paid by Medicare beneficiaries.
Prescription drug expenditures are rising at an alarming rate, due to price increases, an increase in per capita use of prescription drugs, and the increased use of newer prescription drugs. The average annual percentage change in retail prescription drug prices (6.7%) was more than two and a half times the average annual CPI change (2.6%) between 1991 and 1998.

State governments alone -- especially if the programs cover only a small percent of the population -- are not going to have the purchasing power to negotiate substantial discounts for prescription drugs. In light of recent price increases, it is crucial that any program uses the federal government's purchasing power to negotiate the deepest possible discounts for beneficiaries.
The proposal does not ensure that all Medicare beneficiaries can receive prescription drug coverage as part of the benefit package.
The Clinton Administration's National Economic Council/Domestic Policy Council estimated that earlier proposals with similar income eligibility standards (coverage for those with income below 175% of poverty) would exclude at least 2/3 of Medicare beneficiaries (25 million people) from coverage. 60 percent of beneficiaries who currently have no prescription drug coverage would not be eligible for the new program (other than a tiny percent with eligibility under the catastrophic program).
Ken Thorpe estimates that the Bush proposal would eventually enroll between 700,000 and 900,000 (about 5 percent) Medicare beneficiaries who currently have no prescription drug coverage.

The catastrophic proposal is unlikely to benefit very many people. According to a government survey, average prescription drug expenditures of the top decile are about $4,800. The $6,000 deductible will restrict eligibility to an extremely small population; these people are likely to face a challenging burden of proving their pharmaceutical expenditures.

The proposal fails to provide assistance to the millions of Americans of moderate income just above the income limit, many of whom spend hundreds or thousands of dollars on their prescription drugs.
People with income above 175% of poverty (the cutoff level for 50% subsidies) are in dire need of affordable prescription drug coverage. 77% of Medicare beneficiaries have income below $30,000. Even among those with income above $30,000, 29% lack stable drug coverage, 9% have high out-of-pocket drug costs, and 43% bear a heavy burden of chronic disease.

The proposed premium subsidy program for people living in the income range of $11,600 to $15,000 for individuals (between 135% and 175% of poverty) is an empty promise. Very few of these people can afford to pay any premiums for prescription drug coverage.
The proposal relies on states for administration of the programs, when states have had only modest success to date.
Existing state programs vary widely in terms of benefits, eligibility, and coordination with Medicaid (which has prescription drug coverage). Less than a quarter of people eligible for state pharmaceutical assistance programs enroll in them. The Clinton Administration estimated that only 800,000 people nationwide are enrolled in state pharmacy assistance programs. Roadblocks to enrollment include the stigma associated with a welfare type of program, complicated enrollment processes, a lack of awareness of the programs, and limitations on number or type of drugs covered. High deductibles (e.g., as high as $638 in New York), discourage enrollment in some programs.

There is a danger that states will not use these funds to expand their current programs. Instead, states may merely substitute Federal funds in already existing state-sponsored low income assistance programs.

The National Governors' Association has not supported shifting the responsibility of a senior prescription drug coverage to the states. While the Bush proposal appears to meet some of its concerns about shifting costs to the states or requiring maintenance-of-effort, the NGA's policy resolution (HR-39) states "[Congress] should not shift that responsibility [to expand prescription drug coverage to seniors] …. to the states."
This is a complicated program, both difficult for seniors to understand and too complex for states to administer.
The modest success of states in enrolling eligible participants in existing state pharmaceutical assistance programs reflects the complexity of this undertaking. Consider what beneficiaries must do to benefit. They must: be made aware of the program, track their income, and/or track drug expenditures, and be able to prove income or prove expenditures to the state government. To provide people with coverage, states must: verify the income and/or expenditures of beneficiaries, coordinate every step with eligibility for Medicaid, carefully avoiding duplicate eligibility in both the state pharmacy program and the Medicaid program, set up an arrangement to purchase the pharmaceuticals, at the best price possible, and set up an arrangement (or an outside contract) to administer the purchase of pharmaceuticals. A simpler approach would be to expand Medicare benefits to include prescription drugs just as doctor visits and hospital stays are covered.

For more information, contact: Gail Shearer or Janell Duncan, 202-462-6262
Consumers Union's Washington, DC Office
January 30, 2001

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