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SENATE MEDICARE DRUG BENEFIT WOULD INVOLVE GRADUAL PHASE-IN UNDER PROPOSAL BY SEN. HEINZ; CHRONIC DRUGS, THEN ANTIHYPERTENSIVES WOULD PRECEDE FULL COVERAGE

Executive Summary

Sen. Heinz (R-Pa.) is pushing a gradual phase-in approach to Medicare drug benefits as a way of gaining support in the Senate Finance Committee. Although he favors a broad outpatient prescription drug benefit, Heinz reportedly hopes that a gradual phased-in approach will help allay committee concerns about the cost of adding such a benefit to the Senate catastrophic care bill (S 1127). Heinz is leaning toward a plan initially considered by the Senate Finance Committee Staff to cover immunosuppressive drugs for transplant patients (beyond the one-year coverage now provided), chemotherapeutic agents, and I.V. antibiotics. In the second phase coverage would be extended to antihypertensives and diuretics, drugs most commonly prescribed for the elderly, according to HHS data. Coverage in the final phase would provide all types of pharmaceuticals. The proposal is viewed as a way to address cost concerns because the benefit's structure and reimbursement provisions could be adjusted based on experience in the first two phases. During Finance Committee markup of S 1127, Heinz proposed that Medicare cover all outpatient prescription drugs; however, he withdrew the plan to allow quick passage of the catastrophic care bill ("The Pink Sheet" June 1, T&G-1). Finance Committee Chairman Bentsen (D-Texas) and Health Subcommittee Chairman Mitchell (D-Maine) agreed to pursue the drug benefit subsequently. Sen. Durenberger (R-Minn.) reportedly prefers providing coverage for beneficiaries with low and moderate incomes, rather than all those who meet a high deductible the approach being considered in the House. The committee is proceeding cautiously in its efforts to draft a Medicare outpatient drug benefit amendment. The catastrophic care measure passed by the committee calls for an Institute of Medicine study of drug costs and coverage, and members are said to be withholding their opinions pending receipt of cost estimates from the Congressional Budget Office. Staffers describe CBO as being stretched by requests to analyze catastrophic care and budget reconciliation proposals. Finance Committee aides say two or three members firmly oppose adding a drug benefit, about the same number firmly support it, and a majority of approximately 15 members are undecided. In addition to cost concerns, the senators are said to have reservations about price setting and about administrative difficulties. Cost concerns are exacerbated by the wide range of actuarial projections, which vary substantially depending on the underlying assumptions made. Chairman Bentsen is concerned about the impact of reimbursement-setting and generic substitution provisions on the industry's research and development. Bentsen reportedly might ask an independent organization like the National Science Foundation to provide information on R&D spending. Questions about the complexities of administering Medicare drug coverage include how to determine when a beneficiary who has used multiple pharmacy providers has reached his deductible.
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