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MEDICARE OUTPATIENT DRUG BENEFIT "GONE BUT NOT FORGOTTEN," GRADISON TELLS IBA: PREDICTS CATASTROPHIC CUT-BACK "BACKLASH" IF MEDIGAP RATES INCREASE

Executive Summary

The full outpatient Medicare drug benefit will be eliminated but drug coverage is likely to continue to be a national political issue as drug costs increase, Rep. Gradison (R-Ohio) predicted one week after the congressional retreat from the program. In a discussion of the drug benefit at the Industrial Biotechnology Association's annual meeting in Washington, D.C. on Oct. 12, Gradison remarked: "We thought we had a sensible financing plan. It didn't fly, and it's going to be repealed." "I would say the drug benefit is gone and won't be back soon: it's [like] that old expression -- gone but not forgotten," said Gradison. The Ohio Republican is one of the prominent health figures on Capitol Hill and was a cosponsor of an eleventh-hour effort in the House to save the drug benefit from repeal. Gradison, the ranking Republican on the Ways and Means/Health Subcommittee, had unsuccessfully joined with subcommittee Chairman Stark (D-Calif.) and Rep. Waxman (D-Calif.) in proposing a House floor measure to repeal most catastrophic care benefits except drug coverage ("The Pink Sheet" Oct. 9, p. 15). Under the Senate plan, proposed by Sen. McCain (R-Ariz.), coverage of all other drugs would be eliminated and reimbursement of home I.V. therapies and immunosuppressives, the so-called "Mitchell drugs," would be delayed one year, until 1991. Gradison noted that the pharmaceutical industry was said to have spent $3.5 mil. lobbying to kill the drug benefit the first time around and "I suppose the industry must be thrilled with what has happened." However, he maintained, "I suspect that the drug issue is going to lie out there with people still concerned about it and we are going to be hearing from our constituents . . . the costs of drugs to the elderly are rising very rapidly." If, and when, Congress returns to the issue of drug coverage, there is likely to be a larger cadre of staff with experience in the subject. That could make it harder for the drug industry to get the kinds of anti-formulary and anti-price control provisions in the legislation the next time around. A lot of material about the costs of the drug program and the potential for deficits from the program was generated in this session and that material will be available as a backdrop for any future discussions of the issue. Gradison predicted a political "backlash" from Congressional action to repeal or severely curtail the overall catastrophic care act. "Frankly, I don't think we've heard the end of catastrophic health insurance even if it is repealed," Gradison said. "I think there is a possibility of a political backlash, actually two political backlashes." The first would come from the "losers," those elderly people whose only avenue for expanded health benefits is the federal program. The second fall-out may come from opponents of the program this year, the more affluent elderly reacting to sharp increases for private Medigap insurance premiums. "What is the reaction going to be to the increase in Medigap insurance policies next year, which could run 20-50% above the current rates in part because of the general inflation of health care costs but also in part because Medigap policies will be adding back that which catastrophic was going to take care of," Gradison asked. "It will be very interesting to see the reaction. Maybe they'll blame Blue Cross/Blue Shield, maybe they'll blame us. We'll see." Kathleen Buto, acting director of the Health Care Financing Administration's Bureau of Policy Development, predicted that reimbursement for home I.V. and immunosuppressive therapies would be retained in the House/Senate compromise on catastrophic care. "There is a good likelihood that part of the benefit will survive in conference, which is the so-called Mitchell drugs." She added that "what that means is that the Medicare program's contact with the drug industry and the I.V. providers and others associated with the delivery and care involving these drugs, in particular, will continue." The logistics on how the catastrophic care conference will be approached have yet to be worked out, according to Senate Majority Leader Mitchell (D-Maine). Slowing work on the conference is congressional preoccupation with budget reconciliation legislation. The modification conference also faces technical hurdles in that the House repeal measure is attached as an amendment to House budget reconciliation legislation while the Senate measure is freestanding.

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