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Executive Summary

A Medicare outpatient drug benefit should be set so that the same number of patients who receive reimbursement for physician care could also qualify for drug reimbursement, American Association of Retired Persons board member Tess Canja recommended at the House Ways & Means/Health Subcommittee's June 22 hearing on Medicare drug coverage. "In 1990, approximately 81% of Medicare Part B enrollees met their $100 deductible and received benefits from the program," Canja said. "Given the link between physician visits and prescription drug use, a deductible for prescription drugs that allows 80% of beneficiaries to get coverage should be considered." In addition, Canja said, "the association believes that the drug benefit should provide protection against prescription drug costs that is comparable to that for physician services by requiring a co-insurance of no more than 20%." The short-lived Medicare Catastrophic Care drug benefit had directed that a drug deductible be set each year to allow a projected 16.8% of beneficiaries to qualify for reimbursement. National Committee to Preserve Social Security and Medicare President Martha McSteen joined AARP's Canja in suggesting that the benefit would receive wider support if more beneficiaries qualified for assistance, though McSteen seemed more willing to accept a trade-off of higher co-pays. "The National Committee is opposed to financing prescription drug coverage through an extremely high ($850 or over) deductible," McSteen said. "While a high deductible would help reduce the cost of the prescription drug benefit, it would provide little help to low income and moderate income seniors. A much lower deductible with a 50% copay instead of a 20% copay might be preferable, especially if it were coupled with limits on total out-of-pocket costs." Like AARP, the National Committee is a senior citizen membership organization. Health Care Financing Administration chief Bruce Vladeck reported that an estimated 85% of Medicare beneficiaries used some prescription drugs in 1992, with an average cost per user of $604. He did not review the Clinton Administration's current thinking on the structure of patient cost-sharing for a drug benefit. Both Canja and McSteen recommended that the type of coverage provided to Medicare beneficiaries be similar to those required for the under-65 population as part of health care reform. Health Subcommittee Chairman Stark (D-Calif.) remarked that "if coverage is provided for the under age 65 population, I can think of no reason not to provide the same drug coverage for the elderly." The reform plan should ensure "that the elderly have comparable benefits to those provided to the rest of our population," he added. Subcommittee ranking Republican Thomas (Calif.) raised concerns about the role of drug formularies in drug benefits established by health reform, an issue made salient by the pending budget reconciliation bill's proposal to repeal the ban on Medicaid formularies (see related story, p. 3). Thomas objected that these programs may be based more on cost or political considerations, rather than an "experiential, factual base." He urged Vladeck to step up HCFA's effort to collect and disseminate clinical data on drug products. Stark asked Vladeck whether HCFA is "vigorously" pushing for repeal of Medicaid's formulary ban. "I might argue about the adverb," Vladeck responded, but the agency supports it. The Pharmaceutical Manufacturers Association is supporting Medicare outpatient drug coverage as an interim step to including the elderly in managed competition plans. While PMA opposes federally- or state-set formularies, PMA President Gerald Mossinghoff advised that the association would accept formularies run by the "accountable health plans" that would be offered by managed competition health alliances.

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