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2003-11-22 -- AARP advocates for rich seniors and drug and insurance industries.

The mechanics of how the new Medicare Bill strips Mediciad
prescription benefits from many of the sickest and poorest seniors and
disabled.



New York Times, November 21, 2003
http://www.nytimes.com/2003/11/21/opinion/21KRUG.html

AARP Gone Astray

By PAUL KRUGMAN

"This is a good bill that will help every Medicare beneficiary," wrote
Tom Scully, the Medicare administrator, in a letter to The New York
Times defending the prescription drug bill. That's flatly untrue. (Are
you surprised?) As the Center on Budget and Policy Priorities points
out, the bill will force millions of beneficiaries to pay more for
drugs, thanks to a provision that cuts off supplemental aid from
Medicaid. Poorer recipients may find previously affordable drugs
moving out of reach. (See report below.)

That's only one of a number of anti-retiree measures tucked away in
the bill. It contains several Trojan horse provisions that are clearly
intended to undermine Medicare over time - it will allow private
insurers to cherry-pick healthy clients in selected cities, and it
will heavily subsidize private plans competing with traditional
Medicare. Meanwhile, the bill prohibits Medicare from using its
bargaining power to cut drug prices; drug company stocks have soared
since the bill's details became public.

Yet the bill has a good chance of passing, thanks to an endorsement
from AARP, the retiree advocacy organization, which has already begun
an expensive advertising campaign on the bill's behalf. What's going
on?

Let's step back a minute. This is a bill with huge implications for
the future of Medicare. It's also, at best, highly controversial. One
might therefore have expected an advocacy group for retired Americans
to take its time in responding - to make sure that major groups of
retirees won't actually be hurt, and to poll its members to be sure
that they are well informed about what the bill contains and don't
object to it.

Instead, AARP has thrown its weight behind an effort to ram the bill
through before Thanksgiving. And no, it's not urgent to get the bill
passed so retirees can get immediate relief. The plan won't kick in
until 2006 in any case, so no harm will be done if the nation takes
some time to consider.

Many of AARP's members feel betrayed. The message boards at the
organization's Web site have filled up with outraged posts. A number
of those posts say something like this: "Now you're just an insurance
company." Indeed, that may get to the heart of the matter.

Over the years AARP has become much more than an advocacy and service
organization for older Americans. It receives more than $150 million
each year in commissions on insurance, mutual funds and prescription
drugs sold to its members.

And this Medicare bill is very friendly to insurance and drug
companies. Senator John Breaux, one of only two Democrats who
participated in negotiations over the bill, takes the controversy as a
good sign: "No one got everything they wanted." But as Jonathan Cohn
points out in The New Republic, drug and insurance companies got
exactly what they wanted: no efforts to limit prices, generous
subsidies and lots of additional business. For example, insurance
companies that offer an alternative to Medicare will not only be able
to pick and choose their customers, but will also get 30 percent more
per client than the government spends on the average Medicare
recipient.

So do AARP executives support this bill because they hope to share in
the bounty? Maybe, but it probably runs deeper than that. Once an
advocacy group becomes as much a business as a service organization,
its executives are likely to start identifying more with industry
interests than with the groups they are supposed to serve.

Thus it may seem odd on the surface that William Novelli, AARP's chief
executive, wrote a glowing preface to Newt Gingrich's book on health
care reform. After all, Mr. Gingrich has long advocated turning the
administration of Medicare over to private companies - an unpopular
idea, and also an expensive one (forget the clichés about inefficient
government: private companies have much higher overhead than
Medicare). But what looks like wasted money to taxpayers and retirees
looks like opportunity to private providers. Enough said.

Am I being too cynical? How could I be? In case you haven't noticed,
we live in a golden age of pork: the other big piece of legislation
marching through Congress, the energy bill, makes the Smoot-Hawley
tariff look like a classic of good government.

So it should come as no surprise that Medicare "reform" appears likely
to be another triumph for the coalition of the bought-off - a
coalition that, sadly, includes AARP.

= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
Center on Budget and Policy Priorities Report

http://www.cbpp.org/11-18-03health.htm

Revised November 19, 2003

MEDICARE AGREEMENT WOULD MAKE SUBSTANTIAL NUMBERS OF SENIORS AND
PEOPLE WITH DISABILITIES WORSE OFF THAN UNDER CURRENT LAW

By Edwin Park and Robert Greenstein

A substantial number of the 6.4 million low-income Medicare
beneficiaries who also are eligible for Medicaid and currently receive
prescription drug coverage through Medicaid would be made worse off
under the Medicare conference agreement.  Those who would be adversely
affected are among the sickest and most vulnerable Medicare
beneficiaries.

Under current law, when a benefit or service is covered by both
Medicare and Medicaid, Medicare serves as the primary payer, and
Medicaid "wraps around" that coverage.  Medicaid fills in gaps in
coverage that exists under the Medicare benefit.  It also picks up
most or all of the beneficiary co-payments that Medicare charges.

But the emerging conference agreement would make an unprecedented
change in how Medicare and Medicaid work together.  It would largely
eliminate Medicaid's supplemental - or "wrap around" - role under the
new Medicare drug benefit.  As a result, substantial numbers of poor
elderly and people with disabilities would be forced to pay
significantly more for their prescriptions than they now do.  Those
who could not afford the higher co-payments could lose access to some
of the prescription drugs they need.

In addition, in cases where Medicaid covers a prescription drug but
the private plan that administers the Medicare drug benefit in the
local area does not provide that drug under Medicare, poor elderly and
disabled beneficiaries who now receive the drug through Medicaid could
lose access to it.  Given their limited incomes, such people generally
would not be able to afford such drugs on their own.

The elimination of Medicaid wrap-around coverage has been added in
recent days in the conference in order to save money by reducing
Medicaid costs.  The resulting savings have apparently been used
elsewhere in the drug bill to satisfy more powerful constituencies.

1.      Most low-income seniors and people with disabilities who
qualify for Medicaid would be charged higher co-payments for
prescription drugs under the new Medicare drug benefit than they now
pay under Medicaid.  This could discourage some poor beneficiaries -
particularly those who have serious medical conditions and need a
large number of prescriptions - from obtaining all of the drugs they
need.

Under current law, low-income beneficiaries who qualify for both
Medicare and Medicaid (a group known as the "dual eligibles") either
receive prescription drugs free of charge or are charged nominal
amounts such as $1 or $2 per month per prescription.  (State Medicaid
programs may charge these individuals a maximum of $3 per month per
prescription, but few states charge that much.  Research has shown
that, given the low-income status of these people, Medicaid
co-payments at that level can discourage the purchase of medically
necessary drugs.[1])

Under the Medicare conference agreement, dual eligibles with incomes
below 100 percent of the poverty line would be charged $3 per
prescription per month for brand-name drugs and $1 per prescription
per month for generic drugs.  Those with incomes above 100 percent of
the poverty line would pay $5 per prescription per month for
brand-name drugs and $2 per prescription per month for generics.
There would be no ceiling to limit the total monthly charges imposed
on a poor beneficiary who is sick and has a large number of
prescriptions.  (Note:  most dual eligible beneficiaries who have
incomes above the poverty line are a group known as the "medically
needy;" they qualify for Medicaid because they incur high medical
costs that reduce their disposable incomes to below the poverty line.
Many of these people live in their own homes but require intensive and
costly long-term care services.  Although these individuals
technically have incomes above the poverty line, much of their income
is consumed by high medical costs.)

As a result, most of the 6.4 million dual eligibles would be charged
more for drugs than under current law.  Depending on how the conferees
settle an issue that has yet to be resolved, the increased co-payment
charges could become quite large over time.

Specifically, some conferees are insisting that these monthly
co-payment amounts - the $1 and $3 amounts for those below the poverty
line and the $2 and $5 amounts for those above it -be raised annually
by the percentage that Medicare drug costs increase per beneficiary.
The Congressional Budget Office projected earlier this year that such
drug costs would rise at least 10 percent per year.  Yet most poor
elderly and disabled Medicaid beneficiaries subsist on Supplemental
Security Income benefits that equal only 74 percent of the poverty
line for single individuals and that are increased annually in
accordance with the Consumer Price Index.  The CPI rises much more
slowly than prescription drug costs; the CPI - and hence SSI benefits,
and Social Security benefits as well -are increasing about two to
three percent per year.  The Congressional Budget Office projects that
in the years ahead, Medicare drug costs will rise about four times
faster than the CPI.

Thus, if the co-payment charges that dual-eligible beneficiaries must
pay are raised each year at the rate that drug prices increase, poor
elderly and people with disabilities who now receive prescription
drugs free of charge or at very low cost through Medicaid will face
co-payment charges that rise much faster than their incomes.  With SSI
benefits equaling only about three-fourths of the poverty line - and
with rent and utility costs eating up the bulk of the SSI benefit for
many SSI beneficiaries (poor elderly households spend an average of 59
percent of income on rent and utilities) - prescription drugs would
become increasingly unaffordable over time for some of the nation's
poorest and sickest elderly and disabled citizens.  Those at greatest
risk would be people who have serious medical conditions or
disabilities and consequently have been prescribed a large number of
medications.

As noted, this issue remains unresolved.  Some conferees are arguing
that the co-payment charges for the dual eligibles should be raised
each year in accordance with the CPI rather than in accordance with
increases in drug costs.  Such an approach would resolve this problem
by raising co-payments at the same rate as, rather than faster than,
the incomes of these beneficiaries.

2.      Some low-income Medicare beneficiaries could lose access to
particular drugs they currently are prescribed through Medicaid if
those drugs are not covered under their Medicare drug plan's
formulary.  Under the new Medicare drug benefit, each Medicare drug
plan could have its own list of covered prescription drugs.  The only
requirement is that the private drug plans that will administer the
Medicare drug benefit must cover at least one drug per "therapeutic
class."  (There is no generally accepted definition of what
constitutes a class of drugs.)  If a prescription drug that a
beneficiary needs is not covered by the private plan, the beneficiary
may use a Medicare appeals process, but how effective this appeals
process will be in providing access to medically necessary drugs is
unclear.

The conference agreement would prohibit Medicaid from wrapping around
Medicare by covering a prescription drug that a poor elderly and
disabled beneficiary may need but that is not included in the Medicare
drug plan's formulary.  Yet certain specific drugs may be the only
drugs that are effective for an individual patient; such drugs can be
necessary to ensure that the patient receives appropriate care even
though other drugs in the same therapeutic class are intended to treat
the same condition.  In some such cases, if a poor elderly or disabled
individual enrolled in Medicaid is unable to get a drug because it is
not one of the drugs covered under the Medicare drug plan in which the
individual has enrolled, the patient's health may suffer.



Conclusion

The conference agreement's unprecedented step in prohibiting Medicaid
from fulfilling its traditional wrap-around role, coupled with the
co-payment charges the bill would impose on dual eligibles, would
result in several million of the nation's poorest and frailest seniors
and people with disabilities paying more for drugs than under current
law.  The effects would be largest on those who need a large number of
prescriptions.

To avert such an outcome, states would have to elect to wrap around
the new Medicare drug benefit at 100 percent state cost.  According to
a report by the Kaiser Commission on Medicaid and the Uninsured, based
on discussions with state Medicaid directors, "to maintain the same
coverage, states that historically have provided a comprehensive
prescription drug benefit to dual eligibles under Medicaid would be
forced to use their general revenue funds to finance...the wrap-around
on their own.  To the extent they cannot find ways to supplement the
Medicare coverage, many dual eligibles could end up with worse drug
coverage than they currently receive through Medicaid."[2]

In many states, already strained state budgets are unlikely to be able
to absorb the financial cost of providing wrap-around coverage solely
with state funds.  If so, substantial numbers of low-income elderly
and people with disabilities who are enrolled in both Medicaid and
Medicare would be adversely affected by the new legislation.