Another trip report from my friend in the Federal health-care bureaucracy:

On 11/25/2002, I attended the National Health Policy Forum (NHPF) seminar on a Medicare prescription drug benefit. The presenters were predominantly Hill staff (Committee & personal, Republican & Democratic, left & right), in lieu of the usual academics. They offered considerable agreement as to probable legislation, differing only in details. All were highly knowledgeable; but by because of the election, half were headed for unemployment and the other half aspired to bigger things.

All agreed that any tax funded benefit would be much smaller than proposals made before the election (down from 1/2 subsidized to 1/4 subsidized). They believed that this would have happened even had the election results been different (“campaign promises”). The previously proposed funding could not have been sustained even without the tax cut.

The new proposed plan would have an income test (~100% of FPL, very restrictive), an asset test (no federal precedent), a $50-100/month premium, a 75% copay, and an $8,000 catastrophic benefit. It basically covers the Medicare-Medicaid dual eligibles at levels they can’t afford to pay. The plan would be administered by contractors that take risk. The drafters assume that the contractors will indefinitely subsidize ~1/4 of program costs despite evidence from Medicare Choice that contractors don’t stay with a money losing program. Congressional staff are quite worried about where these contractors will come from, because both pharmacy benefit managers (PBMs) and Medigap insurers have indicated the numbers don’t work and that they don’t intent to play. The system also requires that the contractor accumulate pharmacy bills from multiple sources to calculate the catastrophic benefit.

Lost in the discussion was the one useful and affordable benefit: catastrophic coverage. After $8000, Medicare would pick up 100% of drug costs for the rest of that year. While not ideal, this benefit would help a small group of really sick patients. However, polls show that beneficiaries want first dollar coverage, and never think about trading it for catastrophic coverage.

The only alternative was from Trent Lott. He proposes turning responsibility for Medicare drugs over to the states along with a small block grant (1/4 of costs). The staff largely felt this idea to be a nonstarter, not because the states don’t have any money either; but because federal legislators would not get political credit for conferring the benefit. (Editorial: most states would need to use the money for existing Medicaid costs).

This ought to be trouble for Bush and the Republicans. They promised a prescription drug benefit, and apparently they’re going to deliver a nothingburger. But I’m confident they will manage to blame it on Bill Clinton — or maybe in this case Hillary — that the media will solemnly report that spin as news, and that the right blogosphere will continue to complain about Howell Raines and liberal media bias.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com

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