Health Reform Will Cover Prescriptions, Sources Say

The Clinton Administration plans to include coverage for prescription drugs in the basic health insurance plan being designed for the 37 million uninsured Americans, a costly benefit that the White House also intends to give to all Medicare recipients, sources said Thursday.

“The only thing they haven’t figured out is how to pay for it,” said one well-connected source who has been briefed by White House health planners.

Many private insurance plans do not cover prescription drugs. But that may quickly change because the government’s core benefits package is likely to set a basic, national standard against which all other insurance plans would be measured.

The decision on drug coverage is apparently one of the first of hundreds to be made by the Administration as officials winnow a huge array of options down to the concrete elements of the President’s landmark health care package.

With President Clinton having pledged to announce his plan by early May, the long fact-finding and option-culling phase is now winding down and the process of resolving specifically what will be covered, who will be covered first and how it will be paid for is now under way.

The decision on drug coverage has been watched with particular interest because drug costs are a significant, unreimbursed expense for many people.

One immediate beneficiary of widespread coverage for prescription drugs will be the nation’s elderly, the heaviest consumers of medications; another will be pharmaceutical companies, which have been repeatedly criticized by the Clinton Administration for allegedly making excessive profits and now may face price controls.

Medicare recipients must pay out of their own pockets the entire cost of outpatient prescription drugs. The drug industry stands to gain simply by a vast expansion in the base of potential customers with insurance, analysts said.

Sick people will now be less reluctant to buy the drugs they need. “The drug companies will pick up in volume what they might lose in profits” under price controls, one Administration analyst said.

Sources also said the White House, having found little enthusiasm on Capitol Hill for government-imposed price controls on the private health care sector, is exploring a possible compromise.

They said the President may end up asking all medical providers to voluntarily comply with short-term cost guidelines, while he seeks congressional authorization to impose mandatory price controls in case that proves necessary.

The voluntary guidelines might peg any price increases to the consumer price index or some other major economic index, with wages likely to be exempted, said a top official of the policy-making White House Task Force on National Health Care Reform.

“The President can set up guidelines and request voluntary compliance. But he will also have a trigger so he can say to health care providers: ‘Be good citizens or the bad guys will go to the penalty box,’ ” the task force source said.

In recent weeks, there have been widely circulated reports that the task force is considering short-term price controls on doctors, hospitals, insurers, pharmaceutical companies and other providers as a way to slow medical inflation during the four- to eight-year period when health insurance is to be gradually extended to all.

Amid such reports of possible government price controls, the American Medical Assn. and the Pharmaceutical Manufacturers Assn. are exploring ways to voluntarily restrain medical cost inflation and are conducting discussions with White House officials.

“The obvious thing we don’t want is price controls,” said Dave Emerick, a pharmaceutical association official.

It was unclear to what extent the basic benefits package would provide for physician-ordered medications. A White House official insisted Thursday that no decisions have been made.

The spokesman noted that the task force is still refining the options assembled over the last two months by about 500 analysts and consultants recruited to help devise the President’s plan.

Other task force officials and consultants, however, confirmed the basic decision to include coverage for prescription drugs, saying that the elderly are “desperate” for it and that another benefit much cherished by that population group, comprehensive long-term care coverage--is unlikely to be provided anytime soon.

The White House task force is eyeing a bevy of tax increases to help finance the drug coverage and other benefits for those who lack insurance, an undertaking that could cost $90 billion or more a year. Among these are tax hikes on hospitals, insurers and other providers, “sin” taxes on tobacco, alcohol and guns, and a possible national sales tax.

Also on Thursday, about 1,000 physicians representing the American Medical Assn. lobbied Capitol Hill lawmakers to plead their case against government price controls. Dr. James Todd, AMA’s executive vice president, called Congress “our backup,” and said that “the reception on the Hill really was superb.”

Of the group’s private meetings with the White House and with members of Congress, Todd said: “We don’t want to be confrontational. That does not serve any useful purpose. We want to cooperate on this . . . .”

Times staff writer Marlene Cimons contributed to this story.