Seniors and the Burden of High-Priced Drugs

On July 30, 1964, President Johnson traveled to the Harry Truman Library in Independence, Mo., to sign Medicare into law. With the stroke of a pen, he overcame decades of resistance from organized medicine and helped 20 million Americans over age 65 rest easier, knowing that they would have a guaranteed way to pay for medical care.

Thirty-five years later, Medicare is once again at the center of a vigorous policy debate as the Clinton administration grapples with a new issue: Should the government help pay for prescription drug coverage outside the hospital?

Drugs played a much smaller role in medical care 35 years ago. The powerful and sophisticated breakthrough drugs commonly used today to treat heart disease, ulcers, depression and other diseases were still largely undiscovered. Doctors were much more likely back then to perform surgery and prescribe hospital bed rest for patients afflicted with a range of illnesses.

Not so today. The pharmaceutical revolution, which saw 90 new drugs approved in 1998 alone, has been a tremendous boon to the health of seniors. While 80% of seniors take at least one prescription medicine a day, it is not unusual for them to take multiple drugs. Many of these new drugs are quite costly, and this poses a serious problem for seniors who cannot afford them.

About 35% of the elderly nationwide have no outpatient prescription drug coverage whatsoever. Among those who do, some are covered by their former employers’ retirement plans; others are covered by privately purchased Medicare supplemental “Medigap” policies; the poorest are covered by Medicaid; and some are covered by a Medicare managed care plan. In California, more than 98% of people enrolled in a Medicare HMO have some drug coverage.

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While it is encouraging that a majority of seniors’ prescription drugs are paid for, it may not stay that way. According to some health policy experts, supplemental policies, like Medigap, which offer some protection against the high cost of drugs, may become harder to purchase and less generous with benefits over time.

Gaps in coverage leave many seniors wondering how they will pay for expensive drugs while still covering other living expenses. As a consequence, they often cut pills in half, skip doses or leave prescriptions unfilled, creating potentially life-threatening situations. The desperation of many patients for life-saving drugs is also evident in an underground trade in unused or even outdated drugs.

Recognizing the need to modernize the Medicare program by making it more consistent with contemporary health care benefits, President Clinton has proposed a new voluntary prescription drug benefit for Medicare. The new benefit would limit the total amount Medicare would pay per year for each beneficiary, increasing from $1,000 in 2002 to $2,500 by 2008.

However, Clinton’s proposal was dealt a big blow last Thursday when the Senate rejected a Democratic bid to convert part of a tax-cut package to provide a drug benefit for Medicare beneficiaries.

Under the Clinton proposal, seniors wouldn’t have to pay a deductible, but they must pay 50% of the cost of any prescription. In addition, beneficiaries would pay a premium estimated at $288 per year in 2002, and $528 per year in 2008. Low-income Medicare beneficiaries would have their premiums and copayments subsidized by the government.

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In reality, Medicare is late in responding to the burden on seniors of high-cost drugs. At least 13 states passed laws to assist people who require expensive drug therapies to pay for them.

The debate over extending Medicare coverage to prescription drugs is taking place against a backdrop of soaring drug costs. A study reported last month by the National Institute for Health Care Management Foundation revealed that retail spending on prescription drugs grew 84% between 1993 and 1998. The Health Care Financing Administration estimates that, in 1999, drug costs will rise between 14% and 18%--about triple the rate of all other medical costs.

Drug companies, another voice in the debate, are worried that the Clinton plan will result in lower prices for their products. Because the Medicare program is potentially such a huge purchaser of drugs, it can ask for--and get--products at a deep discount. The payments allowed by Medicare could potentially be lower than the prices in the overall health care market, leading to reduced profit for drug makers.

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In the midst of these changes to the Medicare program, seniors can take steps to advocate for themselves.

Many seniors take several drug medications each day, and it can be difficult to keep them straight. For that reason, it is important for seniors to understand which pills to take, when, and for what reason. If your prescriptions come from different medical specialists, at least one of your doctors should be aware of all drugs you are taking. And, of course, make sure that you follow your doctor’s or pharmacist’s directions: taking the proper dosages, taking them with or without meals, and so on. A variety of logs and pill counters are available to help.

Finding a way to pay for drugs can also be a daunting task. Seniors enrolled in Medicare HMOs usually have the advantage of prescription drug coverage. It is not unusual, however, for an HMO to change the approved list of drugs it will cover under its plan (known as a formulary) from year to year. Generic drugs, chemically the same as brand-name drugs but less expensive, may be worth discussing with your doctor or pharmacist.

Other options are available for those seniors not enrolled in a Medicare HMO, although they tend to be expensive. Medigap policies can be purchased but cost as much as $1,950 per year for someone 65 years old to more than $5,000 for someone 75 years old. Medicare recipients who have questions about their rights and benefits under the program can contact the Health Insurance Counseling and Advocacy Program.

The program is a joint state and federal effort to provide counseling for Medicare beneficiaries. To reach your local program agency, call the statewide HICAP hotline at (800) 434-0222. You will automatically be referred to the HICAP agency in your area.

Jack Christy is the director of the California Medicare Project, a program of the California HealthCare Foundation, a nonprofit health-care philanthropy based in Oakland. Christy can be reached at (510) 238-1040, Ext. 163, or by e-mail at JChristy@chcf.org.