The National Medicare Prescription Drug Congress: The CMS Perspective

22 May
2010

Thomas Scully, former CMS administrator, gave several examples “from the battlefield” of the prescription drug legislation and its potential impact on American senior citizens and health care in general. He touted the MMA as “the deal of the century and millennium” and as a “spectacular deal for rich and poor seniors.”

He noted that Medicare will cover approximately 41 million senior citizens. Of these, 11 million are poor and have no drug coverage and 10 million have Medigap coverage; both groups will be transferred over to the new Medicare plan under the MMA. In addition, the coverage of the so-called “dual eligibles” (those eligible for both Medicare and Medicaid) will be shifted from the states to the federal government under the MMA.

According to Mr. Scully, all of these shifts will give Medicare approximately 50% of the prescription drug market and will force price competition. He envisions that the creation of these “purchasing pools” will enable the senior population to use their clout to lower prices through their insurance companies (specifically PBMs). This is the government’s attempt to curb growing health care prices and to enable coverage for more of the elderly poor. For pharmaceutical manufacturers that do not yet have CMS on their radar screens, Medicare will become the dominant force in their industry; in the CMS, however, a whole new entity will need to be created to regulate coverage of medications.

Because not all plans fit all seniors, the MMA will give the elderly the ability to pick hybrid plans, either health maintenance organizations (HMOs) or preferred provider organizations (PPOs). Hence, participants will be able to tailor their health care plans to their individual needs, and coverage will become uniform for the entire senior population. These changes, in turn, should encourage marketplace competition and dissemination of consumer information.

Mr. Scully suggested that the MMA is being created in order to provide incentives to third-party health care plans (such as PBMs) that have been subcontractors, primarily, under insurance plans but that have not been risk-bearing entities. He thinks that by enabling these PBMs to become PDPs for seniors, they will become free-standing parties that will drive the prescription drug market and will potentially improve quality through their medication-review initiatives.
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The States’ Perspective

Governor Kempthorne voiced the concerns of the state legislatures from his experiences interacting with other governors as chairman of the National Governors Association. He emphasized that our system of reimbursement still rewards providers on the basis of treatment, not prevention. He stated:

“There is no profit in health, there is profit in disease. We need to incentivize health care professionals for preventative care.”

He mentioned that physical examinations, which would be mandatory for all Medicare enrollees, will become a critical component of identifying preventable chronic diseases. This “early identification and treatment,” it is hoped, would enable the postponement of disease and disabilities for many Medicare-eligible senior citizens.

The governor also spoke about the financial burdens of the states over the past four years. The states have seen the worst financial conditions since World War II because concerns such as terrorism, corporate scandals, the stock market downturn, and declining economic growth and consumer confidence, among others, have contributed to decreased funding for state budgets. Conversely, health care costs, particularly Medicaid expenditures for the states, have continued to rise.

As a result of financial strain on state budgets from these spi-raling Medicaid costs, he envisions that budgetary issues might inevitably force a competition between education and health care in state budgets, creating a paradoxical situation of grandparents competing with grandchildren for state funding. It is hoped that the MMA will help to avert this dilemma for the states, because it should alleviate an estimated $17.2 billion over a 10-year period, according to the Congressional Budget Office (CBO).
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The CBO expects about six million Medicaid patients to be switched over to Medicare by 2006 but also expects increases in state budgets in certain time frames within those 10 years. More frequent screening of patients, new resource utilization, and the increased coverage for people who fall 150% below the poverty line will raise the overall cost to states by approximately $1 billion between 2004 and 2006. Despite these setbacks, the governor sees MMA as having a positive and lasting effect on health care for older people in the U.S.

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