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States Protest Contributions to Drug Plan
By Robert Pear, The New York Times
October 18, 2005
The Bush administration notified states on Monday that they would have to pay billions of dollars to the federal government next year to help finance the new prescription drug benefit for people on Medicare.
Administration officials said the 2003 Medicare law required them to charge the states, in exchange for taking over the states' Medicaid drug costs. But state officials immediately took issue with the calculations, saying federal officials had overstated the amounts owed by some states.
The Congressional Budget Office estimates that the required state contributions, also known as clawback payments, will total $6 billion in the current fiscal year and $124 billion from 2006 to 2015.
Some states, including Texas, are openly resisting the requirement for such payments. But federal officials said that if states did not comply, the money could be deducted from federal payments to the states for other programs like Medicaid.
One purpose of the 2003 Medicare law was to relieve states of prescription drug costs for low-income Medicare recipients. But as states do the arithmetic, many have concluded that they will lose money because they must give back most of the savings.
In calculating the amounts owed by each state, the Bush administration used a complex formula that takes account of per capita drug costs for people entitled to both Medicaid and Medicare.
These figures vary greatly from state to state. The administration estimated that total drug costs in 2006 would be less than $220 a month, on average, for each "dual eligible" beneficiary in some states, including Arizona, Arkansas, California, Michigan, Mississippi, New Mexico and South Carolina.
But it said that total per capita drug costs would exceed $300 a month in other states, including Alaska, Connecticut, Florida, Idaho, New Jersey, Ohio and Pennsylvania.
The administration assumed that per capita drug spending would rise 35 percent from 2003 to 2006. But some states, like Michigan, said they had aggressively managed Medicaid drug costs, so their actual costs rose much less than the Bush administration had assumed.
In an interview, Paul Reinhart, the Medicaid director in Michigan, estimated that Medicaid drug costs would rise 15 percent, rather than 35 percent, in his state.
David Parrella, the Medicaid director in Connecticut, said: "There's room for disagreement with the calculations. We're not really happy, but we accept the number we've been given."
Mr. Parrella said his state had 68,000 people eligible for Medicaid and Medicare and would owe about $10.6 million a month.
On Monday, the administration unveiled a new online tool to help Medicare beneficiaries choose a prescription plan from the dozens of plans available in each state.
But some of the information was not yet available from the "prescription drug plan finder" at the federal Web site, www.medicare.gov.
The Bush administration said that another Web tool would help people find drug plans that covered the drugs they took. This tool is known as a "formulary finder." A formulary is a list of drugs covered by a particular insurance plan.
Consumer advocates who had tested the plan finder said it was not particularly easy to use.
"It's tough to use, even for advocates," said Gail E. Shearer, a policy specialist at Consumers Union.
After repeatedly urging people to review the available options, Dr. Mark B. McClellan, administrator of the Centers for Medicare and Medicaid Services, said Monday, "It is not time to choose a plan yet."
Enrollment in the plans begins on Nov. 15. Coverage begins on Jan. 1.
Federal Medicare officials said the new benefit would be a boon to people who are 65 and older or disabled. The Medicare Web site promotes the value of the new coverage, saying: "It will pay for about half your drug costs. Almost 1 in 3 people will qualify for extra help paying for their drug costs. It protects you against ever having very high drug expenses."
But Nancy V. Atkins, the Medicaid director in West Virginia and the chairwoman of the National Association of State Medicaid Directors, said: "It's going to be extremely complex and difficult to help people figure out what's the best course for them. I consider myself pretty knowledgeable and well-educated, but the new choices are still confusing. People will have to muddle through."
In West Virginia, 21 companies will offer 52 free-standing prescription drug plans with different co-payments, deductibles and covered drugs.
After a two-week tour of her state, Senator Blanche Lincoln, Democrat of Arkansas, said Monday that she had found "overwhelming interest" in the drug benefit. "Seniors desperately want to understand it," Mrs. Lincoln said.
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