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Report on Medicare Legislation Raises Concern on Costs

By REED ABELSON

New York Times, August 11, 2003

A report to be released today raises questions about the ability of private health plans to protect the elderly from the high costs of medical care under Medicare legislation proposed by Congress.

The Senate and House are working to overhaul Medicare, the federal health insurance program for the elderly and the disabled, as a way to cover prescription drugs for the 40 million Americans now under the program.

The legislation, which is before a House-Senate conference committee to resolve differences between the two bills, relies heavily on private health plans to provide the drug benefit. Only a minority of Medicare beneficiaries are now enrolled in these plans.

The report, being released by the Commonwealth Fund, says out-of-pocket costs for Medicare beneficiaries enrolled in health plans have doubled since 1999, to an average of $1,964 in 2003. People in poor health have much higher costs, averaging $5,305 a year, the report said.

The report also examines the experience of people who have chosen to receive Medicare coverage through preferred provider plans, known as P.P.O.'s, which allow them to go outside a fixed provider network to see a doctor or hospital of their choice. Those people are paying an average of $2,884 a year to cover the cost of the premiums and co-payments, the researchers said.

"These are pretty dramatic increases in costs," said Karen Davis, president of the Commonwealth Fund, a foundation in New York that specializes in health and social issues. She described the findings as "a cautionary tale" for those looking at the legislation being proposed.

Policy analysts have raised concerns about the role of the health plans, given their disappointing history under Medicare and their inability to control health care costs. In recent years, many private plans have dropped out or cut benefits drastically after the money they received from Medicare failed to keep pace with their rising costs. Health plans are aggressively lobbying Congress for more money.

Lawmakers who support the Medicare legislation expect private plans to be able to deliver care more efficiently than the traditional Medicare program. Some policy analysts say the private plans may also be able to offer a wider array of benefits.

But the new report suggests that the plans, even the preferred provider plans whose development is being encouraged under the legislation, may be unable to protect the elderly from rising costs, said Marsha Gold, a senior fellow at Mathematica Policy Research, who helped write the report for the Commonwealth Fund.

The problem is even worse for people in poor health, whose out-of-pocket spending has increased 140 percent since 1999, the report says. The way some of the plans are structured, people who go to the hospital or undergo many tests end up paying significantly more, despite paying higher premiums. "It is imposing a set of charges that fall most heavily on the sickest people," said Ms. Davis, who also raised concerns that the co-payments could be used by the plans to avoid covering the sickest people.

The high out-of-pocket costs involved with joining a preferred plan also raise questions about the ability of these plans to attract Medicare beneficiaries. Joining a preferred plan costs someone in Medicare about $1,000 more than enrolling in a traditional H.M.O., Ms. Gold said. Even someone in traditional Medicare, who buys supplemental insurance, may not be spending much more than they would if they chose the preferred plan, she said.

"The question is whether it will be attractive enough for plans and for people to enroll," said Ms. Gold, who said the evidence was not yet clear. Medicare only recently began a pilot program in which the elderly could opt to join a preferred plan, she said.

In reviewing these plans last June, Ms. Gold and the other researchers also noted that it was unclear whether the plans will enter the kind of markets currently shunned by private plans: rural areas where costs are high.

Advocates tout need for drug discounts

By John McElhenny, Globe Correspondent, 8/11/2003

Anita McCandless left Canada 56 years ago for a new life in Chelsea, but the $2,000 she pays for prescription drugs every year has her thinking of her homeland once again.

McCandless, 69, a retired cardiac technician, says she has considered asking relatives back home to fill her pharmacy prescriptions for high blood pressure, restless leg syndrome, and other ailments, and then send them to her by mail.

The money she would save buying the medicine in Canada would be better spent on dinners with her husband or gifts for family and friends, she said, especially when the Canadian prescription drugs are nearly identical.

"Being Canadian and having family there, they've all lived to ripe old ages," McCandless said yesterday. "We're all taking the same medicines."

Massachusetts has been active in the drive to import discount prescription drugs from Canada, even though federal regulators say the practice is against the law and endangers society's most vulnerable by weakening the system that ensures the drugs they use are effective and safe.

Advocates say momentum is growing for a plan that would make Massachusetts the first state to help buy discount prescription drugs from Canada for thousands of sick and elderly. They plan a State House rally today to outline legislation that would pave the way for drug purchases on a statewide level.

State Senator Jarrett Barrios said skyrocketing prescription costs force many people to skimp on drugs.

"We have millions of elderly and sick residents who don't follow the doctors' orders because they can't afford to fill their prescriptions," said Barrios, a Democrat from Cambridge.

A survey in March of 19 brand-name prescription drugs by the National Legislative Association on Prescription Drug Prices, a Vermont group dedicated to reducing prescription drug prices, found that the same drugs were between 27 percent and 72 percent less expensive in Canada.

Congress is considering whether to legalize importation of drugs from Canada, Europe, and a handful of other nations. Current federal law bars anyone but the manufacturer from importing drugs, to prevent phony or altered drugs from entering the country.

Federal regulators and representatives of the pharmaceutical industry have voiced concern that expanding access to prescription drugs in Canada could expose US residents to counterfeit operations.

Last spring, the Food and Drug Administration began an effort to shut down commercial middlemen, such as the growing number of retail outlets that are helping citizens transmit their prescriptions across the border.

The pharmaceutical industry also warns that allowing US consumers to buy prescription drugs from other countries could slow US research into new drugs. Spokesmen for the FDA and the Pharmaceutical Research and Manufacturers of America did not return calls yesterday.

Already, more than 1 million Americans and thousands of Massachusetts residents are believed to be filling prescriptions in Canada.

The Marlborough Council on Aging estimates that since June 2002, it has saved seniors $100,000 in prescription costs by helping them buy prescription drugs from Canada. A senior advocacy group, the Massachusetts Senior Action Council, last year took part in a bus trip to Canada.

But the most visible effort in Massachusetts has been Springfield's decision last month to encourage its employees and retirees to buy their prescription drugs from Canada, a move Mayor Michael Albano says could save the city $9 million per year if all 7,000 city workers and 2,000 retirees enroll with their dependents. "Almost everyone's life is touched by going to the neighborhood pharmacy for medications," said Albano, whose son Mikie takes insulin shots every day for diabetes. "We need this now."