Adding Drug Benefits to Cash-Strapped System

WASHINGTON — Health-care costs are rising so fast that they threaten to bankrupt Medicare in a decade. So what are some key politicians proposing to do?

Add a costly new benefit: prescription drug coverage.

Lack of coverage for drugs under Medicare has meant that some of the country’s elderly go hungry so they can pay for medications.

President Clinton and some congressional Democrats have made adding coverage for prescriptions the price of their support for a broad package of cost-saving measures aimed at shoring up the program’s financial outlook. The president would guarantee Medicare 15% of projected government budget surpluses, which are estimated at $4.4 trillion over the next 15 years.

But the issue has split the Bipartisan Commission on the Future of Medicare, whose 17 members were appointed by Clinton and congressional leaders to propose solutions to Medicare’s financial ills. The commission missed its Monday deadline for completing recommendations, and its chairman, Sen. John B. Breaux (D-La.), is struggling to get a consensus.

Up Against the Tax-Cut Camp

Most Republicans would rather use the surpluses for tax cuts than Medicare. But at least those Republicans on the commission say that they would support a Medicare drug benefit--if it were limited to the elderly and disabled who leave the fee-for-service Medicare program in favor of managed care or some other private insurance plan. This way, they argue, the government could promote managed care, which would reduce government’s health-care costs and bureaucracy.

But this approach might not be of much help to the many rural elderly, those such as Gordon and Jean Gohl of Alpena, Mich., who live far from the nearest managed-care plan willing to take on elderly clients and pay for their expensive prescription drugs.

Gordon, 77, is recovering from the surgical removal of a cancerous growth on his neck. His wife, 80, suffers from blood clots, edema and high blood sugar. Their challenge: to scrape together, on their income of $812 a month from Social Security, the $500 a month they need for prescription drugs.

First, Gohl cut back his pain-killing codeine, and his wife reduced her antidepressant. Then they tried reducing the potassium she was taking for her heart.

“Everything quit: her kidneys, everything,” Gohl said. “She went into the hospital. We nearly lost her.”

To cover prescription drugs for the Gohls and the 39 million other Medicare beneficiaries would add at least $20 billion a year to the program’s $200-billion annual price tag, according to the nonpartisan Congressional Budget Office.

The high-level jockeying about prescription drug benefits reflects the increasing prominence that medications play in modern health care. When Congress launched Medicare in 1965, drugs were a small part of a recipient’s health bill, with hospital care the big-ticket item. Over the last two decades, however, drug makers have developed medications of ever-increasing sophistication, and their products frequently enable patients to stay out of the hospital.

Drug Usage, Spending Escalate

As drugs grew more effective for a wider range of illnesses, they also became more expensive. In 1997, the last year for which there are complete statistics, prescription drug spending grew by 14.1%, in contrast to 4.8% growth in overall health spending, according to the federal Health Care Financing Administration.

Managed-care companies often offered drug coverage to all their clients. But in the face of rising prices, they have imposed limits on how much they will pay for drugs, said Richard Frank, a Harvard Medical School economist.

Many elderly Medicare recipients have tried to buy prescription drug coverage in supplemental “Medigap” insurance policies. But these policies often carry high premiums and cap the amount for the drugs they will cover. And the Gohls, like one-third of all Medicare beneficiaries, have no supplemental coverage for drugs.

The elderly without coverage have been hit especially hard, because they are typically sicker and more likely to have multiple illnesses than younger Americans.

If health insurance premiums are excluded, spending on drugs accounts for 34% of all out-of-pocket health costs for those 65 and older, according to the American Assn. of Retired Persons.

“There are some people who . . . just have such high prescription drug expenses that, even with serious price reductions, they would have tremendous trouble affording the drugs they need,” said David Gross, a senior policy advisor at AARP.

One such person is Lorene Chandler, a 79-year-old widow who lives on a $697-a-month Social Security check in the farmhouse where she grew up in rural East Texas. Her supplemental insurance policy pays only $30 a month toward the $200-plus cost of her blood pressure, osteoporosis, arthritis and diabetes medications.

“A few of them I’ve left off taking for a while because I couldn’t pay,” she said. “I tried to cut out the bladder medicine, but then I just stayed wet. And I’m afraid to leave off the heart medicine.”

The situation in rural areas such as Chandler’s is not expected to improve soon. Managed-care companies cannot achieve economies of scale there, and many have been pulling out recently, leaving no choice other than traditional fee-for-service Medicare without prescription drug coverage.

Even in California, where there are more Medicare recipients in managed-care plans than anywhere else in the country, companies such as PacifiCare Health Systems Inc. are struggling to control drug costs enough to be able to provide the benefits under the current federal program, said John Jones, PacifiCare’s general counsel.

PacifiCare, which has more than a million members in its Secure Horizons plan, uses a list of approved drugs for which seniors pay sharply reduced rates.

The pharmaceutical benefit varies widely across the state for Secure Horizons members. Southern Californians may buy any drug on the approved list for a $10 co-payment. Members of the plan in San Francisco and Sacramento pay $25 per prescription, and in several rural counties, Secure Horizons enrollees have no drug benefit.