December 1999 State Legislatures magazine: Making medicines affordable for senior citizens

State Legislatures Magazine: December 1999

Editor's Note: This article appeared in the December 1999 issue of NCSL's magazine, State Legislatures. To order copies or to subscribe, contact the marketing department at (303) 364-7700.

Making Medicines Affordable

State Pharmacy Assistance Programs
Maine Expands Program

California Seniors Get Medication Discounts

Making Medicines Affordable

A number of states have for years helped older Americans buy needed prescription drugs.

By Richard Cauchi
When Margaret Gallagher, 77, goes to the drug store each month, she makes a choice-to buy her cardiac medicine or her anti-arthritis drugs. Her doctor used to help by providing no-cost samples, but they are no longer available.

Margaret's story is repeated daily in communities across the nation. Prescription drugs make up only 11 percent of the total of all health care costs, but that statistic is no comfort to many patients. There are several real-life obstacles. First, Medicare and some private health insurance plans do not cover prescription drugs. Second, health plans that do cover drugs often have restrictive formularies or lists that exclude coverage for a particular drug. Third, spending for prescriptions was increasing an average of 16 percent in 1999, significantly higher than other major medical expenses.

It is no surprise that President Clinton and some members of Congress are calling for federal drug benefits. Yet senior pharmacy assistance programs have been in place in several states for as long as 25 years-quietly but effectively filling a critical gap for moderate-income seniors and others. Using creative combinations of state funds and public-private partnerships, these programs now are pointing the way for other states, as well as for federal policymakers.

STATE PHARMACY ASSISTANCE PROGRAMS
As of mid-1999, 16 states had created pharmacy assistance programs with several common features. Eligibility is based on annual income limits (typically between $14,000 and $19,000 for a single person); the minimum age often is 65 (eight states include special coverage for adults under 65 with disabilities). The programs vary significantly in overall size. In New Jersey, some 206,000 people received help from its program, which marks its 25th year in 1999. The Michigan Emergency Pharmaceutical Program, founded in 1988, serves 31,000 residents.

Three states use earmarked funds: Massachusetts uses a portion of a 25-cent a pack cigarette tax; New Jersey earmarks casino revenues; Pennsylvania uses lottery proceeds. Several others depend on special trust funds. To avoid runaway state costs, most programs have some form of limitations or cost sharing:

Connecticut has a $12 copayment per prescription.
Illinois requires the first $15 per month be paid by the patient.
Maryland covers only chronic maintenance and anti-infection drugs.
Massachusetts has a $15 annual enrollment fee and a maximum annual benefit of $750.
Minnesota's participants must meet a $300 annual deductible.

Unlike Medicaid, most state programs are not entitlements. For example, Minnesota's 1999 law states "new enrollment shall cease if costs of the program ... will exceed appropriated funds." In a bid for federal involvement, that same law specifies, "This section shall be repealed upon federal approval of the waiver to allow the [Minnesota] commissioner to provide prescription drug coverage for qualified Medicare beneficiaries. ..."

Connecticut appropriated $29 million for FY 1999 to serve about 37,700 residents, an average cost of $775 per recipient.

MAINE EXPANDS PROGRAM
The Maine Legislature significantly expanded its program this year, raising allowable income levels and expanding the list of drugs covered.

Senator Judy Paradis is co-chair of the Maine Health and Human Services Committee and lead sponsor of the 1999 expansion. "It's a no brainer," she explained. "By providing a drug program that is very inexpensive per person, we are able to maintain people in their own homes and not use high-cost acute care hospitals or long-term care. People had been discouraged because our program income limits had been very low, but now thousands of additional elders are eligible."

Next year, Maine legislators plan to designate tobacco settlement money to pay for a further expansion.

Missouri used a different approach, establishing a state income tax credit up to $750 per year for pharmaceutical costs incurred by qualified seniors and disabled veterans.

The American Association of Retired Persons (AARP) views these programs as helpful. "State officials recognize that many people who are not eligible for Medicaid have severe problems paying for prescriptions. Many older Americans are endangering their health because they cannot afford their drugs, or they are forced to choose between crucial drugs and the other necessities of life," notes David Gross of AARP's Public Policy Institute.

The pharmaceutical industry has mixed views on state-run programs. Individual drug manufacturers donated $500 million worth of pharmaceuticals through doctors in 1998, but there is little coordination of distribution and no guarantee that a specific product is available. The industry supports low-income assistance programs, but opposes broad legislation that mandates price discounts or lower reimbursement rates.

Whether Congress decides to expand Medicare to cover prescription drugs or not, states are likely to remain actively involved in pharmacy assistance.

For more details on these laws and programs, visit the NCSL Web page at: www.ncsl.org/programs/ health/drugaid.htm

California Seniors to Get Medication Discounts

California took a new approach in October to help older residents buy medications. Senate Bill 393 requires that pharmacies participating in the Medicaid program (Medi-Cal) also offer a discount price to all Medicare beneficiaries. The price "shall not exceed the Medi-Cal reimbursement rate for prescription medicines" plus a small processing cost.

The law is aimed at those over age 65, who make up 12 percent of the state's population, but use 33 percent of the drugs sold, according to its lead sponsor Senator Jackie Speier.

"Retail prices for seniors without drug coverage are far more, often double, than the prices that drug companies charge their most favored customers, such as government agencies and HMOs," she says. "On average, the savings to seniors would be 20 percent to 40 percent. What makes this law unique is its simplicity and lack of complicated bureaucracy. There is no means test-you show your card and get a discount."

Unlike other states' subsidy programs, there is no direct cost to the taxpayers; the California Department of Health Services simply is required "to transmit the price to the pharmacy." The law does not alter other aspects of the federally regulated Medicare program.

Interestingly, the California Pharmacists Association, which remained neutral as the bill worked its way through the Legislature, commended Senator Speier after the law was signed. Carlo Michelotti, the association's chief executive officer, said the law "will level the playing field for Medicare patients' medication costs and ensure continuity of care by encouraging seniors to use community pharmacies" instead of mail-order pharmacies. However, there still is concern that pharmacies in some areas could withdraw from serving Medicaid.

The California law will go into effect next month and will expire in three years unless it is extended.

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