Stateline Story

States Balk at Senate Medicare Plan

  • July 10, 2003
  • By Erin Madigan

A provision tucked inside the U.S. Senate's Medicare plan is raising concern among state lawmakers and policy analysts who fear the proposal would continue to burden states with the high cost of prescription drugs for poor senior citizens.

The Senate plan, approved with bipartisan support June 27, would provide a prescription drug benefit to most seniors under Medicare, the federal program that provides health care to the nation's elderly. But states are critical of the plan because it excludes the roughly 6 million citizens who are both poor and elderly who currently receive drug coverage from Medicaid, the state-federal program for the poor and disabled.

The nation's governors have expressed concern over the Senate measure and have repeatedly asked the federal government to take responsibility for those citizens, commonly known as "dual eligibles," that qualify for both programs. "To exclude the Medicaid population is not something that is fair or consistent with the way the program has been run in the past ... We believe it's (the federal government's) responsibility to cover people over 65, and that has been all the governors' highest priority over the past few months," said Kevin Goldsmith, director of Kentucky Democratic Gov. Paul Patton's Washington, D.C. office, in an interview with Stateline.org.

The House plan, which was approved the same day as the Senate's, would provide coverage for dual-eligibles, and in that one respect is favored by states, though they have not formally endorsed either plan.

In coming weeks a congressional conference committee will attempt to reconcile their differences and hammer out a compromise to send to the President's desk. The reforms would be the largest overhaul of the program in its 38-year history.

States have long lobbied for a prescription drug benefit under Medicare.

States currently spend more than $5.5 billion from their own coffers on prescription drug coverage for dual-eligibles. Over the next 10 years, states will spend an estimated $100 billion on drug coverage for this type of dual enrollee, according to the Kaiser Commission on Medicaid and the Uninsured, a research arm of the Washington, D.C.-based Henry J. Kaiser Family Foundation.

"Drugs for this population are a big budget item for states. If Medicare assumes responsibility for some of the drug costs for these seniors, it could potentially offer significant fiscal relief for states, whose budget situations remain difficult," said Victoria Wachino, associate director of the Kaiser Commission. "I think this is a big deal bigger than the $20 billion in fiscal relief (to states) that passed in (the President's) tax cut law and this issue is not getting enough attention," Wachino added.

Most state leaders are in favor of a Medicare prescription drug benefit, said Trudi Matthews, chief health policy analyst at The Council of State Governments.

"It's not the overall bill that anyone would be for or against. Almost overwhelmingly people have said this is a good thing. It's just that the devils are in the details," Matthews told Stateline.org.

"I think the Senate, to some degree, is keeping the burden of the poorest seniors on the states," Matthews added. "The only seniors who are going to be ineligible for this benefit are the poor seniors and that's just wrong."

Does it matter whether the state or federal government picks up seniors' drug tabs?

Yes, some analysts said.

One analyst and former director of the Congressional Budget Office said it matters because each state defines their Medicaid drug benefits differently.

Due to budget woes, many states have been cutting back Medicaid, including prescription drug coverage. For example, some states, such as Louisiana, have capped the number of prescription drugs Medicaid recipients can receive. Other states have begun using formularies, lists of preferred drugs beneficiaries can get under Medicaid. "It is conceivable that over time the poorest of Medicaid beneficiaries will end up with skimpier drug coverage than those who can access the Medicare benefit itself," said Robert Reischauer, who is also president of the Urban Institute, a research organization based in Washington, D.C.

Reischauer said states might be more apt to change Medicaid benefits for elderly citizens to ease budget pressures by decreasing the number of dual-eligibles they'd have to pay for.

"The states won't get the kind of fiscal relief they might have gotten if they had the drug benefit picked up by Medicare. They will face an incentive to maybe cut back the number of dual-eligibles that they cover in order to get out of this burden," Reischauer said.

States are not required to provide a drug benefit under Medicaid, but all states do. So, CSG's Matthews said that scenario is possible, but unlikely.

"I doubt that any state would risk the health of seniors to make a point about the coverage gaps for poor seniors in this Medicare drug bill ... States have not neglected their responsibility to provide for poor seniors in the past, so I doubt they would do so in the future," Matthews said.

National Governors Association leaders, Gov. Patton and Idaho Gov. Dirk Kempthorne (R) wrote a June 11 letter to ranking members of the Senate Finance Committee Senators Chuck Grassley (R-Iowa) and Max Baucus (D-Mont.) which read: "The nation's governors oppose this approach. It is not good health care policy and it is not a good precedent ... This provision would continue to shift appropriate federal costs to the states."

In addition to the NGA letter, five Democratic governors including Gov. Patton, Iowa Gov. Tom Vilsack, New Mexico Gov. Bill Richardson, Indiana Gov. Frank O'Bannon and Missouri Gov. Bob Holden blasted the Senate provision in their own letter to the Bush administration. The governors said in the June 27 letter that the Senate legislation would "permanently eliminate the federal government's commitment to Medicare beneficiaries who are also Medicaid eligible, at least in the area of prescription drugs."

"Generally (the governor) is disappointed that the Senate version excludes Medicaid beneficiaries and hopes it can be remedied in conference committee," said Amanda Crumley, Gov. Vilsack's press secretary.