Co-pays, drug cuts to save Medicaid $11 bln-report

By David Lawder

WASHINGTON (Reuters) – A federal commission on Thursday
recommended $11 billion in Medicaid savings over 5 years from
raising prescription drug co-payments, drug pricing reforms and
curbs against asset transfers to qualify for benefits.

The controversial Medicaid Commission, charged in May with
finding $10 billion in immediate savings, delivered its first
of two reports to Congress and Health and Human Services
Secretary Michael Leavitt.

Costs for the state-federal health care program for the
poor have grown dramatically in recent years, reaching $329
billion in the fiscal year ended June 30, according to the
National Governors’ Association.

It provides care to more than 53 million Americans, but
some states, including Tennessee and Missouri, have cut
benefits due to cope with growing costs.

The panel’s efforts have been sharply criticized by
congressional Democrats as being one-sided because only members
appointed by President George W. Bush were allowed to vote.

The most controversial suggestion is to allow states
flexibility to increase co-payments beyond nominal amounts in
certain cases to encourage use of more cost-effective drugs.

The commission, co-chaired by former Tennessee Gov. Don
Sundquist and former Maine Gov. Angus King, said this move
would save $2 billion over the five-year period.

Currently, drug co-payments are capped at $3 and are
prohibited for some patients and services. The commission’s
report said co-payments should remain nominal for people at or
below the federal poverty line and for “preferred” drugs.

Some public health advocates have criticized co-payment
proposals, saying they would cost more in the long run because
many beneficiaries cannot afford even nominal co-payments.
Rather than pay, they will put off treatment or turn to
hospital emergency rooms for uncompensated care.

“It’s an illusory cost-shift,” said Dr. Georges Benjamin,
executive director of the American Public Health Association.
“These people just don’t have the money.”

TEPID RECEPTION

The suggestions received a tepid reception from Senate
Finance Committee Chairman Chuck Grassley, an Iowa Republican,
who said they would be considered in budget reconciliation
talks to meet a September 16 deadline.

“It’s premature to discuss the likelihood that any one
option will be included in the Finance Committee package,” he
said in a statement.

The commission said $4.3 billion could be saved if states
were allowed to establish drug reimbursement prices based on
average manufacturer prices rather than the current method of
using average wholesale prices, which are typically higher than
prices actually paid by pharmacies.

Another $2 billion would be saved by allowing states to
collect drug manufacturer rebates on behalf of Medicaid managed
care health plans. Currently federal laws prohibit this, which
means they are missing out on average rebates of 15.1 percent
of average manufacturer prices for brand name drugs and 11
percent for generic drugs.

The commission also recommended rule changes to prevent
patients from improperly transferring assets in order to
qualify for Medicaid nursing home care benefits, which would
save $1.5 billion, and closing tax loopholes for managed care
organizations, which would save $1.2 billion.