Facebook Twitter

Plan to subsidize drugs has major flaw — drug firms

SHARE Plan to subsidize drugs has major flaw — drug firms

Republicans get an old-fashioned "A" for effort in their plan to provide America's seniors with some relief from the growing cost of prescriptions.

But it turns out that the legislation that passed the House and is resting not terribly comfortably in the Senate is modeled after a Nevada plan that hasn't worked.

All good intentions aside, the plan to subsidize insurance companies to provide drug benefits for Medicare recipients seems to have a major flaw — the insurance companies themselves.

Anyone who has had any dealings with insurance — from body shops to emergency rooms to house repairs — should not be surprised. Insurance companies are in the business to make money, and their interest increases or declines on that basis.

That's abundantly clear from the Nevada experience. The legislation was enacted to provide subsidies to insurance companies who would join the program to help 10,000 to 14,000 poverty-level Nevada residents 62 or older fill needed prescriptions. The subsidies were to total $4.6 million the first year and $37 million over six years.

According to reports, the state sent out hundreds of invitations last March for companies to sign on. The result: response from only one company that wasn't even licensed to do business in the state. New invitations have been sent out and Republican Gov. Kenny Guinn has expressed unwavering support for the plan despite indications there is little interest from insurers.

The suspicion is that the subsidies are not anywhere near enough to attract insurance companies. On the national level, for instance, Republicans have been warned by those representing the companies that insurers are not interested in selling drug-only policies to the elderly.

Although the bill setting up the plan was passed unanimously by both houses of the Nevada legislature more than a year ago, the emergence of prescription drug benefits as a major issue in the presidential elections has brought some diminishing of support on political grounds. Some Nevada Democrats, who voted for the plan, have wondered aloud why, given its failure, Republicans would adopt it for a national program.

Democrats want to hook prescription drugs to Medicare as a direct benefit, with all Medicare recipients included in a plan with similar premiums. Drug manufacturers fear this would give government enormous clout and ultimately would lead to a sharp decline in the profits they argue are needed to develop new drugs.

Democrats contend the Republican plan is insufficient and will be stiffed by the insurance companies, most of whom are unwilling to take the entire risk of drug coverage. The Nevada experience quite clearly doesn't help the Republican case.

Republicans reject this as too expensive. The House bill calls for varying premiums and co-payments. Their proposal would equalize the benefits by requiring that the overall value of differing private plans be equivalent to a standard policy established by the government.

The complexities of the system are among its biggest problems. Critics contend that there isn't enough incentive for insurance companies, and the wide variety of potential plans and benefits make it too confusing for many of those it is supposed to benefit. Those supporting it, however, say that the proposal allows seniors some choices and gives insurance companies the opportunity and freedom to design benefits that work using their clout to lower drug prices.

A number of states have drug benefit programs for the elderly, most all along the lines of the Democrats' proposed direct pay, where the state is the insurer and does all the claim processing — reimbursing the pharmacies and establishing which drugs can be included. The Nevada plan is the first to go the private route.

The encouraging thing in this debate, at least for Medicare recipients caught in the upward spiral of prescription costs, is that relief of some kind is in sight. Both parties are in agreement on the need to subsidize what has become the most expensive part of growing old.

There also is more brewing here than just the subsidization of drug costs for the elderly. Pharmaceutical companies are concerned that cries of price gouging, reinforced by charges that prices for the same drug are less overseas, will find a sympathetic ear in the next Congress. By 2008, Americans are expected to pay $243 billion annually on drugs.

Vice President Al Gore has been vocal in his allegations that American drug companies make outlandish profits and that has begun to resonate not only with the powerful bloc of seniors but with all voters.