It looks like PacifiCare Health Systems Inc. and its rivals have dodged a bullet.
Cypress-based PacifiCare and other health insurance providers appear to have won a victory after President Bush and other government leaders recently said they weren’t going to delay the much-touted Medicare prescription drug plan, which goes into effect Jan. 1. The drug benefit promises drug coverage for the first time to the 40 million Medicare recipients.
The idea of postponing the benefit was suggested by some conservative GOP Congress members following Bush’s plan to spend up to $200 billion to rebuild areas damaged by Katrina.
The House Republican Study Group proposed delaying the Medicare drug benefit by a year in order to save an estimated $40 billion.
But the White House passed on the idea, and Sen. Charles Grassley, an Iowa fiscal conservative who heads the Senate Finance Committee, dismissed any potential delay of the Medicare drug benefit plan. Grassley’s committee oversees Medicare.
On political grounds, delaying the Medicare drug bill probably was a loser from the start. Older people vote in disproportionate numbers, and taking away one of their benefits was sure to bring fallout for Republicans in upcoming elections.
PacifiCare said it wasn’t particularly worried about possibly seeing Medicare drug coverage delayed. In fact the company, which is spending some $50 million to launch its drug coverage operation to support Medicare coverage, never put its lobbying machine into motion.
“We didn’t spend any significant time or energy concerning that issue,” said Tyler Mason, PacifiCare’s director of public relations. “The president and members of Congress (who) supported the bill said that was not an option,seniors need a drug benefit and they need it now. I think that the noise you heard out of Washington were those folks who originally were not supportive of the bill.”
Earlier this decade, PacifiCare and its peers lobbied hard for more funding for their Medicare health plans. Medicare funding for private insurers had been capped during the late 1990s, when former President Clinton signed the Balanced Budget Act.
Their efforts paid off in late 2003, when Bush signed the Medicare Prescription Drug, Improvement and Modernization Act into law, earmarking billions of dollars for PacifiCare and other health insurers. The act is expected to cost the government more than $700 billion during the next decade.
PacifiCare said that its Secure Horizons Medicare Advantage health plan recently got regulatory approval to offer drug coverage next year. The insurer said the decision affects 730,000 Medicare Advantage members in eight states.
PacifiCare is hoping that its long history of offering Medicare health plans will give it an edge in going after the market for senior drug coverage.
The Medicare drug plan is set to boost Prescription Solutions, PacifiCare’s Costa Mesa-based drug benefit management unit. Prescription Solutions is one of the company’s fastest-growing businesses, with yearly revenue of close to $1 billion.
Expanding Drug Distribution
The unit, which runs a mail-order pharmacy for PacifiCare plan enrollees and other customers, is planning to build a distribution center in Overland Park, Kan., to handle expected demand. The company has another distribution facility in Carlsbad.
PacifiCare competitors who plan to offer their own Medicare drug plans include WellPoint Inc., the Indianapolis-based owner of Blue Cross of California and Woodland Hills-based Health Net Inc.; Aetna Inc. of Hartford, Conn.; and Cigna HealthCare, a unit of Philadelphia’s Cigna Corp.
Earlier this year, Minnesota-based UnitedHealth Group Inc. announced plans to buy PacifiCare for $8 billion in a deal that’s set to wrap up next year. UnitedHealth also plans to offer its own Medicare drug plan.
