PRESCRIPTION FOR DRUGS
Medicare Reform is Taking Hits from Both Sides; PacifiCare Could be Winner
By VITA REED
While most of the Bush administration’s attention is focused on Iraq, healthcare reform is a budding issue that’s getting a less-than-cuddly reception on Capitol Hill.
At issue: adding prescription drugs coverage to the Medicare system, the federal health insurance program that covers 40 million senior and disabled Americans.
During his State of the Union address last month, President Bush said eligibility for a prescription drug benefit could be tied to making Medicare beneficiaries move from the traditional government-sponsored program to enrolling in privately managed healthcare service plans.
Cypress-based PacifiCare Health Systems Inc., through its Secure Horizons plan, is a health maintenance organization that covers Medicare patients and offers drug coverage. Once the dust settles, PacifiCare could benefit from a privatization of drug benefits by picking up more enrollees.
The president’s plan, at least initially, has angered both sides of Congress,even Republicans, who traditionally are seen as more sympathetic toward health maintenance organization operators.
GOP lawmakers are demanding to be consulted by the Bush administration before hitting the road to explain and possibly defend the benefit proposal before their constituents.
And some rural Republicans contend that forcing Medicare beneficiaries into health maintenance organizations won’t work. They argue that many private health plans have either withdrawn from or never entered into the Medicare markets in rural areas because there aren’t enough people in those areas to entice the plans. If Medicare patients are forced to go to private plans, rural Republicans say, they’ll be left without coverage.
Democrats, meanwhile, are lining up to toss grenades at the Medicare plan, charging that President Bush should simply add a prescription drug benefit to the traditional, government-funded and run program.
How that benefit would be delivered splits the political sides: Republicans favor more market-based legislation that allows the private sector,PacifiCare for instance,to administer the drugs benefit, with funding still coming from Medicare.
Democrats, on the other hand, want the government to fund and run the program. Because they couldn’t strike a deal with Republican lawmakers, Democrats chose not to push a reform bill through to President Bush’s desk last year, despite having control of Congress ahead of the November elections.
The president’s current plan is seen as part of a push to bring about a more thorough privatization of Medicare, which was established in 1965, at a time when there were fewer senior citizens and shorter life expectancies.
Medicare has never covered prescription medications. Much of the clamor for a drug benefit has come in recent years, as longer life expectancy and the development of expensive, branded drugs has created a need for healthcare reform.
In reality, the administration’s tone is somewhat moderated from those at the far right of the Republican Party that want to do away with government-funded healthcare altogether. President Bush has said he only wants to modernize Medicare to make sure that its beneficiaries could choose whatever worked for them, including prescription coverage.
Any changes to Medicare could stand to benefit PacifiCare, one of the health maintenance organizations that hung in with the seniors’ coverage, despite concerns about its government reimbursement being capped below medical inflation.
Lobbying Hard
PacifiCare says it supports public-private partnerships, but is awaiting more information about the drug proposals, said Tyler Mason, a company spokesman.
Meanwhile, Mason said PacifiCare would like to see Congress restore more funding to the existing Medicare health maintenance program.
PacifiCare and other Medicare-funded health-plan operators have lobbied hard to restore funding levels for the program ever since they were cut in former President Clinton’s Balanced Budget Act in the late 1990s.
PacifiCare’s Secure Horizons plan makes up a significant part of the company’s revenue and profits and accounts for some 800,000 members in eight states, including 38,000 in Orange County, according to Mason.
Perhaps owing to uncertainty about the future of the proposed Medicare reform, shares of PacifiCare have been stuck at about 27 since President Bush first floated his plan.
If the Democrats prevail, and prescription drugs are covered under the Medicare program, some observers say Medicare health maintenance organizations could become extinct because it would gut one of the only profitable aspects of covering seniors.
In fact, scores of Medicare healthcare providers have left the system during the past five years, claiming that government reimbursement doesn’t provide enough to care for seniors, who are sicker than the general population and use more services.
“It would torpedo senior HMOs,” said Peter Bastone, chief executive of Mission Hospital Regional Medical Center in Mission Viejo, prior to Bush’s unveiling of his proposal. “Really, one of the biggest pieces of the senior HMO is the drug benefit plan it has.”
It’s not uncommon, according to Bastone, to see seniors who have reached their limits on a certain Medicare health maintenance organization drug benefit jump to other plans. He predicted that if traditional Medicare did come up with a drug benefit, it could be a way out for some managed care companies wary of staying in the market.
PacifiCare’s Mason disagrees: “While the drug benefit within (PacifiCare’s coverage) is one of the most valuable benefits, it also offers disease management, lower out-of-pocket costs, lower hospitalization and less paperwork.”
Separately, PacifiCare is planning to launch a Medicare plus Choice preferred provider organization plan in Orange and Los Angeles counties in April, Mason said.
Preferred provider organizations traditionally offer enrollees a wider choice of doctors without “gatekeepers” who direct care, among other things.
Additionally, the Bush administration may simply be stuck with a certain political reality: lawmakers are reluctant to make big structural changes to the healthcare system, as evidenced by the failed universal health insurance proposal floated 10 years ago by the Clinton administration.
In 1993, Republicans warned that the plan backed by then-First Lady Hillary Rodham Clinton would force people into healthcare maintenance organizations, similar to what Democrats said about Bush’s ideas when they first emerged.
