• Bridging the Drug Gap (Post - Mar. 20, 2001) • Health Section • Recent stories by Abigail Trafford • Talk: Parachuting From the Mommy Cliff • Talk: Health news message boards • Health Talk Archive • Live Online Transcripts • Subscribe to washingtonpost.com e-mail newsletters

Second Opinion:
Elderly and Prescription Drugs
Hosted by Abigail Trafford
Washington Post columnist
Tuesday, Mar. 20, 2001; 2 p.m. EST

Welcome to Second Opinion, a weekly column and Live Online discussion with Post Health columnist Abigail Trafford.

Does your health plan cover prescription drugs? You need coverage because medicines are a mainstay of treatment, especially when it comes to managing chronic illness and preventing disease. Prescription drugs can also be very expensive -- a year's supply can cost as much as surgery.

The hardest hit in the drug crunch are the elderly. About one-third of those on Medicare -- 12 million Americans -- have no coverage for prescription drugs. Now a new study shows how devastating the lack of coverage can be for people who depend of medicines.

Political leaders are calling for legislation to provide drug coverage. Republicans say they want a bill by summer recess. But how generous should the benefit be? Who would be eligible for help? How much would the legislation cost? Online to talk about prescription drugs is Marilyn Moon, health economist at the Urban Institute.
The transcript follows.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

Abigail Trafford: Welcome everybody! Do you need prescription drugs? Do you have coverage? What do you think should be done for people who don't have drug coverage? Send us your questions and comments.

Abigail Trafford: Hello Marilyn Moon and welcome. Prescription drugs is a hot political issue. It's also a personal issue. Who among the elderly and disabled do not have any coverage for medications? Who is suffering the most?

Marilyn Moon: Actually, there are people at all income levels who lack good, reliable coverage. People who have employer-sponsored retiree coverage (usually at higher incomes) and those with Medicaid (low income people) have the best coverage. That's about 40% of the Medicare population overall. People who buy drug coverage under Medigap (private supplemental insurance) pay a lot for it, and those in HMOs are finding that they face limits on what is covered. This problem is growing rapidly and will be worse each year that we don't do anything about it.

Abigail Trafford: New studies show that medicare beneficiaries without drug coverage get fewer prescriptions--no matter what their health status. How great is this unmet need? Doesn't it cost more money in the long run if people aren't getting their chronic illnesses managed properly?

Marilyn Moon: You are exactly right, but whenever you add a new benefit to a program as large as Medicare, you will also cover drugs for some people who are already getting them, and it takes time for the benefits to arise while the costs come right away. These two things mean that it is almost certain to be costly in the beginning.

Baltimore, Maryland: If prescription drugs are just paid for by a third party, why wouldn't the drug companies just accelerate price increases?

Marilyn Moon: They might. One key issue is what we should do to control that. But you should also realize that the most generous plans that have been discussed would usually ask patients to pay between 25 and 50 percent of the costs of their insurance. This is still a big amount -- and much larger than what many of us now pay for our drugs if we have insurance.

Ironically, those without drug coverage pay the most now because they are paying retail, while many of us get discounts as well as insurance protection.

Abigail Trafford: Here's a basic question: why are drug prices so high in the U.S.--higher than in other countries and across the border in Canada or Mexico?

Marilyn Moon: Drug companies charge what they can get away with. If you have a lot of power, such as being a government of another country, you can bargain for a good deal. If you are a big employer or HMO you may be able to get more. Also, drug companies know that folks in other countries often have lower incomes and could not pay as much as we do. These are all factors. Drug companies have the best of all possible worlds. They can divide us up into little groups and "conquer" charging us all different prices.

Adamstown, Md.: If the Congress should go bananas and enact a comprehensive (or even
partial) drug benefit for Medicare beneficiaries, how can society prevent
pharmaceutical firms from cost-shifting via raising product prices for
various drugs excluded from protection ? Or, raising prices generally and
giving Medicare a kick-back that would be called a discount.

Marilyn Moon: I hope the Congress does go "bananas" and add drugs to coverage. None of us would stand for such poor insurance out of our employer plans. But you are right that if Medicare gets a good price deal for its beneficiaries, the costs that some of the rest of us pay would likely go up a little bit. Which is a better system -- relatively equal prices or big discounts for some and none for others?

Reston, Va.: Since a Maryland study showed that state could cover all residents, provide prescription drugs and save $300 million the first year under a single-payer system, AND a Massachuesetts study showed they could do all the same things and save $1 billion dollars over 3 years, AND single-payer is really (admit it) less federal government and more local control of health services (which Republicans are supposed to love) and would save HUNDREDS OF BILLIONS over the years while getting more bang for our buck (which we surely don't get now), why are we wasting time with tinkering with medicare and not going in the direction of a national health plan (which is not, not socialized medicine so don't say that it is!)?

Marilyn Moon: I do not believe that a single payer system is socialized medicine, but I have come to believe that it is something that scares a lot of Americans. We do not tend to like uniformity even if it would save money and be a fairer system for the many who are now disenfranchised. I guess I believe that we will muddle along patching up the system here and there because many of those with good coverage now are afraid that they would be losers under a new system. Since Medicare is essentially a single payer system for those who are eligible and it is very popular in polls, this seems to be a contradiction, but not one I can explain.

Abigail Trafford: Everybody wants legislation to provide a drug benefit. The White house wants it. Congress wants it. What are the main approaches to providing drug coverage?

Marilyn Moon: Everyone wants their own proposal, but not someone else's. There are a few key issues that have to be resolved before we will get such coverage. One of the most important is how much we are willing to pay. Most beneficiaries cannot afford to pay the full costs themselves so this means using some of the surplus or new taxes to cover these benefits. The President has proposed $153 billion over 10 years. That is only enough to cover one in every ten dollars that Medicare beneficiaries will likely spend over this time. That is not enough to get much of a benefit. Another issue is who do we want to control the benefit? Are we willing to put in place some tough restrictions on drug companies and beneficiaries so that our dollars are spent wisely? Do we want this to be controlled by the government or by some private insurance company? Finally, some of the proposals require that in order to get drug coverage, we must accept a major set of changes in Medicare, increasing reliance on private health insurers. This is a controversial proposal and many supporters of that approach want to use drugs as the "carrot" to convince people to go along.

Abigail Trafford: What are the estimated costs for the different proposals?

Marilyn Moon: I already said that President Bush has proposed to spend $153 billion, although we do not know what that plan would look like. Vice President Gore proposed a plan during the campaign that would cost more than twice that amount. It would also give substantially higher levels of protection. In this area, we will likely get what we pay for. If there are high copays and high premiums charged to beneficiaries, the plans will cost less, but they also protect less.

Abigail Trafford: The drug companies say they fear price controls. Absent price controls, how the government or private health plans or employers or patients managed to restrain the rising costs of prescription drugs? What pressures can be put on pharmaceutical industry to restrain costs?

Marilyn Moon: There are many ideas about this, but not all have been tried in practice. Medicaid requires that it get the lowest price available, although the system of pricing is so complex that we don't know if this is happening. Private insurers work with prescription benefit managers (pbm's) to negotiate with drug companies. They get rebates by steering patients to particular drugs: like covering vioxx but not celebrex. This is referred to as a formulary. A drug company will give you a better deal if you steer all your business their way. Sometimes that's fine if the drugs are truly equivalent. But this is not always the case. It is also not clear whether the government could enforce such controls. An independent organization would be needed, I believe, to validate these formularies and figure out whether drugs are equivalent. Otherwise all of us subjected to such controls will be suspicious of the motives.

Adamstown, Md.:
Given some level of Medicare drug coverage, how can the nation keep drug firms from raising prices for the non-covered sector ?

Marilyn Moon: I think we have to recognize that if we give drug companies monopolies on particular drugs, and if Medicare gets a bargain, then the companies will use their market power to make sure they do not lose. If the volume of use goes up when Medicare beneficiaries get coverage, the drug companies will do very well. Stamping out another 100,000 pills does not cost very much. As a society, we have a stake in making sure these companies do not stop doing research and development, but we also have a right to expect them to behave responsibly. Some people have also talked about limiting the length of patents they get or at least preventing them from extending patent life by exploiting various loopholes.

Abigail Trafford: What about the argument that drug companies need to make significant profits so they can invest in research? For every winning drug, there are hundreds?, thousands?, of compounds that don't pan out. Designing an testing drugs is very expensive.

Marilyn Moon: This is an expensive part of their business. But if we help them increase the amount they sell, they will be spreading these costs over a wider base. I believe that we have a right as a society to say: we are giving you a 20% increase in sales, with very little increase in costs, so be reasonable and give us discounts. I have great faith in the power of drug companies to protect themselves. I do not want to squeeze them unreasonably, but I would not be unhappy to see fewer dancing stomachs on TV advertising these drugs.

Abigail Trafford: What's the message to people in the U.S. who need affordable drugs from the decision of major drug firms to supply expensive AIDS drugs to African countries at very low cost?

Marilyn Moon: You raise a good ethical question. Most Americans assume that people without insurance coverage get care anyway in the U.S. But as Abby's column this morning indicated, we have substantial problems here as well.

Abigail Trafford: What about drug coverage for people who aren't on Medicare. Do most people have a drug benefit if they have health insurance?

Marilyn Moon: Most people who have coverage through their employers have prescription drug coverage and if they do, it is almost always better than what we are considering for Medicare beneficiaries. People who buy their own coverage or who are uninsured have the same problems as do Medicare beneficiaries. But as we age or get sick, the need for such coverage also rises. Medicare beneficiaries represent about 13 percent of the population, but use about 35 percent of drugs.

Abigail Trafford: Medicare was designed many decades ago to take care of a generic 40 year old body in case of acute illnesses that required hospitalization. The benefit package was not geared even then to the complex chronic diseases that predominantly affect those over 65. Today medicine has changed, shifting services from the hospital to outpatient settings. Prescription drugs are key to treating and managing disease. All in all, Medicare is in many ways obsolete. What kinds of changes are under discussion to modernize Medicare?

Marilyn Moon: I have been glad to see that people are beginning to talk about other changes in Medicare's benefit package to make it work more like insurance that workers' have. Most of us have lower copays and deductibles, for example, and after we have paid $2000 or $3000 in such costs, there is a catastrophic limit that pays any additional costs each year. Medicare does not have such a limit and its hospital deductible is now $792. Rearranging some of these requirements could allow people to rely only on Medicare rather than having to also buy supplemental coverage. In areas where Medicare coverage applies (like outpatient surgery), it has kept up with the times. Omission of drug coverage and catastrophic limits are the biggest problems. For those with mental health problems, this is also a poor benefit package.

Alexandria, Virginia: Don't you think the prescription drug debate is missing the larger picture? HALF of Americans are obese or severely overweight. The "need" for many expensive drugs, from heart medications to diabetes pills to high blood pressure pills, could be eliminated if our sedentary, super-size-it society would get off of its collective duffs to exercise, eat right and maintain a healthy lifestyle into old age. Then they would not need all of these expensive medications, and the drug companies (and with any luck McDonalds) would be out of business. Why doesn't anyone have the courage to tell this side of the story? Thanks for your insights.

Abigail Trafford: And you can bet many a drug company is searching for that "slim pill" that will help people lose weight. Marilyn, your thoughts?

Marilyn Moon: Americans do, I believe, love technology and medications and hope to find an easy solution to their problems. Certainly we should stress lifestyle changes where appropriate. But lots of health care problems befall people who do all the right things. Moreover, some of us have genetic makeups that make it more difficult to lose weight or achieve other lifestyle improvements. I am leery of blaming the victims, particularly as we are finding out that many things have varying causes. Ulcers were thought to be caused by too much stress, for example, and now we know that they are often bacterial infections.

I am interested in the easy diet pill myself, but perhaps it is fate that this does not seem to be on the horizon.

Another area of concern I have is with misuse of some of the terrific drugs to combat mental illnesses that can be misused.

Rockville, Md: Marilyn: I am not elderly but I do take a prescription drug that is quite expensive. Fortunately, my insurance company covers it and I pay only $30 a month. My question is twofold: first, since this is not a drug that comes in generic form, should I have to pay the highest co-pay? I end up paying $30 a month (although, mind you, I'm not complaining. My insurance company has a three-tiered system. The drug costs $1300 a month) Second, what do people who do not have any form of insurance but need a drug similar to mine do?

Marilyn Moon: What people do who have to buy that drug without insurance is pay $1300 (or perhaps more if the amount that you see that your insurance pays includes a discount). They may do without, cut their dosage, eat less, or if they are very lucky get onto one of the programs that drug companies sometimes have to help with these expenses.

The three tier copays are aimed at making us all aware of the costs of drugs and moving to less expensive ones when feasible. I hear now that some are using 4 tiers, but I don't know how high the 4th one is!

Arlington, VA: Pharmaceutical companies do charge pretty steep prices for some drugs, but I've witnessed how pharmacies and hospitals often jack up those prices by more than 100%. How can this practice be changed?

Marilyn Moon: Pharmacies often are squeezed in the whole process and do not to my knowledge represent a major source of price increases.

Hospitals charge a lot for drugs, but that is because they are really charging for the delivery and other aspects of a hospital stay. And in the case of Medicare, when you get your bill from the hospital, you can relax. Medicare pays a flat fee for your stay so all those charges are just wishful thinking on the part of the hospital.

Out There, WV: Why are birth control pills so expensive? They've been around so long that surely the companies have recouped their R&D costs. I think it's because of the MEN running the companies and the -insert religion of your choice] fanatics.

Also, when are they going to be available without a prescription? I've heard this was going to happen eventually; how soon?

Marilyn Moon: You should talk with your pharmacist and find out if there are alternatives that are not on patent and that would cost less. I believe that we will not soon see this as a non-prescription item soon.

You might also write to the drug company and ask them what's up. Who knows, maybe they'll send you a free sample.

Arlington, VA: Do all seniors qualify for Medicare, or are there income limits? Assuming that everyone qualifies, couldn't the money saved from covering the wealthy who could afford their own insurance easily pay for a drug benefit for the needy?

Marilyn Moon: There are no income limits on eligibility for Medicare. You pay taxes while you are working in exchange for this benefit and high income people pay a substantial amount. There has been some discussion of making high income people pay more to get into Medicare or eliminate their eligibility altogether but there are a lot of problems. The private sector does not do a good job of taking all comers so even if you have high income, you might not be able to get insurance. Also, where should we set the cutoff? If insurance is going to cost you about $8000 (probably a low estimate), should the cutoff be at incomes of $20,000? Probably not. What about $50,000 or $100,000? That might be more reasonable but there aren't enough beneficiaries with incomes in that range to make it worthwhile to go to all the expense to set up such a system.

We could ask higher income seniors to pay more for Medicare as a way of covering drugs, but what is the rationale for asking that group to help support low income seniors and disabled persons? Why not all of us?

Abigail Trafford: If you could design a model drug benefit, what would it be. And what would it cost?

Marilyn Moon: This is the hardest (and last) question I'll answer. I believe that the Medicare program is complicated enough. I would add this as a benefit to Medicare (for which people could decline to sign up if they have good insurance). I would subsidize it, with higher subsidies going to those with low incomes. This would also raise participation and keep the per capita costs lower since it would not appeal just to the very sick. You would only be able to sign up every 5 years or so and then at a higher cost if you postponed signing up. I would ask beneficiariesto pay a substantial premium because this is an important benefit. It would cost a lot, but be worth it and I hope to use it when I retire later.

Abigail Trafford: Thank you Marilyn Moon for your good advice and expertise. Thank you all for your questions. Join us next week--same time same place--for a discussion on doctors-in-training.

   |       |