American College of Physicians: Internal Medicine — Doctors for Adults ®

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Responding to concerns about new Medicare reforms

From the January/February ACP Observer, copyright 2004 by the American College of Physicians.

As the front page reports, the College endorsed the new Medicare Prescription Drug Modernization and Improvement Act of 2003, which includes numerous ACP-supported provisions that will benefit internists and their patients. While our efforts have been applauded by many College members, we have also heard from several ACP members who question whether the law truly represents the best interests of their patients.

I recently received an e-mail from Anne Rose N. Eapen, FACP, a member of the Governing Council of ACP's Virginia Chapter. She graciously granted me permission to use my response to her thoughtful comments as the basis for this issue's column.

Self-interest vs. public interest

Dr. Eapen began by questioning whether the new legislation's benefits for the medical profession outweigh the costs imposed on others. Her concern gets to the very heart of whether a membership-based organization like the College can reconcile its self-interest with the public interest.

I explained that the College is proud of the role it played in winning support for the provisions of the law that directly benefit internists. Those provisions include a halt to physician payment cuts, increased payments to rural physicians and measures to reduce regulatory red tape.

ACP endorsed the bill, however, not just because of its advantages for internists. Based on established ACP policy, the College concluded that the overall impact of the legislation will be highly favorable to most Medicare patients, particularly the poor. We also felt that the overall design of the Medicare drug benefit and other reforms were consistent with ACP policies.

Medicare drug prices

Dr. Eapen also raised concern that the new law prohibits Medicare from using its market power to bargain with drug companies to lower drug prices. College policy agrees that it would have been better if Congress had given Medicare the same authority to negotiate prices that it gave the Veterans Administration. Instead, the bill delegated this responsibility to pharmacy benefit managers.

The prohibition on direct negotiation of drug prices was a pragmatic decision made by the legislation's sponsors to diffuse potential opposition from drug companies. That opposition would have effectively doomed the legislation to eventual defeat.

But there is ample precedent for Congress making similar promises for pragmatic political reasons-and then later changing course.

When Medicare was enacted in 1965, for instance, it prohibited interference in the practice of medicine (really), promised that physicians would be paid their usual and customary fees, and said that hospitals would be paid their costs plus a bonus. These measures were included for the pragmatic purpose of reducing opposition to the bill from physicians and hospitals.

We all know what happened later: Congress enacted price controls on both hospitals and physicians to rein in the costs of the Medicare benefit. If the cost of the new Medicare drug benefit consumes more federal dollars than intended, it is very likely that a future Congress will revisit the prohibition on Medicare price negotiation with drug companies.

Low-income beneficiaries

Dr. Eapen also questioned how the new law will affect low-income beneficiaries. She worried that very poor seniors who now get prescription drugs under Medicaid (with minimal payments of $2 or $3 per prescription) will have to pay much more under the new bill.

I explained that enrollment in the new Medicare Part D (prescription drug benefit) is optional. Individuals eligible for full benefits in both Medicaid and Medicare who do not select a Part D will automatically be enrolled in a plan—but they can decline enrollment in that plan or change plans. The law does not permit states to mandate enrollment in Medicare Part D as a condition of Medicaid eligibility.

ACP policy strongly advocates that Medicare provide a more generous drug benefit for those least able to afford their medications. For most of the poor, the new Medicare benefit will be an improvement over what they now get under Medicaid or other programs.

Individuals eligible for full benefits in both Medicare and Medicaid with incomes up to 100% of the federal poverty level will pay no premiums or deductibles. They'll face co-pays of $1 for generic drugs and preferred drugs, and $3 for all other drugs.

While it's true that some poor will not qualify for added subsidies and new benefits because their incomes are too high or they don't meet the assets test, many more will qualify. Beneficiaries who have incomes between 100% and 135% of the federal poverty level and meet an assets test (three times the current supplemental security income asset test standard used by the Social Security program) will pay no premium or deductible. These individuals will face limited co-pays of $2 for preferred drugs and $5 for others.

Both low-income groups are exempt from the "coverage gap" that will affect higher-income beneficiaries. For those with higher incomes, Medicare will pay 75% of beneficiaries' drug costs between $251 and $2,250. Those seniors would then receive no additional help until they had spent $3,600 of their own money.

Risks and benefits

This is not to say the new law is perfect. No law is, and the more complex and far-reaching the legislation, the more likely it is that it will have adverse unintended consequences.

Dr. Eapen expressed the hope that ACP is fully prepared to address potential problems in future initiatives. I assured her that we will have multiple opportunities to advocate changes in the law as problems are identified, just as the original Medicare law enacted in 1965 has been modified repeatedly to respond to changed circumstances, unintended consequences and constituent pressures.

The College will closely monitor implementation of the new law and, as problems arise, lead the effort to make necessary changes.

Over the next several weeks, ACP will be providing straightforward explanations for you and your patients about the key provisions in the law. I am confident that most of you will concur that the legislation is better for internists and patients than the status quo.

But as questions and concerns arise, I encourage you to let us know about them, just as Dr. Eapen has done. I promise the College will thoroughly review, investigate and respond to your questions and concerns.

Robert B. Doherty is ACP's Senior Vice President for Governmental Affairs and Public Policy.

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