In theory, the idea sounds good: expand the Medicare drug benefit so seniors can avoid costly hospitalizations and the government can save money. Or so President Clinton is likely to argue when he announces his long-expected proposal to add a new Medicare prescription drug benefit.
But the reality is likely to be much less pleasant. Expanding the drug benefit--an idea Clinton disclosed in his last State of the Union message--is likely to cost big bucks, and Congress had darn well better understand the consequences of unleashing this scheme.
History has repeatedly shown that entitlement programs end up costing substantially more than originally projected. So rather than reducing costs, a proposed Medicare drug benefit could constitute a raid on the treasury of this popular social program.
Clinton reportedly believes pharmacy-benefit managers could keep costs down by obtaining discounts from drug manufacturers and drugstores and preventing overuse of prescription medications. But evidence suggests a possible disaster:
- Soaring drug costs currently plague Medicare risk plans, which cover more than 6 million beneficiaries. Pullouts from numerous markets have caused disruption and reduced coverage for many beneficiaries.
- The effects of exploding drug costs extend far beyond Medicare. Physicians who have accepted capitated payments are struggling to contain drug costs (see story on page 36).
- Direct-to-consumer advertising campaigns are putting excessive pressure on doctors to prescribe costly drugs that patients demand. By now, everyone has heard the tale of the Viagra frenzy.
Even earmarking some of the federal budget surplus for Medicare and levying a modest premium on beneficiaries may not prevent more costs being added to a program already facing serious solvency problems.
Before plunging into such dangerous waters, the government should launch a pilot program to measure the impact of any new entitlement. Establishing payment tiers would allow beneficiaries access to more expensive drugs if they are willing to pay higher out-of-pocket costs. Such a payment structure may help dampen demand for "we-want-it-all" coverage.
For physician executives concerned about the future of Medicare, this is an important topic to weigh in on.