States stand to save $16 billion annually in Medicaid funding if the Medicare reform proposals passed by Congress last week become law.
While most of the attention on Medicare reform has focused on savings to senior citizens, a provision in the House-passed reform bill would slowly transfer the responsibility of covering prescription drugs for certain seniors to the federal government from the states. The states currently cover drug costs for seniors who are eligible for both Medicare and Medicaid, referred to as "dual eligibles."
Under the House Medicare bill, the federal government gradually would take on full responsibility of drug coverage for dual eligibles over the next 15 years.
The Senate bill would exclude seniors on Medicaid from accessing prescription drugs through Medicare, after an amendment introduced last week by Sen. Jay Rockefeller (D-W.Va.) was shot down.
The amendment, which closely resembled the House provisions, called for Medicare to cover prescription drug costs for dual eligibles.
Combined, the federal government and states spend $280 billion in Medicaid funding for all medical services each year. Of that, states spend about $98 billion covering medical care for dual eligibles, said Matt Salo, director of health legislation at the National Governors Association. Last year, prescription drug costs for dual eligibles stood at $7 billion and are estimated to grow at 16% to 17% each year.
"By voting down this amendment, we have yet again failed our seniors," Rockefeller said after his amendment was rejected 47-51. "It is unconscionable to me that seniors who have the least amount of income and need prescription drug coverage the most are completely left out of this Medicare benefit."
For cash-poor states, many of whom are scaling back Medicaid benefits as a budget-balancing maneuver, having Medicare pick up the tab on prescription drugs for dual eligibles would save them billions of dollars each year. Any Medicare bill that passes wouldn't take effect until 2006, however.
In a letter dated June 11 to Sen. Charles Grassley (R-Iowa), chairman of the Senate Finance Committee, and Sen. Max Baucus (D-Mont.), ranking Democrat on the committee, the NGA said, "A major reason that states currently have a long-run structural problem in their fiscal outlook is that they have absorbed responsibility for dual eligibles."
Medicare currently offers nearly no prescription drug coverage, and as a result, states have had to foot the entire bill for prescription drugs for low-income seniors. A House Democratic healthcare legislative aide who asked not to be identified said that because Medicare covers so many other services, it simply makes no sense for the program not to cover drugs as well.
"The question isn't why the House bill pays for (dual eligibles' drug costs). It's why the Senate bill doesn't," the aide said.
Senate Majority Leader Bill Frist (R-Tenn.) discussed the amendment with Rockefeller but remains concerned about the cost to Medicare of covering dual eligibles and would prefer looking at other alternatives to address the issue, said Nick Smith, a spokesman for Frist.
A call to the White House seeking comment was referred to HHS, which referred it to the Centers for Medicare and Medicaid Services. A spokesman there said the CMS has not taken a position on dual eligibles.
According to Salo, the Bush administration prefers Medicare not to pick up the drug costs of dual eligibles. The administration favors a proposal to move Medicaid to essentially a block-grant approach. Under that plan, states would get fixed amounts of federal money for Medicaid in exchange for greater flexibility to tailor the program to each state's needs.
Critics, however, said that approach puts Medicaid recipients at risk of being dropped from the program and states at financial jeopardy if the Medicaid population unexpectedly increases.