High-Cost Drugs, Problems of Uninsured Vex States

Congress will close the year with a Medicare bill in its trophy case, but the soaring number of uninsured Americans and rising insurance premiums and prescription drug costs promise to make 2004 a challenging season for state health care officials.

State officials say the cost of patching the nation’s frayed health safety net is busting state budgets. And while Congress added a drug benefit to Medicare, it did not stop the Food and Drug Administration from trying to shut down imports of cheaper medicines from Canada.

Iowa Gov. Tom Vilsack, a Democrat whose state maneuvered to keep the Canadian pipeline open, told Stateline.org, “If the folks in Washington, D.C., don’t think people are angry about this, they’re obviously not listening to the citizens of this country.”

States now spend over one-fifth of their budgets on Medicaid, which provides coverage for more than 40 million people, half of them children. “There isn’t a state that isn’t worried about (Medicaid) and isn’t concerned,” said Sandra Shewry, director of health policy at the National Governors Association.

These problems, building for years, reached alarming proportions in 2003.

The U.S. Census Bureau reported that almost 44 million Americans 15.2 percent of the populace — went without health insurance in 2002. That was 2.4 million more than the previous year.

After years of signing more people up for Medicaid, difficult times forced states to scale back eligibility and trim optional benefits.

Michigan and Oklahoma eliminated adult dental care for Medicaid recipients. Texas cut services for the mentally ill and coverage for 7,800 low-income pregnant women.

Five states also froze enrollment in their Children’s Health Insurance Programs, which insures children in families that make too much for Medicaid but still can’t afford private insurance.

The outlook for 2004 is no rosier.

“States will have an exceptionally difficult set of choices to make going into their next legislative session,” said Trudi Matthews, chief health policy analyst at The Council of State Governments.

Growth in Medicaid spending slowed for the first time in seven years, but is still expected to climb at least 8 percent a year for the rest of the decade. A project of The Henry J. Kaiser Family Foundation surveyed states and found:

• 49 states planned to reduce or freeze payments to physicians, hospitals and other providers for fiscal 2004.
• 44 would likely restrict which drugs Medicaid patients can buy.20 planned to pare dental and vision coverage, doctor visits and home care.
• 18 were eyeing tighter eligibility standards for Medicaid and long-term care.

“A lot of governors and legislatures tried very hard to preserve the gains they had made during more robust economic times, but they’ve got more folks clamoring at the door,” said Alwyn Cassil, spokeswoman for the Center for Studying Health System Change, a Washington, D.C.-based think tank funded by The Robert Wood Johnson Foundation.

Despite the dismal picture, state officials agreed there is one bright spot the billion Congress provided states under the Bush tax cut package, including billion for Medicaid. That helped stave off even deeper cuts, state Medicaid directors said. But the fiscal relief was only temporary.

“If I was a governor and knew the fiscal relief was going to expire at the beginning of fiscal year 2005, I would have to do some hard thinking about my priorities and … (how) to fill the hole,” said Victoria Wachino, associate director of the Kaiser Commission on Medicaid and the Uninsured.

State officials also fretted over the rising cost of prescription drugs for those with skimpy drug benefits or none.

Governors and legislators pushed the prescription drug issue across borders, pressing the federal government to remove legal hurdles to re-importing lower-priced drugs from Canada.

Several Midwest governors expressed interest in the issue and legislators in seven states considered measures to promote imports, although none became law.

Minnesota Gov. Tim Pawlenty (R) told a U.S. Senate panel in November that the FDA should let the Gopher State help residents buy less-expensive prescription drugs from Canada. “If they sue me, I am willing to be sued,” he said. As for FDA concerns that re-importation is unsafe, Pawlenty said: “Show me the dead Canadians. Where are the dead Canadians?”

Maine got a green light from the U.S. Supreme Court to implement Maine Rx, a program to help the working poor and elderly by forcing drug makers to grant the same discounts that they give to Medicaid.

Other strategies to control drug costs include forming bulk-buying pools, increasing copays, prior authorization rules and preferred-drug lists for state employees and Medicaid patients.

Governors focused concern on the nearly 6 million elderly or disabled Americans on the Medicaid rolls who also qualify for Medicare. They unanimously called on the Bush administration to pick up the prescription drug tab for this group and not saddle already strained state Medicaid programs with the bill.

The states’ call was answered just before Thanksgiving as Congress approved a Medicare bill that grants all senior citizens including the dual-eligibles a prescription drug benefit from the federal government.

However, states didn’t break out the champagne and toast cost savings.

They’ll likely save money in the long term, but the Medicare drug coverage won’t begin in earnest until 2006 and policy analysts said a provision requires states to return to the federal government most of the savings gained from shifting dual-eligibles to Medicare.