Medicare Reform

Medicare reform could help states reduce their Medicaid expenditures by up to "billions of dollars a year" if the final bill reported by the conference committee reconciling the House’s and Senate’s bills would have the federal government assume responsibility for drug costs for beneficiaries eligible for both Medicare and Medicaid, the New York Times reports. Of the approximately 40 million Medicare beneficiaries, seven million have incomes low enough to also qualify for Medicaid. Dually eligible beneficiaries often are sicker; more likely to be disabled, mentally ill or in a nursing home; and have large drug expenses, according to the Times. They account for approximately $13 billion per year in Medicaid prescription drug spending, nearly half of which is paid for by the states. Under the House Medicare bill (HR 1), the federal government would assume the cost of providing prescription drugs to dual-eligibles through Medicare, with Medicaid filling the gaps in drug coverage. The Senate Medicare bill (S 1) would not cover dual eligibles’ drug expenses under Medicare but rather would keep covering those costs through Medicaid.

If the conference committee adopts the House provision regarding dual-eligibles, states could save billions of dollars each year, according to the Times. States like New York and Massachusetts — which have large low-income populations and "relatively lax" Medicaid eligibility standards — would benefit the most. About 30 states also could experience significant savings if a Medicare drug benefit is enacted because they could scale back their own senior prescription drug assistance programs, the Times reports. Overall, the 30 programs cover nearly 1.5 million people and cost about $2 billion per year. According to the Times, some of those costs would be assumed by a Medicare drug benefit. However, Matt Salo, director of health legislation for the National Governors Association, said, "The concern is that under the House bill, a state might actually have to disenroll people from the state program to make them eligible for the Medicare benefit, get them enrolled in the federal program, and then enroll them back in the state program once the federal benefit runs out."

Total Effect Unclear

It is still unclear how exactly state programs would be affected by a Medicare drug benefit, and even if a drug benefit is enacted, it would be so complex that the effect on states "would not be fully comprehended for years," the Times reports. Tricia Neuman, a Kaiser Family Foundation vice president and director of its Medicare Policy Project, said, "The states have a huge amount at stake in the Medicare bill. They’re spending billions of dollars on drugs now and they have an expectation that this bill means they’ll spend a lot less. But how much relief they’ll get is still very much in question." Regardless, state officials have begun to "aggressively" lobby Congress to support provisions that would "win some relief for … fiscally battered states." New York state Gov. George Pataki (R) said, "As prescription drug coverage is debated in Washington, we are working with our delegation, congressional leadership and other states to ensure that programs we already invested in receive federal assistance" (Perez-Pena, New York Times, 7/18).