Former President Bill Clinton in his remarks to the Presidential Scholars at Gaston Hall on June 25, 1999 announced as follows:

"Next week I will propose a detailed plan to strengthen Medicare, to cut its costs, to modernize its operations, to use competition and innovation, to strengthen the core guarantee of quality care for all Americans who are elderly and eligible. I will also, for the first time, propose a way to help senior citizens with their greatest growing need, affordable prescription drugs. It is a huge issue out there for seniors".

Those of you who are regular viewers to this site are aware of the increased space that we have devoted in the last few months to two topics in particular that are of key interest to all of us, not just the elderly. These two topics are the introduction of possible prescription drug coverage under Medicare, and Social Security and Medicare solvency. The solvency issue has been intertwined with articles on the balanced budget. The inter-relationship of these two issues is now coming more and more to the forefront. Please view the articles on Social Security Solvency, if you have not done so already, since you will then be better able to understand the different facets of the problem as it related to possible prescription drug coverage under Medicare.

According to IMS Health prescription drug sales will increase by 43% to $143 billion by the year 2002 in the United States. Worldwide sales are expected to grow to $415 billion from $302 billion in the same period. One of the elements fueling this growth is the aging population.

In the June 8, 1999 issue of the New York Times the main front page article is entitled "Clinton Will Seek A Medicare Change on Drug Coverage" by Robert Pear. As we had accurately predicted below, under former President Clinton's plan, private companies would be hired to administer the purchasing and administration of the new prescription drug benefit. Different areas of the country would be under the aegis's of competing "pharmacy benefit managers". All Medicare beneficiaries would be covered with no income criteria discrimination whatsoever. The premium for the extra prescription drug coverage would be between$10 to $25 per month. There would not be any price controls of the drugs involved at all.

White House officials also introduced documents to show that for every $1 increase in pharmaceutical expenditures there will be a commensurate $3.65 reduction in hospital care expenditures. We have no idea as to how these exact numbers are arrived at, but certainly it seems to us to make sense that it can reduce hospital stays and expenses associated with the elderly. Employers who offer prescription drug benefits to their retirees could also join in on the plan.

The proposed plan would be financed through having at least 15% of the Federal budget surplus over the next 15 years be set aside to preserve Medicare's solvency. This however is the crux of the problem, and that is why we refer you over to our articles on Medicare solvency and the budget. As we had previously pointed out, there would be no surplus this year without the $133 billion taken is in Social Security taxes. Without this tax there is actually a $5 billion deficit. When the government recently passed the Emergency Spending Bill of over $14 billion, about $11 billion will be borrowed from Social Security to meet requirements of the Balanced Budget Act of 1997. We also pointed out that as of 2 years ago it was computed that Medicare would be insolvent in 2001. Because of a healthy economy and low interest rates the life of Medicare was extended to 2015. What if interest rates go up and the economy weakens for itself? The Balanced Budget articles specifically show you how tenuous the balancing act has become. We will soon have more people receiving benefits than there are people paying into the system. Thus when the President's plan states that the financing will come from the surplus, are we going to have a surplus or is it just a dodge?

We have covered this issue starting with the Bi-Partisan Commission to reform Medicare under Sen. John Breaux (D-La). We went into the proposed bills of Rep. Tim Allen (D-Ma) and Jim Wright (D-Tex). We covered the proposals of Sen. Ted Kennedy (D-Mass), John Rockefeller (D-W.Va.) and Rep. "Pete" Stark (D-Ca). We showed the position of the pharmaceutical industry. We explained the viewpoint of the Republican members of Congress.

Now it is time for us to state our viewpoint. We favor prescription drug coverage for Medicare beneficiaries unequivocally. We favor private "pharmacy benefit managers". We also favor a slight premium increase for those who want the prescription drug coverage along the lines as discussed above. The question therefore becomes how do you finance such a program, and at the same time maintain a balanced budget. We will listen with an open mind to all ideas and bring them to your attention as they are publicized. It is only after we have heard all the proposals and analyzed them that we will make up our own minds. We hope that you will become knowledgeable about this issue, and then, and only then will you be able to make up your own minds. This is just the continuation of what will be a long negotiation period between all sides in this issue. If you want to make your viewpoint heard we suggest you go into Helpful Web Sites to see where you can get your congressmen's web address and let them know what you think the outcome should be on this matter. You are also more than welcome to e-mail us with your thoughts, and if possible we will print it with your permission on this site.

Thus his plan would assimilate many of the proposals that we discuss in the latter part of this article. We imagine that the Republicans and the drug industry would favor private prescription drug coverage rather than coverage under Medicare.

In the last several weeks we have written several articles dealing with the topic of assisting seniors with costs involved in buying prescription drugs. For the latest information on the bill introduced by Rep. Tom Allen (Maine-Dem.) see this article below. In addition to this article please read our other articles:

A study by the National Academy of Social Insurance, a Washington non-profit research group indicated that adding prescription drug coverage to Medicare would result in a 7-13% increase in Medicare costs. Medicare spending in 1999 is expected to cost $212 billion. We dispute this figure and feel that a workable plan can be achieved with a minimal of cost increase. Please read our articles and you can discover some of the proposals that can achieve this result. We do know that about 4.5 million elderly have out of pocket expenses of over $1,000 per year and that about 1.3 million elderly have over $2,000 a year out of pocket expenses for prescription drugs.

On April 20,1999 the Democratic Congressional delegation announced their proposed legislation to secure prescription drug coverage for Medicare recipients. In the forefront of the announcement were Sen. Edward M. Kennedy (Dem.-Mass), Sen. John D. Rockefeller 4th (Dem.-W.Va.) and Rep. Pete Stark (Dem.-Cal.). Under the proposal, a $200 a year deductible would be imposed on the Medicare beneficiary. Medicare would then pay 80% of the cost of each prescription until the cost of the prescriptions reach $1,700. Beneficiaries would be charged a slightly higher premium to help pay for the additional cost to Medicare. In addition a "favored customers" rate system as per the article below would be set up, under the direction of private organizations to manage drug benefits for Medicare beneficiaries. These private organizations could include groups of retail pharmacists, insurers and specialized companies like PCS and Medco. Interestingly Rep. Bill Archer (Rep.-Texas) who is Chairman of the House Ways and Means Committee indicated his interest " to provide some form of prescription drug coverage to Medicare beneficiaries. Thus we now have the 3 major players (Drug Companies, Republicans and Democrats) recognizing the fact that some sort of prescription drug coverage is needed for Medicare beneficiaries. It still promises to be a long drawn out battle before any legislation is enacted. Remember also that Pres. Bill Clinton has also stated that he favors some sort of prescription drug coverage for Medicare recipients.

One of the largest expenses that seniors incur is in connection with their costs for prescription drugs. In September of this year, Rep. Tom Allen of Maine introduced legislation in Congress addressing this problem. So far 53 fellow Democrats have co-sponsored the legislation. His proposed legislation would not cost the taxpayers any money. Similar legislation proposed by Rep. Jim Turner(D) has the backing, so far, of 60 Democrats in the House.

As of May 13, 1999, 107 Democrats in the House are now co-sponsoring Rep. Allen's proposed bill. The proposed bill is named "The Prescription Drug Fairness for Seniors Act of 1999" (H.R. 664). The bill has been referred to the Committee on Commerce, and in addition to the Committee on Ways and Means, for a period to be determined by the Speaker. No Republican member of the House has signed on yet as a co-sponsor. We have a list of the co-sponsor's, and if you send us a self-addressed envelope, we will send the list on to you. Under the provisions of the bill, pharmacies would be able to purchase prescription drugs for Medicare beneficiaries at the same low prices available to the federal government and other " favored customers".

The proposed legislation would allow seniors to purchase prescription drugs at the same low price as "favored customers" of the drug industry. This is the category that includes the large HMOs and the federal government itself. Under the legislation the drug companies set their best prices at whatever level they want, but it can be at no greater cost than what they already charge the federal government for purchase of the same drug. The "favored customers" get as much as 60% discounts from the drug companies. The pharmacies would be using the same pharmaceutical system now in use and no new federal bureaucracy would be created. Drug companies are lobbying strongly against this legislation, since they allege it will strongly negatively impact their earnings. This in turn will negatively affect their research budgets. According to the most recent figures about 19% of a senior's income goes to the cost of prescription drugs. So far no Republican member of Congress has endorsed this proposal. As of the latest figures there are 9 million "favored customers" on the Federal Supply Schedule, and this number would grow to 48 million if the legislation were passed.



Allan Rubin

To e-mail: or

Return to Home