State Health Care Laws and Proposals
(5/17/08)- As a follow-up to our item dated 1/18/08 below the U.S. Court of Appeals for the Ninth Circuit heard oral arguments in connection with the lawsuit to overturn San Francisco's new compulsory health-care coverage law. The employer mandate law took effect for businesses with 50 or more employees on January 1, 2008, and many businesses in the city began to pass along the cost to customers immediately thereafter.
San Francisco's law aims to provide affordable health care coverage to the city's estimated 73,000 uninsured residents, roughly half of whom work. The first payments to the city's program were due the first week in May.
Attempts by Maryland and Suffolk County, N.Y. to require employers to expand health-care coverage of workers were overturned in court last year.
(4/30/08)- According to the figures in the supplemental budget that was just released by Governor Deval Patrick of Massachusetts, the state's universal health care coverage will cost $151.1 million more than was budgeted in its first year of operation.
The state had appropriated $472 million for the fiscal year ending June 30, but enrollment in the state's subsidized insurance programs for low-and middle-income workers exceeded expectations.
About 340,000 of the state's estimated 600,000 uninsured have gained coverage since the state began requiring health insurance. The state had projected that 136,000 people would sign up for its Commonwealth Care policies, but 174,000 are now enrolled.
For the coming fiscal year, the governor has requested $869 million for Commonwealth Care, but his aides have already conceded that will not be enough as enrollment continues to grow.
(2/7/08)- The California Senate Health Committee defeated Governor Arnold Schwarzenegger's state health-care coverage plan by a vote of 7 to 1, with three abstentions. Even though the California Assembly had passed the plan, this committee vote effectively kills off the plan. Citing both the rising costs for the plan and the state's large impending deficit, opponents of the plan prevailed.
To see more on the California plan, please see our items dated 12/31/07 and 9/18/07. Pennsylvania and Illinois had hoped to have health-care coverage for the residents of those respective states, but Massachusetts has been the only state to pass such a plan (see our item dated 12/31/07 for the Mass. plan).
The coup-de-grace for the California plan was delivered when the committee heard that Massachusetts would have to increase the cost of its plan by over $400 million in 2008, a cost to be borne mainly by resident taxpayers of Mass. The committee members feared that the same thing would happen to California residents because its plan would also become too costly. The California plan would have covered non-legal residents as well as legal residents thus resulting in an additional cost of over $1.5 billion.
(1/18/08)- As a follow-up to our item dated 12/31/07 about the legality of the San Francisco universal health care coverage plan, a unanimous decision, from a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit, allows the city to proceed with its law requiring city located businesses with more than 20 employers to pay a fee to help cover employees' health care costs.
City officials estimate this will help about 20,000 of its residents who do not have health-care insurance. The law, which passed the city's Board of Supervisors in 2006, had been challenged by a local restaurant trade group, that argued that it would violate a 1974 federal stature that prohibits conflicting local, state and federal plans.
Judge William A. Fletcher of the circuit court wrote that the city had a "strong likelihood" to prevail in the case, and granted a temporary stay of the district court order from Judge Jeffrey Wright of the Federal District Court of San Francisco while the full appeal is heard.
Under the law, businesses with more than 20 employees are required to pay a minimum health care contribution of $1.17 to $1.76 an hour for each employee. The fees can go toward a variety of health-care options, including employer-provided insurance, health savings accounts, direct payment of medical bills, or payment in a new city program called Healthy San Francisco.
City officials envision their program eventually will provide care for about 73,000 uninsured adults, through a network of 22 clinics offering primary and preventive care and coordinating access to more specialized hospital services, including mental-health and substance abuse service.
(12/31/07)- The Census Bureau reported that the number of uninsured health care residents in this country grew to 47 million in 2006, a one year increase of 2.2 million. The share of U.S. residents who had employer-based coverage dropped to 60% from 64% in 2000, according to the Economic Policy Institute, a liberal research group.
The cost of employer-sponsored premiums rose by 6.1% in 2007, which is considerably above the inflation rate, according to the Kaiser Family Foundation.
California is faced with a ballooning budget deficit that threatens its health-plan coverage for its uninsured residents. Governor Arnold Schwarzenegger has asserted that the deficit has grown to an estimated $14.5 billion over the next two years. At last count California is one of 15 states that now face budget deficits for the coming fiscal year according to the National Association of State Budget Officers.
California state agencies have been notified to prepare for cuts that could total as much as 10% for each agency. To see more on the California health plan coverage for uninsured residents please see our item dated 9/18/07.
In addition to being the most populated state in the union, it is estimated that about 20% of the state's population have no health insurance. This means that there are more uninsured people in California, as is the total population of Massachusetts, Maine and Vermont combined.
A federal judge, Jeffrey Wright of the Federal District Court in San Francisco, struck down a key provision in the city's program to provide basic health care to the uninsured residents of the city. The city was set to begin requiring employers with more than 20 workers to state subsidizing he health plan on January 2, 2008.
Judge Wright claimed that the new San Francisco law would violate a 1974 federal law designed to prevent inconsistencies in the coverage afforded employees who work for the same company but live in different jurisdictions.
Between Nov. 1 2006 and August 1, 2007, at least 105,000 people in Massachusetts have signed up for the Commonwealth Care plans. Those earning up to 300% of the federal poverty level without access to employer-sponsored insurance qualify for these plans.
Massachusetts's officials now estimate that about 300,000 of its residents will sign up for the state's health coverage plan that is due to go into effect on January 1, 2008. Any resident of that state who does not sign up for health insurance will face a tax penalty of $219. The state hopes to have 600,000 residents to eventually sign up to its plan.
Massachusetts's now expects to exceed its first year budget gap for the state health care plan to now exceed $150 million, and are struggling to prevent double-digit premium increases next year.
(10/4/07)- In a follow-up to our item dated 10/1/07, Michigan lawmakers approved two tax increases and gave themselves an extra month to resolve a $1.75 billion budget deficit, and thus avoided a threatened full shutdown of the state's governmental operations. The state's Republican led Senate approved the tax increases by separate 20-19 votes, with Lt. Gov. John D.Cherry Jr. casting the tie breaking vote in each case.
One of the bills that the legislature passed, and that Democratic Governor Jennifer M. Granholm signed, increased the stae's tax rate to 4.35% from 3.9%. The other bill expanded the coverage of the state's 6% sales tax to cover a much longer list of services that up to then had been exempt from the tax.
All departments opened as usual on Monday. Michigan has the highest unemployment rate of any state in the union at 7.4% compared to the national average of 4.6%. Foreclosures in the Detroit area are running about 5 times the national average.
(10/1/07)- As our item dated 8/30/07 below noted, the state of Wisconsin, whose fiscal year began on July 1 was the only state that does not have a new budget in place for its fiscal year. The state of Michigan however just became the second state operating without a budget in place.
In Wisconsin, by law, spending, taxing and services automatically proceed at the current levels until a new budget is passed. That is not the case with Michigan where the Democratic Governor Jennifer M. Granholm, and Michael D. Gishop, the Republican majority leader in the Senate disagree on how to resolve the problem.
The Democrats in Michigan favor increased taxes while the Republicans favor a cut in spending. Governor Granholm has notified about 35,000 of the 53,000 state employees not to come to work on Monday. Only Michigan state troopers needed for "critical law enforcement will be asked to report to work. The state, which is the center of the nation's auto industry, has a deficit both for the current fiscal year and for next year's budget also.
(9/18/07)- Can California follow in the footsteps of Massachusetts and come up with a universal state wide health-care coverage plan? California has more uninsured residents than any other state, so it is a critical state in determining whether or not the state can do anything to alleviate this crisis.
So far Governor Arnold Schwartzenegger (Rep.) $12 billion plan has not garnered support from any Republican lawmakers who reject its taxes on employers, hospitals and doctors to pay for health coverage for the 6.8 million uninsured residents of the state. Democrats object to the plan since it requires everyone without employer coverage to buy individual coverage even though such coverage may be unaffordable.
The governor's plan has received the backing recently of the California Hospital Association, which agreed for the first time to support a revenue tax on the state's more than 400 hospitals. Many business continue to oppose his plan since it calls for a 4% levy on employers who don't provide insurance for its employees. Many also oppose his plan that calls for an increase in the state's sales tax.
The state's Democrats have proposed a plan that would extend coverage to about 70% of the state's uninsured, and would be funded by a 7.5% payroll tax on employers who do not provide insurance. Their plan does not call for financial contributions from doctors or hospitals not require non-insured individuals to buy such insurance.
Under California law no new taxes or tax increases can be passed by the legislature without a two-thirds majority vote. California voters would have to approve any law that the governor and the legislature may agree upon if it contains tax increases.
(8/30/07)- Governor Arnold Schwartzenegger (Rep.) signed California's overdue budget after using his line item veto power to trim $700 million and temporarily eliminate the state's operating deficit. This action means the state can immediately begin to pay the schools, hospitals, state contractors and social service agencies that have had payments cut off since the fiscal year began July 1.
This leaves Wisconsin as the lone state whose fiscal year began without having passed a new budget. Michigan lawmakers continue to negotiate their budget, but its fiscal year does not begin until October 1.
The budget passed with a bare minimum of two votes, both cast by Republicans. California is one of the few states that requires two-thirds legislative majority votes to pass the state budget. This means that the attempt to provide universal health insurance for all residents of California will not be enacted this year.
(8/14/07)- The Illinois House of Representatives defied Governor Rod. R. Blagojevich by failing to enact a new budget from the one it had submitted to him earlier in the special session. The governor did not like certain items in the budget that it had passed, and he had called for another session so that a budget more to his liking might be passed. For more on this matter please see our item dated 8/6/07 below.
(8/6/07)- There are three states that have entered the second month of their fiscal year without a budget. The three are California, Wisconsin and Illinois. In Illinois there is a particularly bitter budget battle going on between the Democratic Governor Rod. R. Blagojevich and the state legislature.
As a result of the budget battle in Illinois, one of the governor's top legislative priorities, a health care proposal called Illinois Covered, is caught in the quagmire of the negotiations.
Governor Blagojevich told the AP last week, "There's not going to be a budget resolution without a health care plan, whether we have to stay here through August to get it done or through September."
Michael J. Madigan, the House speaker and chairman of the Illinois Democratic Party has opposed some of the governor's more expensive proposals.
(7/29/07)- A shortage of primary-care physicians is threatening to undermine Massachusetts' state subsidized Commonwealth Care medical plan for its 550,000 uninsured residents. For more details on this plan please see our items dated 4/17/07 and 3/31/07 below, and our article The Massachusetts Health Insurance Plan.
According to a study that was just released by the Massachusetts Medical Society 49% of the state's internists are not accepting new patients. 95% of the 270 general practitioners at Boston's top three teaching hospitals have halted new patients. The average wait to get an appointment according to the society is seven weeks.
Median income for primary-care doctors was $162,000 in 2004, making it the lowest type paying doctor according to a study that was conducted by the Medical Group Management Association in Englewood, Colo. Specialists earned a median of $297,00, with cardiologists and radiologists exceeding $400,000.
Under the Massachusetts plan, residents who make between one and three times the poverty level ($48,000 for a family of three) are eligible for coverage. Residents of the state who do not get coverage will pay a penalty on their state taxes, and companies with more than 10 employees will face a fine for each worker to whom they don't provide coverage.
The law officially took effect on July 1, but the state won't impose any penalties until next year.
(5/10/07)- The Maine plan, which was the first state plan intended to provide universal health coverage for its residents continues to lag far behind in connection with the number of people covered under its umbrella. When the law was enacted it was intended to cover the entire 130,000 uninsured residents of the state by 2009, with 31,000 of them intended on being covered by 2005.
So far, only 18,800 people have signed up for the Dirigo plan. To find out more about the plan please see our items dated 1/2/07 and 9/6/03 below. Governor John E. Baldacci has proposed a host of adjustment to the original plan, which he hopes for enactment by the legislature by the end of the year.
Most insurance companies have not found it profitable enough to participate in the plan, leaving only one insurance company, Anthem Blue Cross Blue Shield with the majority of the business in the state. Dirigo means "I lead" in Latin. The governor's new plan will be called DirigoChoice.
The new proposals will allow the program to cover preventive care, subsidized premiums and deductibles, and includes coverage for mental health. It does not exclude people for preexisting conditions.
(4/17/07)- The Commonwealth Health Insurance Connector Authority of Massachusetts has approved the plan for health insurance coverage for an estimated 263,000 of the state's 328,000 adults who are currently uninsured as we discussed in our item dated 3/31/07 below.
The plan will now be presented at public hearings throughout the state and face a final vote in June. The proposal would cost an estimated $215 million.
Under the proposal, individuals earning $30,630 to $50,001 would not be eligible for state subsidies, but they would not be penalized if they could not find health insurance prices at $150 to $300 a month. A person earning up to $15,315, one and half times the federal poverty level would not have to pay anything under the proposal. People who earn more than $50,001 would not be given a cap on insurance costs.
Many small businesses have complained that they could be driven out of business if you required them to have health insurance coverage for their employees. When you look at the numbers however, small businesses in the true sense of the word would not be required to cover them employees under any of the impending state laws.
The Massachusetts plan and Illinois Governor Rod Blagojevich's proposal exempt businesses with fewer than 10 employees. Pennsylvania Governor Ed Rendell's plan, which was introduced in January, would exempt businesses with 50 or fewer workers. Vermont's program, scheduled to take effect on October 1, exempts businesses with eight or fewer employees in the first year.
(3/31/07)- Massachusetts is close to becoming the first state to have universal health care and prescription drug coverage for all its residents. There are about 515,000 uninsured residents in the state who would have some form of coverage under the plan.
The state had set up a board, the Commonwealth Health Insurance Connector Authority to set up the rules for coverage under the plan. The agency has spent the last few months trying to compromise the interests of businesses, insurers and health care advocates in the state. The proposed rules are subject to public hearings, with final approval set for the end of June.
About 47,000 residents of the state fall below the federal poverty lines and are therefore eligible for Medicaid. An estimated 150,000 residents had incomes at 100% to 300% of the poverty line and will therefore get a state subsidized rate. This group will have to pay something, typically $18 to $170 per month.
The rest of the uninsured will be required to buy insurance that meets a standard set by the authority. The authority approved plans from 7 insurers with premiums ranging from $175 to $288 a month, and deductibles ranging from nothing to $2,000 a year. Insurance companies would be allowed to place caps on lifetime coverage.
The maximum deductible for a basic health plan would be $2,000 per individual per year, and a maximum out-of-pocket cost would be $5,000 if providers within an insurer's network were used.
The plan can be phased in through January 2009, but residents will still need to have some form of insurance by July of this year. Those who fail to get insurance would face penalties that could include the loss of a personal income tax deduction.
(2/1/07)- President George W. Bush formally announced some of his health-care changes in his State of the Union speech. He is proposing to shift health-care expenses to individuals and families instead of relying mainly on coverage through employers.
Under the present tax law premiums for employees that are paid for by the employer for health-insurance are not included as an income item for the employee. The president's proposal would mean that this amount contributed by the employer would become an income item that has to be reported by the employee when he makes out his income tax.
On the other hand, his proposal would create a tax deduction of $7,500 for individuals and $15,000 for families for everyone who gets health insurance, through work or in the open market. Presently if you buy health insurance on your own, you do not receive any tax deduction for the cost of the insurance.
Another part of the president's plan would help states extend coverage to the uninsured by diverting money from hospitals that care for the poor into state insurance pools.
(1/22/07)- Back in 1994 the then President Bill Clinton proposed universal health coverage for everyone in this country. As we all know that attempt ended in failure, but the health-care crisis continues to worsen with each passing year. According to the latest count there are over 46 million people in the United States who do not have health care coverage.
Many states are attempting to deal with this problem because the federal government has failed to act on this matter. California's Governor Arnold Schwarzenegger gained a lot of media attention recently when he announced his plan to try and deal with this situation. Let us examine what has been proposed by five of the states that have been in the forefront of this issue.
Slightly less than 19% of all Californians have no health insurance, making it the leading state for uninsured residents. The national average is 15.7% according to the latest Census Bureau numbers on this situation.
Under Governor Schwarzenegger's California proposal employers with 10 or more employees would have to offer health insurance to its employees, or pay at least 4% of their payroll into a state program for the uninsured. Doctors would contribute 2% and hospitals 4% of their gross earnings to the program.
Insurers would have to offer coverage to everyone regardless of the individual's health, and could spend no more than 15% of patient's premiums on administrative costs. All individuals would have to purchase health insurance or face tax penalties. At last count there were 36 million residents living in California.
Massachusetts will have a compulsory health insurance plan starting in July of this year. That makes it the first state to have its health insurance plan go into effect. All residents of the state will be required to purchase health insurance. Low-income residents will receive subsidies to buy their own insurance.
Residents will be able to buy the insurance through a private insurance company created by the state that will connect the buyers and sellers. The state will provide $125 million towards the program, and it is expected that another $50 million will come from penalties on businesses that don't provide health insurance. The rest comes from reallocating an existing $1 billion in government money.
Maine has its Maine Rx Plus program which deals with prescription drug costs for its residents. The state-subsidized DirigoChoice health insurance plan is optional and offered by private companies. Enrollment is limited to small businesses, the self-employed and the uninsured who don't provide health insurance to employees.
Subsidies are provided to low-income uninsured and that is funded by federal money. Participating employers will pay 60% of the health costs for their employees. Insurance companies will pay an annual fee calculated as the amount saved in bad debt and charity.
DirigoChoice was targeted to cover 30,000 residents in its first year, but has only been able to enroll 13,000 so far. There are a total of 130,000 uninsured residents in Maine.
In Vermont private insurance companies will offer the state-subsidized Catamount Health plan this October. The state has raised tobacco taxes and charged employers $365 per year for each uninsured employee to cover these subsidies for low-income uninsured. Individuals are not required to buy insurance, and the plan is open only to the uninsured. There are 60,000 uninsured residents in Vermont.
The state of Pennsylvania has 760,000 uninsured adults. Governor Edward G. Randall has proposed 47 changes to state law and regulations so that some form of health insurance would cover all residents of the state. The state passed a law in 2006 that would cover the health insurance needs of the 150,000 uninsured children residing in the state.
To cover the cost of his proposals the state would increase cigarette taxes by 10-cents per pack, and impose a fee on businesses that do not offer insurance to their employees. His plan does not require individuals to join a health care insurance program.
(11/10/05)- The U.S. Court of Appeals for the First Circuit in Boston affirmed a lower court's ruling that the Maine law that requires greater transparency in business dealings by the pharmacy-benefits managers (PBMs) in the state was constitutional. The Maine law that was passed in 2003 requires the PBMs to disclose to their clients any payments they receive from drug manufactures. The PBMs have a fiduciary responsibility to pass any discounts and rebates that they receive from the pharmaceutical companies onto their clients.
The law went on to state that these disclosures by the PBMs to their clients would not be made public. The PBMs had argued that the state had no authority to regulate the private business relationships that were being conducted by the PBMs and the drug companies. The law in effect was saying that the fiduciary obligation of the PBM to extract the best prices for the drugs of its clients outweighed their corporate duty to make as much money as possible for the company.
Many other states have been awaiting this decision before enacting similar legislation in their own locality. Pharmaceutical Care Management Association has indicated that it would appeal the ruling to the Supreme Court.
Under the transparency provisions of the new Medicare law, pharmacy benefit managers and other sponsors of Medicare drug discount cards must pass along the full amount of any manufacturer's rebates to the consumer. The PBMs will have to disclose rebate terms to Medicare officials, (but not to the public) when the new Medicare law goes into effect.
In connection with this topic we wrote an item back in 2003 in our article entitled "Medicare and the Cost of Prescription Drugs-HMOs and PBMs Part IV" The text that dealt with this particular item is repeated now for your perusal:
"The PBM's trade organization, the Pharmaceutical Care Management Association (PCMA) was granted a temporary injunction that prevents the state of Maine from enforcing legislation that the state recently passed requiring the PBMs to disclose certain information to its clients. The law required the PBMs to disclose any secret deals they had with the drug manufacturers.
As a general rule the amount of fees and rebates that a manufacturer pays to a PBM has been kept "secret". These fees and rebates improve the chances of a particular drug to be sold by a PBM. Maine was the first state to introduce legislation to force the PBMs to disclose these payments. Several other states have now followed Maine in enacting similar legislation. The law became effective in Maine in September 2003. In granting the temporary injunction against compliance with the law, the judge said that PCMA "has demonstrated substantial likelihood of success" in its argument that the Maine law is preempted by the federal benefits law, the Employee Retirement Income Security Act of 1974.
The Maine law also requires the PBMs to pass along to their clients the volume-based discounts they get from a drug maker. The law also requires the PBM to get the physician's approval if a prescribed medication is to be switched. It also requires the PBM to tell the individual and the health-insurance provider the cost of the prescribed drug and the drug that the PBM wants the patient to be switched to. Violations would be punishable by a fine for as much as a $10,000 per violation."
(9/6/03)- The state of Maine has sent prescription Maine Rx Plus cards to about 73,000 people who were part of the state's now-defunct Healthy Maine program entitling residents to a 10% to 25% discount off brand name drugs and a 60% discount on a range of generic drugs.
A suit has been filed by the Pharmaceutical Care Management Association, a trade group, against the state of Maine in an attempt to prevent the state's prescription drug plan from going into effect on September 13th. The suit alleges that the plan would prevent the pharmacy benefit managers (PBMs) from securing the lowest price possible for drugs.
The Maine legislature has passed a comprehensive health insurance plan that will make low-cost coverage available to all Maine residents by 2009. Governor John E.Baldacci signed the legislation, which looks to insure 31,000 residents by 2004 and the remainder of the state's residents by 2009. The plan would create a semiprivate agency that would start in July 2004 to provide private coverage to the nearly 275,000 uninsured residents as well as businesses, the self-employed and municipalities with 50 or fewer employees. The new program is called Dirigo Health Reform Act of 2003 (Maine Rx Plus) and it will be put into effect in January 2004. Enrollees will be able to buy preferred drugs at a discount of between 15% to 60%.
Premiums would be based on income, family size and the particular features of the plan that are desired. Employers would pay up to 60% of an employee's premium. The upper thresholds for individuals that qualify for the plan are $31,400 for individuals, $42,420 for couples, and $64,400 for a family of four. The state estimates that 275,000 of the 325,000 residents without health care insurance would benefit from the proposal.
What remains to be seen is whether or not Maine will need to seek approval from the federal government to enact the plan. If Maine does seek federal approval, and if same is granted, it is likely that most of the states would follow with similar programs of their own.
Individuals with annual incomes below $27,000 and families of four that make less than $55,000 a year will be eligible for reduced premiums. The plan puts a one-year cap on insurers, hospitals and providers and limits outpatient procedures. The plan would also be financed by federal tax relief money the first year and then with money recovered that does not have to be paid for the uninsured to receive emergency medical care.
Justice John Paul Stevens in his majority opinion in the Maine RX case affirmed the state's view that allowed non-Medicaid beneficiaries to take part in the program. The state's viewpoint was that in making prescription drugs more affordable for its poorer residents, even those who were not eligible for Medicaid, it was in effect, helping them with one of their major expenditures. This would help to keep them off the Medicaid rolls and thus help to keep down the cost of Medicaid.
Justice Stevens wrote that the program: " provides a plainly permissible justification for a prior authorization requirement that is assumed to have only a minimal impact on Medicaid recipients." He went on to write that "prior authorization" requirements could help save money for Medicaid without harming beneficiaries. The state of Hawaii has enacted similar legislation to the one in Maine and there are 18 states that have offered bills similar to Maine RX to offer drug discount plans. The states where similar programs are pending are: Col., Flo., Geo., Ill., Ind., Mass., Mich., Minn., Mississippi, Missouri, N.J., N.Y., Oh., R.I., Tenn., Tex., Vt., and Va.
The U.S.Supreme Court's ruled on May 19, 2003 that the state of Maine could proceed with its Maine RX prescription drug law. In a 6-3 vote the majority did not rule on the constitutionality of the law. The ruling merely states that appeals court should not have blocked the state from proceeding with the law. According to Justice John Paul Stevens: "By no means will our answer to that question finally determine the validity of Maine's RX program."
Justice David Souter and Ruth Bader Ginsbury, joined the Stevens opinion, with Justices Antonin Scalia, Clarence Thomas and Stephen Breyer joining in to form the majority vote, even though Justices Scalia and Thomas wrote separate opinions which strongly upheld the program. Chief Justice William H. Rehnquist, and Justices Sandra Day O'Connor dissented.
The Federal District Court in Portland had found that the program violated both the federal Medicaid statute and the constitutional proscription against state interference with interstate commerce. The appeals court had disagreed with the lower court, but put the program on hold till the Supreme Court could rule on the matter. The Supreme Court said that the program should not have been put on hold by the appeals court.
The title of the case in question is PhRMA vs Concannon, 01-188. Thus the lower court will still have to rule on the constitutionality of the program or the federal Department of Health and Human Services could effect the eventual outcome of the matter also. The Bush administration can also have a pronounced effect in this matter also.
The U.S. Supreme Court heard oral arguments on Tuesday January 21 in the matter of the Maine prescription drug discount program known as MaineRX. A ruling is expected on this matter is expected sometime between May and July. With 48 out of the 50 states presently having budgetary problems, if Maine prevails in this case, many states will follow with similar type of legislation. Keep in mind also that the federal government, which has its own budgetary deficits to deal with, filed a brief in this case siding with the state and affirming the legality of the program Maine RX.
As a matter of fact the federal government has begun to use cost and "functional equivalency" for drug payments for Medicare and Medicaid beneficiaries. This was brought to the forefront when Thomas A. Scully, administrator for the Centers for Medicare and Medicaid Services spoke at a recent convention of the American Medical Association. In speaking about Nexium, the new heartburn medication he said it was identical to Prilosec, which became available in generic form in December 2002. He said: "You should be ashamed if you prescribe Nexium" because it increases costs, with no medical benefits. He went on to say "The fact is, Nexium is Prilosec. It is the same drug. It is a mirror compound."
In recent weeks federal officials have adopted policies to limit what Medicare pays for prescription drugs. Medicare pays for about 400 outpatient prescription drugs, including cancer drugs, and medications given to patients by injection or infusion in a doctor's office. A federal advisory committee has stated that it is incumbent on Medicare to weigh costs against benefits in deciding whether to pay for new drugs, medical devices and other technology.
Incidentally we will be writing an addition to our article about "Medicare and the Cost of Prescription Drugs-Part II" later this week where we will discuss in more detail the $2.5 million that the state received as its share of the settlement for Medicaid fraud by two drug companies. The money that the state receives from the settlement will go to the MaineCare program that was formerly known as Maine Medicaid.
The current Medicaid rebate program was initiated in 1991. The drug companies are required to pay quarterly rebates to the states in a way that accounts for the discounts that the drug companies give to their big customers. The rebate is calculated on a drug by drug basis. The drug company pays the greater of a 15% rebate or the difference between the manufacturer's and the drug company's best price for the drug. Maine is attempting under its MaineRX program, to extend this rebate to all its residents, not just those who qualify for Medicaid.
PhRMA is arguing that the MaineRX program violates the "commerce clause" of the U.S. Constitution, in that it is attempting to regulate the prices of sales transactions outside the state's border between drug makers and drug wholesalers. It is also arguing that the Maine law violates the "supremacy clause" of the Constitution by overruling the federal Medicaid law with a law of its own.
The U. S. Court of Appeals in Washington ruled that Maine's
Healthy Maine Prescription program was illegal, following a
similar ruling of illegality in connection with a similar type
Vermont plan. Please keep in mind that this ruling does not
pertain to the pending matter before the Supreme Court as to the
legality of the MaineRX discount drug program. Oral arguments for
MaineRX were heard by the Supreme Court on January 21. There are
34 states that have enacted legislation similar to Maine'sRX
program that will be effected by this ruling when the Supreme
Court decides this matter.
MaineRX was approved by the state's legislature in 2000 but has
been challenged ever since by PhRMA so that it still has not been
utilized by the state. No matter which way the Supreme Court
ultimately decides the case, the decision should give the
legislative branch of the government further impetus to act on
the high cost of prescription drugs in this country.
If the Supreme Court upholds MaineRX the 34 states waiting in the wing with similar type legislation will be sure to proceed with their plans. If the legislation is held to be illegal by the Supreme Court the pressure will surely build on the federal government to act on the matter. "In either instance, the case becomes a catalyst for Congress to take action," said Olympia Snowe, one of Maine's two Republican senators who strongly endorse the program.
The Healthy Maine program was approved by the federal government about two years ago. The three-judge panel of the U.S. Court of Appeals court ruled that the Healthy Maine program was not permissible, even as a demonstration project, because there were no mandatory guarantees of state contributions to the program, and there were no federal contributions towards the plan. The appeals court said that the program violated the Social Security Act, which set the terms for Medicaid.
The federal law requires drug companies to sell drugs to state Medicaid programs at discounts that reduce retail prices by about 18%. The Healthy Maine program required the drug companies to give similar discounts to thousands of people who earn too much to qualify for Medicaid. PhRMA, the main trade association for the brand name drug companies, had filed the lawsuit. Colorado, Hawaii, Maryland, Massachusetts, New Mexico, New York, Vermont, Washington and Wisconsin have passed similar programs to the Healthy Maine program.
Under the Healthy Maine Prescription program the state contributed about 2 % towards the cost of the discounts. The state did this to overcome the objection from the U.S. Court of Appeals in Washington when it ruled that Vermont's prescription drug plan was illegal. The court held that Vermont's plan was illegal because it did not use any additional state's Medicaid funds to underwrite the discounts. PhRMA sought to have the Maine plan invalidated because the 2 % contribution did not qualify as a payment of Medicaid funds.
AARP announced that it had filed a friend of the court brief with the Supreme Court in support of the Maine RX program. AARP's brief stated that the formulary list approach has not harmed patients since the approved drugs in the list were effective in dealing with the medical problems of the patients. Cost effectiveness is a tool that should be included in determining what medications should be used in dealing with different medical problems.
The Supreme Court ruling of May 19, 2003 means that Maine is no longer enjoined from initiating its program. The case is known as Pharmaceutical Research and Manufacturers of America v. Concannon, No. 01-188 (no date). The Supreme Court heard the drug industry's trade group's appeal of the legality of the Maine law that uses the federal Medicaid law as leverage to force drug manufacturers and wholesalers to sell their products in the state at discounted prices. PhRMA argues that Medicaid beneficiaries would be harmed by the law since it restricts their access to all medications that may be available to treat a medical problem. The state's program has a formulary approach in determining which medications are on the approved list.
The Bush administration has filed a brief with the Supreme Court in favor of the constitutionality of the Maine law that allows the state to extend its prescription drug program to non-Medicaid residents. State officials have estimated that the program will cover about 325,000 of its residents who are not covered by prescription drug insurance coverage. This group includes senior citizens who lack prescription drug coverage.
Hawaii recently adopted a law similar to the one enacted in Maine and 33 other states have similar legislation pending the outcome of this case. At least nine other states have adopted similar legislation this past year, including Florida, Louisiana, and Michigan.
PhRMA has also instituted an action in the U.S. District Court in Washington, D.C., which challenges the Michigan program. The lawsuit was filed against U.S. Health and Human Services Secretary Tommy Thompson and Thomas Scully, administrator of the Centers for Medicare and Medicaid Services for approving the Michigan program. The lawsuit in effect is challenging the attempt to use preferred prescription drug lists to restrict the choices of drugs available to the state's residents. In order for a drug to be on such a list the drug must be approved by a panel that attests to the efficacy of the drug, and the drug company must give a discount that will exceed the normal 15% reduction ordinarily required under Medicaid.
The appeal of the ruling by PhRMA to the decision that upheld the constitutionality of the Maine law to the Supreme Court is based on two legal concepts. The first grounds for the appeal is the claim that it interferes with interstate commerce and the second ground is that it is inconsistent with the federal Medicaid statute since it restricts Medicaid beneficiaries from choosing government qualified drugs. Solicitor General Theodore B. Olsen contested both these claims in the government's brief submitted in favor of upholding the law.
The former leader in the Maine State Senate, Chelle Pingree who was instrumental in passing the State MaineRx program, was elected to the U.S. Senate with prescription drug coverage under Medicare being her overriding campaign promise in her election campaign. Maine Rx is the law that tries to force the drug companies into price negotiations with the state to lower drug costs for the uninsured. Another Maine program, Healthy Maine Prescriptions (which has been turned down because of illegality by the courts), uses the purchasing power of the Medicaid program to provide discounts of up to 25% to low-and moderate-income people. Maine Rx includes within its coverage residents whose income exceeds federal poverty levels by about three times, since it covers for example a family of three with an income up to $43,900.
PhRMA sustained the loss in the state of Maine, when federal Judge Ricardo M. Urbina of the U.S. District Court in Washington ruled that federal health officials had the authority to grant the state a waiver to use the state's Medicaid program to help provide discounts to non-Medicaid recipients. Incidentally Judge Urbina is the same judge who castigated and ruled against Bristol-Myers in the BuSpar patent extension case against Mylan and Barr Labs that we discuss in our article about Patent Laws and the Cost of Prescription Drugs. Judge Urbina's decision was upheld by the U.S. Appeals Court for the First Circuit in Boston.
Maine has formulated a program (Maine Rx) that provided sharp discounts to its residents to help them purchase prescription drugs. Eligibility to participate in the program was extended to residents who did not have health coverage even though they might have had as much as three times federal poverty limits in income. With this much income they did not qualify for Medicaid.
PhRMA the drug industry's trade group has appealed the denial of their request to have Maine's prescription drug law declared unconstitutional. The program would extend Medicaid discounts on prescription drugs to an estimated 325,000 low- and moderate-income residents of Maine. Under the Maine program, the state requires pharmaceutical makers to grant Medicaid-style rebates on medicines bought by state residents with income less than three times the federal poverty level.
A federal appeals court (1st Circuit Court of Appeals) had previously denied the request by PhRMA, to reconsider a 3-judges panel's decision of the federal appeal's court allowing Maine's prescription drug-discount law to proceed. Prior to this ruling a 3-judge panel of the federal appeals court ruled that Maine can proceed with its Maine Rx Program and thus overturned the ruling of Judge D. Brock Hornby. The 3 judge panel of the appeals court found that the Maine law only regulates in-state activities and that the program only seems to expand existing mechanisms in the Medicaid program.
The Maine Rx program creates a 12-member commission to review drug prices and access, and provides an additional $3 fee to pharmacies for every prescription they fill in the program. It imposes a "profiteering" penalty of up to $100,000 per action on manufacturers or distributors who are considered to be charging excessive prices for drugs or restricting the state's supplies.
The law directs the state to negotiate with the drug companies participating in the program for "an initial rebate amount equal to or greater than the rebate calculated under the Medicaid program". The state would pass the rebate to the pharmacies, which in turn would pass the discount on to qualifying residents.
The state could advertise which drug companies were not participating in the program. PhRMA contends that since the drug companies sell medicines to wholesalers and distributors, rather than directly in the state, the law violates the interstate commerce clause of the Constitution
To understand why the industry is opposed to the law it is necessary to understand what the law involves. PhRMA contends that the law interferes with the interstate commerce clause of the Constitution and also violated the supremacy clause of the Constitution, which states that if federal and state law conflict, federal law should prevail. In his lowere court ruling Judge Hornby agreed with PhRMA's argument stating: " I find the plaintiff's likelihood of success on the merits on most of its constitutional challenges to be overwhelming." Maine's Attorney General Andrew Ketterer said the ruling, which essentially set aside the law, disappointed him. The state appealed this ruling, and this ruling was reversed on appeal.
There are about 1 million residents who live in Maine, of whom about 325,000 are uninsured or have insurance that does not cover prescription drugs. There are about 200,000 residents of the state who are in the Medicaid program or covered by special programs that deal with prescription drugs for the elderly.
SmithKline Beecham PLC announced that it would stop selling prescription drugs to its wholesaler in Maine. According to the ruling from U.S. District Court in Bangor, Maine Judge D.Brock Hornby, however this action is now unnecessary. The judge ruled in favor of granting the preliminary injunction sought by the drug industry's trade group the Pharmaceutical Research and Manufacturers of America.
As originally proposed the law was intended to bring down the price of prescription drug prices to the same level as the drugs cost in Canada. That portion of the original legislation was considered too excessive so it was eliminated. Parameters were established to help the commission determine what a reasonable profit level was for the drug industry.
If the commission determines by January 5, 2003 that the price for drugs in the state Rx program were not at the same level as for users with large discounts, then the state could begin imposing price controls as of July 1, 2003. The state could also require "prior authorization" before doctors could prescribe drugs to its Medicaid recipients. At last count it is estimated that there are about 20 states with similar legislation to Maine's prescription drug law pending.
To see what the other states have done regarding prescription drugs and the elderly please go to State Laws that Help the Elderly with Prescription Drug Costs
To see what other plans are available in connection with helping keep down the cost of prescription drugs by other entities please see: Various Proposals for Prescription Drug Coverage Under Medicare
FOR AN INFORMATIVE AND PERSONAL ARTICLE ON PRACTICAL SUGGESTIONS WHEN SELECTING A NURSING HOME SEE OUR ARTICLE "Selecting a Nursing Home"
By Allan Rubin
updated May 17, 2008
http://www.therubins.com
To e-mail: hrubin12@nyc.rr.com or rubin@brainlink.com