United States: Illinois Launches Senior Prescription Drug Program

On January 29, 2002, Governor George H. Ryan unveiled Illinois SenioRx Care, a prescription assistance program for seniors. The program was approved a day earlier by the Bush administration and by Tommy Thompson, the Secretary of the United States Department of Health and Human Services (HHS), under a waiver. HHS is promoting the program as a national model for providing assistance for prescription medication to low-income senior citizens. The benefit under SenioRx Care will provide a broad range of drugs, including antibiotic, gastrointestinal, anti-anxiety, antihistamine and antidepressant therapies. This program will also make diabetic testing supplies, hypodermic syringes, ostomy supplies and selected over-the-counter medications available to eligible seniors. As a Medicaid program, the state will receive federal matching funds, cost sharing features and drug manufacturer rebates. Medicare, which currently covers approximately 40 million seniors and people with disabilities, does not cover most outpatient prescription drugs. Medicaid is a state and federal partnership that provides health coverage to about 40 million low-income Americans, including people with disabilities and older Americans living in nursing homes. Under this federal and state partnership, states have more flexibility in expanding benefits to meet the needs of their respective constituencies.

In a press conference held at the Illinois Capitol on the day the program was announced, Governor Ryan stated "This program is the first of its kind across the nation due in large part to the success we have had with the State's Circuit Breaker [Pharmaceutical Assistance program under which SenioRx Care is modeled.] We hope other states will join us so that all seniors can receive the assistance they need to care for their health." Joining Governor Ryan to unveil the program were Revenue Director Glen L. Bower and Public Aid Director, Jackie Garner. The program is expected to extend prescription drug coverage to approximately 368,000 low-income seniors. Governor Ryan first presented his concept for this prescription drug plan to Thompson, during a meeting in April 2001 in Chicago. The proposal had been under preliminary review by the federal government since Illinois submitted its plan to the Centers for Medicare and Medicaid Services on July 31, 2001.

The pharmaceutical benefit under the program provides coverage to eligible low-income Illinois seniors age 65 and older. Those seniors with annual incomes up to about $17,200 for a single person and $23,220 for a couple will qualify without being subject to an asset test. The program is scheduled to begin June 1, 2002. Participants will pay a co-pay of an average of $3 per prescription. For individual pharmaceutical costs in excess of $1,750, SenioRx Care will pay about 80 percent of the cost of additional prescriptions, while enrollees will pay the remaining 20 percent plus the co-pay. As an incentive to maintain private prescription drug coverage, the program will allow individuals the option of receiving monthly rebate checks to help cover out-of-pocket expenses, including premiums, deductibles and co-payments for pharmaceuticals. Once enrolled in SenioRx, an individual remains eligible for 12 months. The current program will continue to serve eligible seniors earning between 200 and 250 percent of the federal poverty level as well as disabled citizens.

Thompson expects that the successful implementation of the SenioRx program in Illinois will make it easier financially and administratively for other states to develop similar prescription drug benefits for low income seniors. To facilitate that, simultaneous to his approval of the Illinois plan, Thompson announced a model demonstration application form, Pharmacy Plus. This demonstration will allow states to expand Medicaid coverage for prescription drugs to Medicare beneficiaries and other individuals with family incomes up to 200 percent of the federal poverty level.

In announcing federal approval of the program, President Bush and Thompson emphasized the administration's commitment toward enacting legislation this year to provide some drug benefit for seniors. The President's fiscal year 2003 budget plan, released February 4th, provides $77 billion over 10 years toward the expansion of Medicaid drug coverage to low-income seniors. The general principal that President Bush adheres to in his framework for improving Medicare benefits announced on January 28, 2002 is that all seniors should have the option of a subsidized prescription drug benefit as part of modernized Medicare. The framework does not elaborate extensively on the design of such a benefit but states that Medicare subsidized drug benefits should protect seniors against high drug expenses and should give seniors with limited means the additional assistance they need. The drug benefit would give all seniors the opportunity to choose among plans that use some or all of the tools widely used in private drug plans to lower drug costs and improve quality of care.

About 27% of Medicare beneficiaries do not have prescription drug insurance. According to an HHS study completed in 2000, seniors without drug coverage not only lack insurance against high costs, but do not have access to the discounts and rebates that insured people receive. Findings of that study included: (1) prescription drug prices for those without coverage are typically 15 percent higher than prices paid on behalf of people with coverage; (2) such price gap almost doubled between 1996 and 1999; (3) Medicare seniors and people with disabilities without drug coverage are five times more likely to report being unable to purchase prescriptions as those with coverage; (4) in addition to the millions of completely uninsured, nearly half of seniors with Medigap did not have that coverage for the entire year; and (5) Medicare beneficiaries without drug coverage fill fewer prescriptions and have higher out-of-pocket spending across all groups, even among the most ill. Another study recently cited by the White House reports that Medicare beneficiaries without prescription drug coverage used 8 fewer prescriptions a year than the seniors with coverage. For low-income seniors, individuals without a drug benefit use 14 fewer prescriptions annually than low-income seniors with coverage. Of the average of $2,784 a year Medicare recipients spend out of pocket on health care, approximately 12 percent is spent on prescription drugs.

Serious Congressional efforts toward national Medicare coverage of prescription drugs decelerated soon after the presidential election and even more so in light of the subordination of domestic social policy concerns to terrorism and homeland security. Though currently a multitude of Medicare prescription drug benefit plans are under consideration, the implementation of any program providing a drug benefit will likely be impeded by the significant funding issues facing the Medicare program in the mid-term and long term. While there are a range of projections, it is estimated that the costs of the Medicare program will begin to exceed the program tax revenues within 10 or 15 years. Medicare currently comprises about 12% of the federal budget. Without changes, by 2030 it could constitute between 28% and 38% of the federal budget, requiring more than doubling the payroll tax to cover increased expenditures. The annual costs of prescription drug coverage proposals would further exhaust Medicare funding unless cuts elsewhere in the program were made.