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August 1, 2002

Senate Passes Prescription Drug Legislation;
Fails To Reach Agreement on Medicare Outpatient Drug Benefit

After more than two weeks of contentious partisan debate, on July 31, the Senate completed prescription drug legislation action, without agreeing on a plan to expand the Medicare program to add coverage of prescription drugs. Over the past week, the Senate rejected four separate proposals that would have added a drug benefit to Medicare. While several of these plans were able to secure the support of a majority of senators, none were able to get the 60 votes that were required to waive budget rules (the Senate budget resolution limits available spending on Medicare prescription drug coverage, and a waiver was required for any proposal above this limit).

The Senate's failure to agree on a Medicare prescription drug benefit is a major setback for efforts to fill the largest gap in the program's benefit package - and a major concern for Medicare beneficiaries with severe mental illness (both the elderly and non-elderly people with disabilities eligible for SSDI). While there is wide bipartisan support in Congress for adding prescription drug coverage to the program, Republicans and Democrats remain far apart on key issues such as how a benefit should be delivered and whether to target coverage to only those beneficiaries with high drug costs. Democrats generally favor a benefit within the current structure of Medicare, while Republicans generally favor subsidizing private health plans that would sell coverage to beneficiaries.

Among the plans that the Senate debated, but failed to pass were:

  • Graham-Miller-Kennedy - This plan was sponsored by Senators Bob Graham (D-FL), Zell Miller (D-GA) and Edward Kennedy (D-MA). It would have added a drug benefit directly within Medicare and would have cost $594 billion for 10 years, before expiring in 2010. The plan had no deductible, and included subsidies for beneficiaries at, or below, 150% of poverty, as well as "stop loss" coverage above a $4,000 threshold. This plan also included provisions that would have allowed Medicare plans to use a formulary that relies on a single medication within a given therapeutic class (e.g., atypical antipsychotic medications), barred more than two medications within a given class and authorized higher copayments for off-formulary medications. The Graham-Miller-Kennedy plan received 52 votes, below the 60 votes that were required to waive budget rules.
  • Tripartisan - This plan was sponsored by Senators Charles Grassley (R-IA), John Breaux (D-LA) and James Jeffords (I-VT). It would have provided coverage through private drug plans at a cost of $370 billion over 10 years, with no sunset in coverage. It would have charged a $250 annual deductible, with a 50% copay for costs up to $3,200 and 100% coverage for expenses above $3,450 (until out of pocket expenses reached $3,700). Low-income subsidies would have been available for beneficiaries below 135% of poverty, with subsidies phased out for beneficiaries above 150% of poverty. The "tripartisan" plan would have required that a health plan offering prescription coverage to Medicare beneficiaries have at least two medications within each therapeutic class on its formulary and would have deferred decisions about which drugs get onto a formulary to local boards. The "tripartisan" plan received 48 votes, short of the 60 votes needed to waive budget rules.
  • Hagel-Ensign - This plan was sponsored by Senators Chuck Hagel (R-NE) and John Ensign (R-NV). It would have provided full coverage against catastrophic costs only, with limits on out-of-pocket costs ranging from $1,500 a year for enrollees at 200% of poverty, up to $5,500 for those at 600% of poverty. The plan would have made drug discount cards available to all Medicare beneficiaries, regardless of income. Benefits would have been administered through private firms. It would have cost $295 billion over 10 years. The Hagel-Ensign plan received, 51 votes, short of the 60 required to waive budget rules.
  • Graham-Smith - This compromise plan was brought forward on the last day of debate as a last ditch effort to forge an agreement between the two parties. It was sponsored by Senators Bob Graham (D-FL) and Gordon Smith (R-OR). It would have cost $390 billion over 10 years, and like Hagel-Ensign would have provided catastrophic coverage (coverage for drug costs above $3,300 for those at or below 200% of poverty, with no coverage for individuals above this $18,000 threshold). The Graham-Smith plan received 49 votes, far short of the 60 votes needed to waive the budget rule.

NAMI will continue pressing members of Congress on the need for a prescription drug benefit under Medicare and to address the current discriminatory 50% copayment requirement for outpatient mental illness treatment services. Final Senate Legislation Contains Proposals on Reimportation and Restrictive Formularies

After the defeat of these four competing Medicare plans, the Senate did muster a majority in favor of the underlying prescription drug bill, S 812. This legislation contains three major elements that are intended to make prescription medications less expensive through access to generic substitutes and imports from Canada. The final bill also contains a proposal that would allow states to vastly expand discount programs that rely on restrictive formularies that limit access to medications that are not pre-approved lists.

As passed by the Senate yesterday (by a vote of 78-21), S 812 contains the following:

  1. changes to a 1984 law (known as Hatch-Waxman) that regulates the terms under which generic substitutes can come to the market once the patent on a brand name product expires (limiting the ability of a brand name manufacturer to challenge FDA approval of a generic),
  2. a new program that would allow for reimportation of brand name medications from Canada, but only after the Secretary of Health and Human Services certifies both that all reimported products meet all U.S. standards for safety and efficacy and that consumers will experience substantial savings, and
  3. incentives for states to expand restrictive formularies in their Medicaid programs to cover non-Medicaid populations enrolled in state sponsored and private sector plans (see discussion of the Stabenow amendment below), and
  4. a $9 billion package of assistance for state Medicaid programs currently under severe financial strain (see FMAP discussion below). It is unclear at this time what the future of S 812 is. The Bush Administration is already on record against major components of the bill, including the proposed changes to the Hatch-Waxman law. In addition, House leaders have expressed opposition to consideration of all of these proposals in the absence of an agreement on a Medicare prescription drug benefit. The House passed its own Medicare prescription drug bill (HR 4954) on June 28. Thus, it appears unlikely that S 812 will move forward in the few remaining months of the of 2002 congressional session.

NAMI Opposes Stabenow Amendment

One of the major pieces in the Senate-passed version of S 812 is an amendment authored by Senator Debbie Stabenow (D-MI) that would allow states to develop new programs (or significantly expand current ones) that rely on restrictive formularies that severely limit access to brand name medications. These programs, known as "supplemental rebate" programs, typically limit prescribing options to a single medication within a given therapeutic class (e.g., atypical antipsychotics or SSRIs). Many also mandate prior authorization or impose a "fail first" requirement before access is granted to an off-formulary medication. The Stabenow amendment allows states to expand these restrictions beyond their Medicaid programs and would create immunity from legal challenges against these policies brought by patient groups. NAMI opposes the Stabenow amendment as an assault on the ability of consumers and families to work with their doctor to select the most clinically appropriate and effective medication(s).

Senate Approves Medicaid FMAP Increase for the States

As noted above, the Senate did vote 75-24 in favor of a $9 billion package of temporary fiscal relief for the state Medicaid programs. As the fiscal pressures on states have increased in 2002 as a result of the current economic downturn, governors and state legislatures across the country have been forced make deep cuts in their Medicaid programs. In many instances these cuts have come down hardest on children and adults with severe mental illnesses. Especially vulnerable as states have moved to cut Medicaid are prescription drugs and many optional services such as intensive case management that are part of the assertive community treatment model.

The amendment passed by the Senate would provide fiscal relief to the states by increasing the federal share of the Medicaid program, known as FMAP. It would provide a temporary (18 month) increase in each state's FMAP that would a total of $6 billion. The amendment would also add an additional $3 billion to the Social Services Block Grant (SSBG) which many states use to provide community-based mental health services. NAMI supports this effort to help prevent further cuts to state Medicaid programs across the country. It is expected that the National Governors Association will make an attempt to add an FMAP increase to separate spending legislation this coming fall, given the uncertain prospects for S 812 in the House.


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