Prescription Drugs and Medicare Reform

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William D. Novelli
AARP Executive Director and CEO
American Medical Association
2003 National Advocacy Conference
Washington, DC

Good afternoon. It's a pleasure to be here. You have had quite a line up of speakers already today with more to follow, and I'm certainly proud to be part of it. I especially want to thank Dr. Mike Maves for inviting me to speak to you on behalf of AARP's 35 million+ members.

You and your colleagues-physicians, researchers, medical scientists, public health experts-are largely responsible for the enormous progress we have made in helping people to live longer and to live better in 21st century America.

But as you know, despite all of this progress, we still face serious challenges regarding health and health care.

Last spring, AARP released a study titled, "Beyond Fifty: A Report to the Nation on Trends in Health Security," which identified the primary factors that influence the health security of 50+ Americans:

1. Increased reliance on prescription drugs and other new health technologies has brought about major changes in the delivery of health care and has driven health-care costs and coverage structures.
2. Chronic diseases and conditions are common among people over age 50, especially in the oldest age segments. But the systems that serve the chronically ill remain oriented largely toward acute medical care. Increasingly, the health-care needs of this population involve a range of services across the spectrum of physician, inpatient, outpatient, and long-term care.
3. Greater longevity-and the functional limitations that accompany old age-have highlighted the need to live more independently and increased awareness of the quality of life, especially during the last stages of life.
4. There is increasing recognition among those who provide or pay for care that patients need choices about quality and value. Informed decision-making is an increasingly important-yet often missing-dimension in consumer thinking about health security. (For those needing long-term care, especially, the challenge of navigating a fragmented, uncoordinated, patchwork of public and private programs is very, very difficult.)
5. High and rising health-care costs make care less accessible for many 50+ Americans. Average spending per person over age 50 has increased, fueled largely by the increase in chronic conditions and spending for prescription drugs. Out-of-pocket spending on prescription drugs and long-term care represent the greatest health-related financial risk for older Americans.

I'm not going to talk about all of these today, but they do provide a good context for the issue I do want to focus on-- prescription-drug coverage in Medicare and Medicare reform.

We face a major problem in this country today: older Americans and their families cannot afford or sustain current prescription drug costs. We truly need these products, but we also need them to be affordable. The marketplace is out of balance, and spending on these wonderful drugs that combat disease and ease suffering is too high.

• Spending on prescription drugs rose on average about 13 percent a year between 1993 and 2001. For the next decade, it is expected to rise about 12 percent a year.
• Prices of brand name prescription drugs have been rising at nearly four times the rate of general inflation.
• Nearly one American woman in five between the ages of 50 and 64 did not fill a prescription because it was too expensive.
• Millions of seniors are skipping doses or splitting pills to save money.
• Prescription drugs are the fastest growing item in many state health-care budgets, not just because the prices are higher, but because more people are using them, and often they are demanding the Cadillac when the Chevy would work just as well.

A recent study by Harris Interactive found that higher out-of-pocket drug costs are causing massive non-compliance in the use of prescription drugs. Millions of Americans do not ask their doctors for the prescriptions they need, do not fill the prescriptions they are given, don't take their full doses and take their drugs less often than they should. Moreover, the higher people's out-of-pocket costs for drugs, the more likely they are to be non-compliant.

We hear from our members every day on this. It is a huge and persistent problem that won't go away by itself. It affects not just low-income seniors, but middle-class people on fixed incomes, as well. We are committed to helping our members, and all older Americans and their families, to cope with this. Our goal is affordable drug coverage in Medicare, with some cost containment so that a Medicare benefit can be sustained.

We are also concerned about Medicaid and the states' abilities to sustain these programs. Forty-nine states currently face Medicaid shortfalls driven by unsustainable drug costs. High drug costs are continuing to drive the increase in Medigap premiums for the few plans that offer drug coverage.

And, businesses large and small are feeling the squeeze of high drug costs. Many are either dropping drug coverage or requiring employees and retirees to pay significantly more.

Until we achieve affordable and sustainable drug coverage in Medicare, pressures for other cost-reducing measures will only increase…pressures for drug reimportation, more state solutions, price controls and increased litigation.

Last year, Congress came close to achieving drug coverage in Medicare. The foundation for success has been laid. The House passed a bill, though in our view, it needed improvement. Although the Senate failed to pass its own legislation, 99 Senators voted for some form of a prescription-drug benefit for Medicare beneficiaries. The Senate essentially reached an implicit bipartisan agreement on a number of key issues, including the need to contain the spiraling cost of drugs. They could not agree, however, on two issues:

1. Whether to target the limited dollars to seniors most in need-those with low incomes and/or high drug expenses.
2. The role of private insurers vs. the government in delivering the benefit and controlling the cost.

While these differences are substantial; they are not insurmountable. Both public and private insurance can co-exist, just as they have in Medicare under the Medicare Plus Choice program.

Congress and the administration has many priorities, and the nation's deficits are higher, so finding adequate resources for drug coverage will be difficult. But there is simply too much public and political pressure - and too much pain - to maintain the status quo.

This morning you heard the President address this, and present a framework for debate and action. We are very encouraged by the President's leadership on this issue. Policymakers in Congress in both parties and both Houses are working on this. So the Medicare debate is moving forward, and there is broad commitment to find a solution. But it will not be easy.

Some lawmakers believe that adding prescription drugs to Medicare is the single, urgent need and should be the goal. Others say that Medicare itself must be reformed and prescription drugs should be just a part of this overhaul.

Our position is that Medicare should be strengthened for the decades ahead. But we must also remember that it is a program that works. And, it works reasonably well, especially when compared to most other aspects of the American health-care system.

We advocate sensible improvements to strengthen Medicare, as long as they include prescription-drug coverage and ensure that the program remains the solid rock of health care that more than 40 million Americans rely on.

The first step is to ensure that enough money is available in the budget to accomplish these goals. The Administration's willingness to increase the level of funding for a Medicare prescription-drug benefit and other reforms is an important step. As all the research and analysis shows, an adequate Medicare drug benefit is going to require a very substantial funding commitment.

So, what does that benefit look like? Our members tell us a prescription-drug benefit must meet five criteria. It must:

1. Ensure all Medicare beneficiaries have access to affordable, meaningful prescription-drug coverage in all Medicare options-no exclusions due to age, geography, health status or ability to pay;
2. Provide stable coverage that beneficiaries can rely on from year to year;
3. Protect beneficiaries from extraordinary out-of-pocket costs;
4. Provide lower-income beneficiaries with additional assistance;
5. Not create incentives for employers to drop current retiree coverage or disadvantage beneficiaries in the traditional Medicare.

Older Americans and their families don't expect first-dollar coverage, but they do want a benefit they can depend on over time. To meet these criteria, it may be possible to integrate drug coverage into a total benefit package. We are concerned that a drug-only benefit in Medicare may be unstable due to rising costs.

We are also concerned that it may not offer a benefit that is generous enough to attract an adequate number of enrollees. If that were the case, the risk pool might be too small to hold down premium costs and to sustain the program over the long term.

Medicare improvements should take into account the surge in beneficiaries that will begin in 2011 when the first baby boomers become eligible for benefits. They should include greater coverage of prevention and detection benefits so that illnesses can be detected earlier and managed better, improving the delivery of care to chronically ill beneficiaries and the greater use of drug therapies that are replacing more expensive hospital stays for many people.

We must find a pragmatic, bipartisan, workable solution to this problem. Until we do, no one will be able to feel secure from the rising costs of drugs. The payoff-in increased independence, quality of life and financial savings-is huge.

Well-thought-out, and well-funded, policies can be transformational in our society. But public policy alone has limits. We must also address individual behaviors and personal responsibility for our own health.

So it is important for people to understand and use medications wisely. Our research shows that, even though people 45 and older are taking lots of prescription drugs-especially those 65 and older-they are not realizing the full benefits of these drugs because they're often not taking them as directed. And many are not using generics despite their comparable efficacy and lower cost. They don't fully understand what generics are.

On the basis of this research, here is our basic message that we tell our members and the public:

• If generics are available, then take them, as long as your physician agrees.
• If a drug is not necessary, there is no reason to take it. Over-utilization can be physically harmful; can compromise the effectiveness of other drugs, and wastes money. And don ' t go in for overkill. For example: take Tums or Maalox for heart-burn, and save the expensive Prilosec for reflux disease.
• Under-utilization is just as bad. Take the medication your doctor prescribes. For example, some higher cost drugs such as statins, for high cholesterol and anti-hypertensive medications have been shown to be under-utilized.

We reach a lot of people, and we are going to continue to educate our members and others to use prescription-drugs wisely. Information and education are critical in bringing down drug costs. When people can take better care of themselves they may rely less on medical interventions to lead healthy lives. We have reached a new era in this country. People turning 50 today have half of their adult lives ahead of them. They are using that milestone to question what they want to do with the rest of their lives, instead of viewing it as a time of decline. For many it is a time to enjoy new-found freedoms, make new choices, and dream new dreams.

There is a lot to feel good about because we know more and more about aging, and aging itself is getting better for us all. Increased and improved longevity is one of our greatest success stories, and today we have the knowledge, innovation and technology to make it even better. The question is: do we have the will? I believe the answer is yes. But, it will take all of us working together to face the new challenges our progress has brought us. Tomorrow, I will be standing with your AMA president, Dr. Yank Coble, and the leaders of other national organizations to kick off the Cover the Uninsured Week campaign to bring greater awareness to the problem of the more than 40 million uninsured people in this country.

Recently, AARP joined with you to advocate for fixing the physician payment formula, because it was an obvious error that needed to be corrected. We told the Congress that, "Our members want physicians who treat Medicare patients to be paid fairly," and that "errors or miscalculations in Medicare payment formulas should be corrected."

And now, we need to join together in the Medicare debate. Our members are your patients. And, lack of a meaningful prescription-drug benefit in Medicare is harming them. It undermines the treatment you provide. It must be very difficult for you to know that you are prescribing important drugs that many patients will not be able to afford. That's sad. Together, we can put a stop to much of it with a meaningful prescription-drug benefit in Medicare. Let's work together on this..