In a posting on www.signalhealth.com, John Rodat has written an excellent summary of the unintended (or perhaps not…) consequences of the Medicare Drug program. Namely, and I quote…
–“Lots of Medicaid clients are also Medicare clients.
–Lots of these “dually eligible” folks are sick and use lots of pharmaceuticals.
This is especially so for those in nursing homes
–So when the Federal government created the new pharmaceutical benefit, it recognized that it would be paying for drugs that were previously being paid for under Medicaid. That would simply have shifted the cost from states to the Federal government
To offset that effect, the new law includes a provision (tenderly called the “clawback”) that establishes a formula by which the states pay the Federal government.”
And, this formula may well cause some states to pay the Feds more than they gain from the Medicare Drug program…
Kudos to Mr. Rodat for his insight.
What does this mean for you?
More supply-fueled demand for drugs means higher total Rx costs.

The Presidential Panel on Federal Tax Reform heard testimony from two economists that “federal tax subsidies to employers and employees for health insurance, flexible spending accounts and new health savings accounts do not promote the expansion of basic health coverage and increase the number of uninsured residents.” (source California HealthLine)
The Panel, chaired by ret. US Sen John Breaux (LA) is working to assess the impact of the Federal tax deduction for health care benefits, which amounts to a $188 billion subsidy today and will reach $250 billion “in several years.”
The reasoning behind the testimony and hearings lies in the apparent disconnect between the subsidy and it’s impact on the uninsured. Simply put, higher income individuals benefit from the subsidy, while lower-income people are more often uninsured as their employers do not offer the benefit, they are marginally employed, or cannot afford their employer-sponsored coverage.
To address this disconnect, one of the economists testifying recommended “limited subsidies for health insurance in combination with refundable tax credits to help low-income and uninsured residents purchase coverage.”
Why is this important to you?
The President has promised to halve the Federal deficit over the next four years, and huge subsidies for health insurance are likely to be a leading target. The perception in Washington is that the subsidy works to minimize individuals’ concern about and focus on managing their health care; think “ownership society”.
If Bush is truly committed to deficit reduction and the ownership society, health insurance tax benefits are a likely target.

The Senate and House have very different ideas of what to do with Medicaid in coming years; this difference of opinion may deadlock the two bodies on overall budget negotiations.
Briefly, the Senate passed a budget with no cuts in Medicaid funding; the House version has $20 billion in budget reductions. The latest news indicates the Senate may be willing to compromise, but conservatives in the House appear to be less interested in restoring the funding the Bush Administration has axed from Medicaid.
As reported in California HealthLine;
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