President Bush's Proposed Medicare-Endorsed Drug Discount Card Initiative: Status and Issues

Publication Date: February 2003

Publisher: Library of Congress. Congressional Research Service

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Research Area: Health

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Abstract:

On July 12, 2001, President Bush announced a Medicare-endorsed prescription drug discount card program to help seniors lower their out-of-pocket drug costs. The President stated that the discount card program would be an interim measure until a broader Medicare prescription drug benefit for seniors can be created. Many seniors do not have adequate prescription drug coverage. In 1998, an estimated 10 million elderly people, or 27% of Medicare beneficiaries, did not have any form of prescription drug coverage.

The Administration planned to implement the card program in January 2002, but it was put on hold because of a federal court order. Pharmacy groups successfully filed a lawsuit against CMS in 2001, asking a federal court to issue an injunction that would halt the card program on the grounds that the Administration had no statutory authority to establish the program. The Administration proceeded with plans to modify the program and use a formal rulemaking process for a new proposal. On August 30, 2002, CMS issued the final rule. Pharmacies continued to claim that the Administration lacked the statutory authority to implement the initiative. On January 29, 2003, a federal district court ruled that the Administration did not have the statutory authority to offer the card program. CMS issued a statement saying that it would be evaluating its options and it would likely appeal. In the 108th Congress, Representative Mark Foley introduced a bill (H.R. 513) in the House on January 31, 2003 to authorize the Secretary of Health and Human Services to endorse prescription drug discount cards for use by Medicare beneficiaries.

The proposed card program would be similar to prescription drug discount card programs that are currently available from a number of sources. The Administration's card would endorse and promote a number of qualified privately-administered prescription drug discount card plans which would have a one-time maximum enrollment rate of $25 per plan. Since the announcement of President Bush's proposal, several pharmaceutical companies have implemented their own senior discount card plans for low-income seniors beginning in early 2002.

The Administration has stated that the Medicare-endorsed card plans would offer discounts in the range of 10% to 13%, and up to 15%, on retail prescription drug prices. The net overall effects of President Bush's proposed program would depend on the details of the individual card plans, which are not yet available. Congressional critics of President Bush's proposal dispute the Administration's estimates of potential discounts. Some Members of Congress believe that the card program would not provide additional benefits for seniors. They cite a recent study by the U.S. General Accounting Office (GAO) on prescription drug discount prices available at retail pharmacies, Internet pharmacies, and existing drug discount card programs. The Members believe that the study indicates that seniors already have access to drug discount cards and that these programs offer little savings for seniors.

This report will be updated as events warrant.