MEDICARE TROUBLES

Five states, including Maine, are suing the federal government over a Medicare rule that takes state tax money and applies it to the new federal prescription-drug program. They claim, plausibly, that Congress has crossed the federalism line between encouragement and coercion in declaring that states owe money to Medicare and they may be right. But however the constitutional argument goes, the debate over what is known as Medicare’s clawback provision has exposed yet more difficulties with the new drug benefit.

The benefit required as of Jan. 1 that people who qualified for both Medicare and Medicaid – they’re called dual eligibles – be taken off the Medicaid drug plan and placed on the Medicare plan, which in Maine’s case often meant switching to a less-generous, more-restrictive plan. And because the states would then save Medicaid money, Congress included the clawback to take that money and apply it to the new benefit. Whether they are allowed to take it is the subject of the lawsuit.

Even with a discounted clawback for the current fiscal year, the federal government this year will take all of Maine’s Medicaid funding for the drug benefit plus $3 million more for its 45,000 dual eligibles. Next year the cost is expected to be $17 million, and it goes up from there. This has occurred here for a couple of reasons – Maine’s assumed rebates from drug manufacturers were better than the feds thought and the state’s rate of drug inflation was lower.

Combined, these factors create a false impression of what the shift from Medicaid to Medicare would save Maine. This, in turn, creates a false number of what Maine owes the federal government. It is immediately apparent in this discrepancy that had Maine failed to obtain drug rebates and failed to keep drug inflation low – that is, had it done a poor job managing its prescription drug plan – the federal government would have calculated what it owed more favorably.

Such a reward for poor management and penalty for good management is not what Congress envisioned when it passed the drug plan and it should not be acceptable now. Sen. Olympia Snowe, who has proposed other changes to the drug plan, says she is considering ways of dealing with the clawback through, for instance, a hold-harmless clause.

Congress may be reluctant to open the drug benefit to modification, but now that it is clear the Centers for Medicare and Medicaid Services cannot solve these clear shortcomings, legislation is necessary that at the very least keeps states from paying more for what amounts to a lesser drug program.