Pharmaceutical Assistance Program:
revised to benefit fewer
with greater need

It is a most painful choice for politicians: Given a limited amount of money, do you spread it around to as many people as possible, giving everyone a little bit, or do you take care of those with the greatest needs and give nothing to a larger number who do not need much help? In their struggle over the Pharmaceutical Assistance Program for the elderly and disabled, the General Assembly and Gov. Jim Edgar settled, for the most part, on the second course.

This was the second year in a row that the state altered its program that buys prescription heart, diabetes and arthritis medication for elderly and disabled people who have annual household incomes of less than $14,000. Different this time was the thought and debate that went into devising the most appropriate way to spend a limited amount of money.

The resulting program is radically different from what was in place just 15 months ago, before government overspending and the national recession caught up with the state budget. Gone is a limitless program that provided not one incentive for beneficiaries to think about the cost of what they were getting.

In its place is a scaled-down program providing extensive, but not unlimited, coverage for people who need lots of costly medication. Those people who do not need much medication will now find the program is no longer a good deal. Money saved by cutting their benefits will be spent helping those who need either large quantities or particularly expensive medication.

The Pharmaceutical Assistance Program is an example of the creation, rise and fall of a government effort that started small and grew rapidly. Few regard the program as unworthy, though some consider it an unaffordable extra. Michael Belletire, an executive assistant to Edgar, notes that even with its cutbacks, Illinois remains one of only a handful of states subsidizing prescription drugs for people not eligible for Medicaid health coverage.

The program started when times were relatively flush for the state. After trying for several years to establish a program that pays for all prescription drugs, modeled after one in New Jersey, the Democratic sponsors changed tack. Then-Sen. Dawn Clark Netsch, now state comptroller, and then-Rep. Woody Bowman, now fiscal adviser to the Cook County Board president, won approval of a smaller version, all the time planning to push for expansion later.

Several forces then took hold. Some were controllable by state government, others were not. First, legislators did expand the program. More people were made eligible, and drugs for more ailments were added. One expansion covered arthritis, which critics argue is not life-threatening. Belletire says arthritis coverage is now the fastest-growing component of the program.

In addition to the intentional expansions of the applicant pool, the program grew because the number of elderly increased and because it became better known among advocates for the elderly and disabled, who drummed up applicants. Finally, pharmaceutical prices exploded, outpacing even the higher-than-average inflation in overall medical costs.

As a result, the program was deemed unaffordable by Edgar when he took office early in 1991. The new governor was confronted with estimates that the program, which cost $3.8 million when it began in fiscal 1986, would require $90 million in fiscal 1992. In his maiden budget proposal, Edgar called for drastic cuts. The legislature balked, and the two sides eventually compromised on cuts that were still substantial. The previously wide-open program was limited in fiscal year 1992 to a maximum of $800 a year in benefits for each participant. Each month's prescription refill required a copayment: $5 for generic medication and $10 for brand-name drugs. The imposition of the two-tiered copayment provided an incentive for people to buy the less-expensive, chemically similar generics.

The generic incentive worked. Program administrators reported much more use of generic drugs, which was also aided by a broadening of the state list of generics considered suitable substitutes for brand names. "People have been

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The $800 cap on benefits also helped control costs, but unlike the push to generics, it caused some pain for 18,525 beneficiaries who reached the cap. The program served a total of 103,525 beneficiaries. The savings were great for the state, which spent some $46 million on pharmaceutical assistance last fiscal year rather than $90 million as originally estimated.

When only a handful of people had hit their limits, both the Edgar administration and legislative Democrats, including avowed budget-cutters in both camps, agreed that the mechanism adopted last year was not the best way to spread limited resources. Although many people benefited from the $800, some had relatively moderate pharmaceutical needs. Those with the most expensive drug needs were forced to spend their savings, ask for help from relatives, turn to charities, or attempt to get coverage from the welfare system. Pharmacists and advocates for the elderly reported many people simply stopped taking their medicine, or unilaterally cut daily dosages to every other day.

During last year's fall legislative session, a little noticed resolution sponsored by Sen. Howard W. Carroll (D-l, Chicago) established a committee to figure out what to do with the program. When it began work early this year, the panel quickly junked options with the potential for the greatest controversy or that might upset one of the interest groups represented on the committee. For example, there was no move to institute a requirement that pharmaceutical manufacturers rebate part of the cost of their drugs bought by the program, an approach taken by other states. Nor was there a move to allow beneficiaries to get refills for longer than one month, something that would reduce the dispensing fee that goes to the pharmacist for each prescription and comes out of each recipient's $800 in benefits. The panel also dropped the idea of eliminating some sales tax exemptions to help fund the program. Such a change would close what Carroll called a loophole by taxing, for example, medicated shampoo, just as the sales tax now applies to regular shampoo.

Once it was clear that spending on the program would not increase, the focus shifted to constructing a benefit scheme. Senators and representatives from both parties, along with most interest groups, agreed that the previous year's system — and particularly the cap — had to be scrapped. "The way we designed the program last year was only to live within the budget," says Sen. John W. Maitland Jr. (R-44, Bloomington), a committee member. "That was wrong. We know that."

The Edgar administration, through Department of Revenue Director Douglas Whitley, wanted to retain the per prescription copayment. Whitley's agency, which administers the Pharmaceutical Assistance Program, offered a sliding scale under which the state would pick up an increasing share of drug expenses as an individual's total spending on medication increased during the year. Under that plan, the state and the individual would split the first $200 in drugs 50-50. The state's share would then gradually increase until the government paid 90 percent of prescription costs greater than $800 a year.

Advocates for the elderly criticized the plan as too confusing and, perhaps more significantly, as too difficult to budget for someone with a maximum $14,000 annual income since the monthly payments would fluctuate. Rep. Janice D. Schakowsky (D-4, Evanston), a member of the committee and former executive director of the Illinois State Council of Senior Citizens, said the first month's cost would be so high that some people would be forced to go without help all year. Even some Republicans on the committee did not act as if they were terribly enthusiastic about the governor's proposal.

One big advantage to the administration's proposal was its drop in spending, from about $46 million in fiscal 1992 to less than $38 million this year, assuming 6 percent inflation in pharmaceutical costs now estimated by the administration.

Eventually, Carroll pushed for and almost all committee members agreed to a mechanism (SB 1479/PA 87-0868) that still provides $800 a year in benefits for those who participate. After the first $800, a person will not be cut off but will have to start paying 20 percent of the cost. The enhanced benefits for people with high drug needs are made possible by reducing benefits for the majority and by paring many of the low users from the rolls. First, the state will not pay any of the $800 until a person pays a $25 deductible each month. Carroll and Schakowsky say that should make it easier for participants to budget since an individual's monthly out-of-pocket expense will be steady, until $800 in benefits is received, when the recipient must start paying 20 percent of medication costs.

A separate, but related, change could also dampen participation. The state budget this year eliminated a companion part of the circuit-breaker program that paid an $80 annual grant to the same elderly and disabled people who qualify for pharmaceutical assistance. In the past, those who wanted pharmaceutical coverage used the grant to pay for

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the drug program's enrollment fee. Now, to get coverage, they will be required to pay the $80 up front and the $25 deductible each month. The combined effects mean the program is no longer attractive to anyone needing less than $380 a year in covered medication.

There is a big exception. For the first time, an additional means test was applied for the estimated one-third of program recipients with incomes below the poverty line, which is $6,810 for an individual and $9,910 for a couple. They will be charged only $40 to enroll and pay a monthly deductible of only $15, effective early next year. Still, the program is only sensible for someone below the poverty line who needs at least $220 a year in medication. The delay in the two-level deductible allows the Edgar administration to estimate that the program costs will stay within the $41.5 million appropriated for fiscal 1993.

Most controversial was elimination of the per prescription copayment. Senate Republicans in particular warned that eliminating the copayment means there is too little incentive for people to use cheaper generic medicine. Carroll says the program still provides plenty of incentive since people must still pay the difference between a generic and brand-name drug.

Gary Reynolds, president-elect of the Illinois Pharmacists' Association, says the new program will be much better for the affected population. "I'm tickled to death for the patient," he says. "It's going to be better for them."

The changes are bound to reduce participation. During fiscal 1991, when there were no limits on participation, 27,200 people received less than $200 in benefits. For those people, and thousands of others, it no longer makes financial sense to enroll.

Of course, no one can be sure just how the newly revised program will work. Charles Chambers at the Department of Revenue says the best anyone can do is make a "wild, wild guess" as to the new level of participation. Costs of medications also affect the program, and projections of pharmaceutical inflation varied widely all spring, ranging from 4.5 percent (from Sen. Carroll) to a high of 10 percent (from the Edgar administration). The administration's current estimate is about 6 percent.

Sen. Penny L. Severns (D-51, Decatur), a member of the pharmaceutical committee, cautions that the state's financial condition is still shaky, the elderly population continues to grow, and pharmaceutical prices keep going up. Those factors make Severns predict that the program may need more repairs within the next year or two.

Others have a more immediate concern. Sen. Frank Watson (R-55, Greenville), himself a pharmacist, and Reynolds and Schakowsky all say recipients will be thoroughly confused by this second complete revision of the program. The revised rules went into effect August 1, and it will take some time to see if the program works as planned. "School's still out," Watson says.

Anthony Man is Statehouse bureau chief for the four Lee Enterprises Inc. newspapers with readers in Illinois. He writes frequently about health care policy.

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