Monday, January 23rd, 2006


  • Over 20 States, Including California, Now Providing Some Form of Emergency Coverage
  • Governor Signs AB132 (Nunez) to Provide 30-Day Emergency Coverage, up to $150 Million
  • Tens of Thousands of Prescriptions Filled Under State Coverage as Private Plans Fail
  • Ongoing Problems Will Require Ongoing Solutions

On Friday, January 20th, Governor Arnold Schwarzenegger signed into law AB132 (Nunez), an emergency measures which gives the state of California authority to provide prescription drug coverage to “dual-eligibles”–seniors and people with disabilities who are on both Medicare and Medicaid–as a “payer of last resort” for an emergency period of thirty days.

MANY STATES ACTING: Over twenty states, large and small, blue and red, have put in place such plans given the widespread problems with the implementation of the new Medicare prescription drug benefits, which is largely administered though a myriad of private insurance plans.

NEAR-UNANIMOUS VOTE: The emergency legislation required a two-thirds vote, but received widespread, bipartisan support after being introduced just on Tuesday. The only “No” votes were from Republican Assemblymembers DeVore and Haynes, and Republican Senators Hollingsworth and McClintock.

BUSY WEEK FOR GOVERNOR: The press release regarding the bill signing is available on his website, along with press statements and materials going back to the Thursday, January 12th declaration of the emergency and the beginning of the state’s effort, and a Thursday, January 19th meeting between the Governor and U.S. Health and Human Services Secretary Michael Leavitt in Sacramento on this topic.

CRISIS BACKGROUND: Up until January 1st, the state of California’s Medi-Cal program provided prescription drug coverage to these 1.1 million low-income seniors and people with disabilities. Starting on January 1st, private prescription drug plans under Medicare were to start providing this coverage, with Medicare providing a low-income subsidy. With error rates reported at 20%, leaving potentially hundreds of thousands of Californians at risk of being denied prescriptions, or being charged fare more than they can afford, the state is now continuing to provide back-up coverage through the old Medi-Cal system, even though it was supposed to stop providing such coverage on December 31st. In its first full week, this emergency coverage filled over 77,000 prescriptions, that likely would have gone unfilled otherwise.

TIMELINE: The legislation actually authorizes the state to provide emergency coverage for 15 days, and gives the Governor authority to extend the emergency for another 15 days, with notice to the Legislature, through February 10th. In a meeting of health advocates last week, CA Secretary of Health and Human Services Kim Belshe explained that this was designed to keep pressure on the federal government to fix the problems, but that did “not in any way close the door” for future extensions or other future assistance if needed.

COST: The bills authorizes expenditures up to $150 million, which the Schwarzenegger Adminstration has been clear that they expect to be reimbursed by the federal government. The Centers for Medicare and Medicaid Services, however, have only offered to assist states in going after the prescription drug plans for the necessary reimbursements. While it is true that many of the problems were caused by these (mostly for-profit) prescription drug plans, the federal government has the main authority to run the program and policy these plans, and should be responsible for collections, rather than leave that burden to the states, who were filling in due to these federal failures.

ONGOING COSTS: The Medicare prescription drug benefit was supposed to save the state of California money, around $120 million a year, by taking some of the cost of providing medications to this vulnerable population of seniors and people with disabilities. Instead, the state is paying more so that these “dual eligible” Medicare & Medicaid recipients can get less comprehensive, more costly coverage. The costs are threefold:

  • Without federal reimbursement, the initial $150 million cost of this emergency coverage is likely going to grow, since problems are expected into the future. Some states are putting into place long-term “wrap-around” coverage so that their seniors and people with disabilities don’t get denied drugs or have to forgo medication because of cost burdens.
  • A “clawback” provision in the Medicare drug benefit requires that states pay the federal government the money it would have used for drug coverage for this population that got coverage through state Medicaid programs. While it was supposed to provide 10% savings for states, the flawed formula actually is budgeted to cost California over $70 million in a year, even without the costs of emergency coverage.
  • Finally, since the state is no longer the major purchaser of drugs for these 1.1 million vulnerable patients with above-average medical needs, it is losing its purchasing power in negotiating with the drug companies for better prices for the remaining Medi-Cal population, which has been successful in past years of yielding hundreds of millions of dollars in rebates.

ONGOING PROBLEMS MEAN ONGOING SOLUTIONS: Unfortunately, the federal government is not using its potentially massive purchasing power to get a better deal with the drug companies. In fact, this new Medicare law explicitly prohibits the federal government from negotiating with the drug industry, which is why the program is designed to delegate the administration of this benefit to this bewildering network of private plans, creating the complexity and confusion that now exists.

Senior, disability, health, low-income and consumer advocates will be working to put in place the needed policies at both the state and federal levels to fox this flawed program. Many of the problems in this program are structural, and will not go away in 30 days. The emergency legislation is a necessary, life-saving step in ensuring that California seniors get the prescription drugs they need, but it’s just the beginning.

ACTIONS: Some initial steps that health advocates are taking include:
At the state level:

  • Thank the Governor and state legislators for their emergency action.
  • Remind them that even if the initial problems are solved, these vulnerable seniors and people with disabilities are still facing more costly, less comprehensive coverage, and the state should continue to provide real relief.

At the federal level

  • Urge our Congressional delegation to support full reimbursement for California.
  • Advocate for fixes to the Medicare benefit, from H.R. 3861(Stark) to delay implementation of other upcoming deadlines in the program, to a full reconsideration of the measure so that the program can be simplified by simply letting the federal government negotiate with the drug companies.
Health Access California promotes quality, affordable health care for all Californians.
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