This paper, by Joy Pritts of the Health Policy Institute at Georgetown University, looks at issues related to drug plan marketing activities and privacy under the MMA.

Issue Brief (.pdf)

Prescription Drug Costs

Download a printable .pdf of Health Care and the 2004 Elections: Prescription Drug Costs.

IssueBackgroundOptions for for making prescription drugs more affordableAssessing Candidate PositionsIssue

Health care costs in general have grown faster than the economy. Although still only a modest part of total health care spending in the United States (11% in 2002), the growth in pharmaceutical spending has outpaced other categories of health care services over the last few years. What, if anything, should the government do to make prescription drugs more affordable?

Background

Developments in pharmaceuticals have transformed health care over the last several decades. Today, many diseases are prevented, cured, or managed effectively for years through the use of prescription drugs. In some cases the use of prescription drugs keeps people from needing other expensive health care such as being hospitalized or having surgery.

These advances have not come without a price. In 2002, spending on prescription drugs in the U.S. grew 15 percent compared to a 9 percent increase for all health care. ¹ This growth in spending on prescription drugs is due to three factors: increased use of prescription drugs in general, the higher costs for new products coming to market and replacing existing drugs, and increases in drug prices. In 2002, the average price of a retail prescription grew almost 6 percent, reflecting the influence of newer, higher priced prescription products in the market. ²

The prices for prescription drugs reflect the consumer demand, or willingness to pay for medications, and the patent system, which encourages manufacturers to invest in developing new drugs. Consumer demand has been affected by the growth in private third-party payment for pharmaceutical products, which means that consumers directly see only a small part of increasing drug costs when they fill a prescription. ³ Another possible factor has been the growth in direct-to-consumer marketing of pharmaceutical products, which encourages consumers to ask their doctors about new medications ⁴,while increasing their knowledge about drug options.

Patents affect prices by providing manufacturers who develop new pharmaceutical products an exclusive right to sell the drug for 20 years from the date of the patent filing. ⁵ The actual costs for making most prescription drug products are relatively small (although such costs may be significantly higher in some cases, such as for biotechnology products), and thus, the prices for a drug are usually considerably lower once the patent expires and generic competition enters the market. Therefore, the company that developed the drug must recoup its investment and make most of its profit on a product during the period it has the patent. Once the patent expires, the drug may be manufactured in generic versions by any number of manufacturers. ⁶ Even during the patent years, other products to treat the same condition may come to market, producing price competition among therapeutic options.

Manufacturers make substantial investments in the products that they bring to market, and to be profitable, they must recoup not only the development costs of successful drugs and devices, but also, the costs for research and development for products that never make it to market. Only one in five medicines that enter the clinical testing process ever gain Food and Drug Administration (FDA) approval and enter the market. ⁷ Thus far, however, drug makers have been able to make a profit. From 1995 through 2002, pharmaceutical manufacturing was the most profitable industry in the U.S. Profitability declined somewhat in 2002, and in 2003 it ranked third with profits after taxes of about 14 percent. ⁸

The cost of prescription drugs has commanded considerable public attention over the last decade. People with coverage for their prescription expenses have seen their cost-sharing for brand products increase substantially as employers and health plans move to arrangements which provide financial incentives for consumers to use lower cost drugs. ⁹ People without drug coverage, including many Medicare beneficiaries, often pay the highest prices for prescription medications, and must confront rapid cost increases directly. In response to concerns over the out-of-pocket cost burdens on the elderly and disabled, Congress passed a law last year that provides new Medicare outpatient prescription drug benefits that will be available beginning on January 1, 2006. While government assistance will be comprehensive for low-income beneficiaries, the benefits for others are such that many Medicare beneficiaries will still be paying large amounts out-of-pocket for their medicines.

Options for for making prescription drugs more affordable

While there are a number of policy options under consideration for addressing rising drug costs, the two that are currently receiving the most political attention are reimportation and the government’s role concerning drug prices in the Medicare program.

Importation. Proposals that would allow Americans to purchase drugs from other countries are referred to under the terms “importation” or “reimportation”. ¹⁰ It is currently illegal to import prescription drugs into the U.S. from other countries, and only the original manufacturer may reimport a pharmaceutical product, subject to meeting certain standards on how they are handled and labeled. In practice, however, the FDA, which is the federal agency responsible for overseeing pharmaceutical products, does not enforce the law banning importation in certain circumstances where drugs are imported for personal use.

The significantly lower prices available for common prescription drugs in bordering countries, Canada and Mexico, has led some Americans to import drugs from those countries and has encouraged politicians of both parties to propose lifting the import ban. Congress has passed legislation allowing for expanded importation of drugs on several occasions but the laws were never implemented because they required that the Secretary of the Department of Health and Human Services (HHS) conclude that safety could be maintained and that costs would significantly be reduced. Both HHS Secretary Shalala in the Clinton Administration, and Secretary Thompson in the Bush Administration concluded that they could not meet these standards.

A number of bills on importation have been introduced in the current Congress. The bills differ in a number of ways. Some would allow drugs to be imported only for personal use while others would allow imports for commercial purposes. The bills also differ in terms of the countries from which drugs could be imported, safety standards, regulatory requirements, and fees that would be levied to help pay the costs of increased government regulation. In addition, a number of states, including Illinois, Iowa, Michigan, Minnesota, and Ohio, as well as a number of cities, have undertaken efforts to get lower drug prices for their residents through purchase from other countries. They are doing this in order to reduce state costs for providing drug benefits to state employees, or to make it easier for their residents to import drugs. Although the FDA has not approved these efforts, it also as yet has not stopped them.

Would allowing importation result in lower prescription drug costs for American consumers? There are varying opinions on this issue, but most experts caution that savings cannot be guaranteed, especially if importation is limited to only certain countries, such as Canada. ¹¹ The Congressional Budget Office (CBO), the agency responsible for estimating the financial impact of federal policy changes, concludes that the effect would be small. ¹² It acknowledges that prices for drugs still under patent protections (as opposed to generic products) are 35 percent to 55 percent lower in other countries than in the U.S. However, it cautions that responses by foreign governments and by the pharmaceutical industry to such a change in policy could erode most savings. For example, foreign governments could restrict the supply of drugs leaving their borders; or pharmaceutical manufacturers could limit the supply of drugs sold to foreign nations that facilitate sales to U.S. purchasers.

On the other hand, those who advocate in favor of allowing importation acknowledge that drug importation limited only to Canada would not be a long-term solution. ¹³ They believe that if importation were legal from other countries, including the Asian and European markets, as well as from Canada, there would be enough volume to significantly affect prices in the U.S. market. ¹⁴ They also believe that the potential of lower prices from foreign countries will cause U.S. pharmacies to cut their prices in order to be competitive. At the very least, they feel that the debate around importation makes people aware of the fact that prices are lower in other countries and puts continued pressure on drug makers to keep their U.S. prices in check.

Supporters of importation also argue that the safety issue can be addressed. For example, legislation which passed the U.S. House of Representatives with bipartisan support would limit reimportation to FDA-approved drugs manufactured in FDA-approved facilities in 25 countries, require the use of counterfeit-resistant packaging (or testing of each pharmaceutical shipment that does not use such packaging), and give the Secretary of Health and Human Services the power to immediately halt importation if a product violates the law. ¹⁵ Opponents argue that these safeguards are not adequate. Bills on importation that have been introduced in the Senate are still awaiting action and may not be debated before Congress adjourns.

Government’s role in Medicare drug prices. The second visible issue in the 2004 campaign relating to drug prices involves the appropriate role for government regarding drug prices for Medicare beneficiaries. The Medicare Modernization Act of 2003, which establishes outpatient prescription drug coverage for Medicare beneficiaries beginning in 2006, relies on competition among private health plans to make drugs available to beneficiaries at reasonable prices. Medicare beneficiaries who wish to participate in the new program will have to enroll in one of the Medicare drug plans available to them in their area of residence. Each plan will be responsible for negotiating with drug manufacturers and pharmacies to determine the prices for medicines that will apply under the plan. Because the drug benefits are limited for beneficiaries who are not low-income, many seniors will have access to lower prices, but will also still have significant out-of-pocket costs for their medicines. The law specifically prohibits the government from interfering in the negotiations between the drug plan sponsors and drug manufacturers and pharmacies. It also prohibits the government from establishing any specific list of drugs that will be covered (formulary) or imposing any price controls on drugs.

Supporters of the market-based approach in the new Medicare law believe that the competition for enrollees will cause plans to negotiate with drug manufacturers and pharmacies to offer drugs at the lowest possible prices. They believe that permitting the government to set prices for Medicare would not necessarily guarantee lower prices, may have unintended consequences on the rest of the market, and would negatively affect patients because government price controls would stifle industry incentives to invest in research and development of new therapies.

Some people argue that the current market-based tools being used by health plans and pharmaceutical benefit managers (PBMs) have not been effective, and that prices for brand pharmaceutical products are considerably higher in the U.S. than in other countries where governments take a more active role in negotiating prices and rates of return with manufacturers. It should be noted that the federal government regulates prescription drug prices in the fee-for-service Medicaid program and the veterans’ health program. ¹⁶ Opponents of market-based tools also suggest that in cases where manufacturers have exclusive rights for drugs with few or no competitors, competition may have little or no impact on price. They support removing from the law the ban on government interference and price setting, and granting the government the authority to directly negotiate prices with manufacturers. Some advocate that this authority not be used unless the private plans are not able to achieve lower prices. Other options include using this power only for certain drugs for which there is no competition.

Assessing Candidate Positions

While there is no clear partisan division between Republicans and Democrats on the issue of importation, candidates tend to be more divided regarding government intervention in drug pricing, aligning themselves with those who support a market-based approach versus those who favor more government intervention. Included below are a series of questions to help evaluate candidate positions on prescription drug costs.

• Should the U.S. allow people to buy prescription drugs from other countries? Under what circumstances?
• What can be done to assure the quality and safety of prescription medicines imported into the U.S.?
• If people in the U.S. are allowed to import drugs, will drug companies invest less in research and development? If so, are there any measures the government can take to encourage companies to do research and development?
• Is a market-based system or government intervention the most effective way to control drug costs for seniors? If prescription medicines remain unaffordable for many seniors after the Medicare drug law goes into effect, what approach should be taken?

Prepared by Health Policy Alternatives, Inc.

¹ National Health Expenditures Tables. http://www.cms.hhs.gov/statistics/nhe/historical/t2.asp.² Lundy, Janet, Benjamin Finder, and Gary Claxton. Trends and Indicators in the Changing Health Care Marketplace, 2004 Update. Kaiser Family Foundation. April 2004. Exhibit 1.18.³ The percentage of prescription drug costs paid for by private health insurance increased from 24 percent in 1990 to 47 percent in 2001. Fact Sheet: Prescription Drug Trends, Kaiser Family Foundation, May 2003. Figure 2.⁴ Rosenthal, Meredith B., et al. Demand Effects of Recent Changes in Prescription Drug Promotion, Kaiser Family Foundation, June 2003. Direct to consumer advertising rose by 28 percent annually between 1996 and 2001. The study found that increases in direct-to-consumer advertising between 1999 and 2000 accounted for 12 percent of drug sales growth during that period.⁵ However, the effective patent period is usually shorter because patents are obtained before the products are approved for marketing.⁶ Often, in order to extend their favorable market situation, a company may get a new patent on a slightly different version of a drug about to go off patent.⁷ Di Masi, Joseph A. “Success Rates for New Drugs Entering Clinical Testing in the United States,” 58 Clinical Pharmacology and Therapeutics, 1995, p. 1-14.⁸ Lundy, Janet, Benjamin Finder, and Gary Claxton. Trends and Indicators in the Changing Health Care Marketplace, 2004 Update. Kaiser Family Foundation. April 2004. Exhibit 1.21.⁹ Between 2000 and 2004, copayments in multi-tier arrangements increased by 62 percent for preferred brand drugs and by 94 percent for non-preferred brand drugs. Henry J. Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits Annual Survey, 2000 and 2004.¹⁰ Importation refers to bringing products into the U.S. from other countries, whereas reimportation means bringing back into the U.S. products that were produced here and exported to another country.¹¹ Schuler, Kate. Weighing Promise and Perils of Drug Importation. CQ Weekly, July 24, 2004. p. 1791.¹² CBO. Would Prescription Drug Importation Reduce U.S. Drug Spending, April 29, 2004. http://www.cbo.gov/showdoc.cfm?index=5406&sequence=0¹³ Families USA. Written testimony submitted to the U.S. Committee on Finance, Hearing on International Trade and Pharmaceuticals, April 27, 2004.¹⁴ Schuler, Kate. Weighing Promise and Perils of Drug Importation. CQ Weekly, July 24, 2004. p. 1790.¹⁵ See H.R. 2427 (108th Congress).¹⁶ For example, in Medicaid, the government requires manufacturers to provide rebates to state governments for outpatient drugs, effectively reducing the price the state pays for the drug.

Papers on Issues For People With Medicare Raised By Proposed Drug Benefit Regulations

The Kaiser Family Foundation has commissioned a series of papers to explore key issues that may be of concern for Medicare beneficiaries as the new Medicare drug benefit is implemented. These papers focus on specific areas of potential concern for people with Medicare. In addition, the Foundation also has produced a timeline of upcoming important dates leading up to the implementation of the new drug benefit.

Issue Paper — Marketing and Privacy Issues: An Analysis of the MMA and Proposed Regulations

Issue Paper — Issues for Medicare Beneficiaries in Long-Term Care Facilities: An Analysis of the MMA and Proposed Regulations

Issue Paper — Grievance and Appeals Procedures: An Analysis of the MMA and Proposed Regulations

Issue Paper — The Effect of Formularies and Other Cost Management Tools on Access to Medications: An Analysis of the MMA and Proposed Regulations

Timeline — Medicare Prescription Drug Improvement and Modernization Act Implementation Timeline: June 2004 – December 2006 Key Dates

This comprehensive survey of people on Medicare, conducted in June and July 2004, assesses their attitudes toward the new Medicare drug law. This chartpack, issued in September 2004, presents additional analysis on the survey data, looking at key findings broken down by income group.

Chartpack (.pdf)

This paper, by Sara Rosenbaum, J.D., Director of the Center for Health Services Research and Policy at George Washington University, examines the procedures for resolving beneficiaries’ grievances and appeals under the new Medicare drug benefit. It is one in a series commissioned by the Kaiser Family Foundation that analyzes issues surrounding the implementation of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) and the proposed regulations.

Issue Brief (.pdf)

Health Care Costs

Download a printable .pdf of Heath Care and the 2004 Elections: Health Care Costs.

IssueBackgroundSources of Cost IncreasesCost Control StrategiesImpact of the ElectionAssessing Candidate Positions

Issue

Health cost increases threaten to make health insurance less affordable for all Americans, and make it harder to extend coverage to the 45 million Americans who are uninsured. Rising health costs are also taking a larger share of government spending at a time of high and continuing budget deficits. Strategies for moderating growing health costs may include a strong role for government negotiation or market-based models relying on competitive forces. How the candidates for the upcoming election propose to address these challenges is a critical component of the current political debates.

Background

Since the 1960s, the nation’s efforts to control health care costs through either government regulation or market forces have not had much long-term effect. ¹ After a brief respite in the mid-1990’s, expenditures on health care are again growing at rapid rates, significantly outpacing inflation and the growth in national income. Total health care expenditures grew at an annual rate of 9.3 percent between 2001 and 2002, pushing health spending from 14.1 to nearly 15 percent of the U.S. economy over the period. Health spending in the U.S. totaled $1.6 trillion in 2002 (the last year for which there is complete information), or about $5,400 per person, by far the highest per capita spending on health care in the world. ²

Although Americans benefit from this increasing investment in health care, recent rapid cost growth, coupled with an overall economic slowdown, is placing great strains on the systems we use to finance health care, including private employer-sponsored health insurance coverage and public insurance programs such as Medicare and Medicaid. Since 2000, employer-sponsored health coverage premiums have increased by nearly 60 percent for family coverage, with family premiums increasing 11.2 percent between 2003 and 2004. ³ Medicare and Medicaid program spending have also been increasing, but at lower rates than employer plan premiums.

In the shorter term, policymakers and other private payers for care are seeking ways to reduce cost growth and improve efficiency. Absent aggressive efforts at cost control, however, advances in medicine and the growing elderly population will almost inevitably cause health care spending to grow faster than the economy overall. In the longer term, the nation faces the question of how to finance the health care’s growing share of national resources.

The challenges facing policymakers are made more difficult by unprecedented federal deficits, which are projected to continue over at least the next 10 years – totaling some $2.3 trillion. ⁴ These fiscal pressures are likely to intensify efforts to slow growth in health spending for programs like Medicare and Medicaid. Further, nearly 45 million Americans, many with low incomes, are without any health coverage, and providing them with access to coverage – either by expanding government programs or providing subsidies through tax credits –– will increase rather than decrease total spending. ⁵

And, despite the fact that the U.S. devotes significantly more of its national income to health than other countries high level of health spending in the U.S, performance on a number of important health status indicators lags that of a number of other industrialized countries. Specifically, 2001 data from the Organization for Economic Cooperation and Development (OECD) on 26 nations shows 23 countries with lower infant mortality rates, and 17 nations with longer life expectancy than in the U.S. ⁶ While the level of investment in health care is only one factor affecting health status, U.S. rankings suggest that the benefits of spending on health are not evenly distributed.

Sources of Cost Increases

Costs for each of the major components of health care spending have risen faster than inflation in recent years. Between 2001 and 2002, the last year for which we have complete information, nearly one-third of the growth in health spending was due to increases in spending on hospital care. Increased consolidation and mergers have given hospitals more negotiating clout, allowing them to charge higher prices for their services. Of the 9.5 percent increase in hospital spending in 2002, higher prices accounted for 5 percent of the growth. ⁷ Much of the rest of the increased spending is attributable to more hospital admissions and increases in the amount of services given to hospital patients.

Prescription drugs costs are widely assumed to be responsible for much of the increase in overall health spending. While drug spending increased 15.3 percent in 2002, it represents only 11 percent of total health spending and about 16 percent of the increase in all health care spending for the year. ⁸ In fact, spending for drugs has been declining over the past three years probably as a result of higher co-pays, more use of generic drugs, and tighter controls on drug coverage by private insurers and Medicaid.

Physician spending growth declined in 2002 to 7.7 percent compared to the 8.6 percent increase recorded in 2001. ⁹ Limitations on Medicare physician payments are assumed to account for the slower growth in overall spending. One factor that is often cited for contributing an increase in health care costs is the practice of defensive medicine by doctors due to a fear of malpractice claims. While physicians often cite the high cost of professional liability insurance, according to the Congressional Budget Office (CBO), spending on malpractice insurance accounts for less than 2 percent of total health spending. Although malpractice premiums continue to escalate at about 15 percent a year, CBO states that significant reductions in this rate of growth would only modestly affect overall health spending growth. ¹⁰

The remaining one-third of health spending increases is attributable to spending for nursing homes, home health care, and other items of medical equipment and supplies. Spending for home health care rose by 7.2 percent in 2002, primarily as a result of higher Medicare payments and an expansion in Medicare coverage of home care. ¹¹

While more recent data record a slow down in the rate of increase in health spending, most observers predict that future increases will continue to outstrip growth in the overall economy and wages. These trends will make health insurance less affordable, increase out-of-pocket spending, and require larger public outlays at a time of rising budget deficits.

Cost Control Strategies

Cost containment strategies are likely to be pursued by government and private purchasers of health care – insurance plans and employers. Government policies intended to reduce the increase in spending for Medicare and Medicaid will be on the public policy agenda regardless of the election outcome. Meanwhile, employers and insurance plans will continue to search for ways to slow spending increases by using their leverage in the market to hold the line on price increases, by shifting costs to workers in the form of higher premiums, deductibles, and co-payments, and by attempting to use innovations such as disease management to head off more expensive health care interventions with tailored guidance and care for commonplace, chronic diseases.

At the political level, much of the discussion about health care costs has centered on the greater burden of costs to employers and individuals. Some think introducing more consumer involvement into health care spending decisions is an answer. Supporters of new “consumer-driven” health plans – consisting of tax-favored savings accounts and catastrophic insurance for expenses beyond a high annual deductible – believe that providing consumers with more information about their health care choices, coupled with strong financial incentives to be prudent purchasers of services, will result in lower cost growth. Advocates of this approach favor greater price transparency so that consumers can make more informed choices and more reliance on personal savings accounts for health care that allow patients to control routine health spending. Critics of this approach raise concerns about the potential impacts that the higher cost-sharing would have on lower income people, about the potential for these new arrangements to be disproportionately used by healthy people, and about the risk that important health care services will be forgone.

Others have called for a more direct role for government in containing health costs. They cite the success of Medicare policies in reducing the increase in per capita spending over the history of the program. The adoption of prospective payment systems in Medicare that shift financial risk for benefit costs to providers, and increased reliance on fee schedules and competitive bidding as the basis for other provider payments have been, in their view, effective in moderating Medicare spending growth. These payment policies have been widely adopted by private insurers as well. Direct government negotiation of prescription drug prices by the veterans health system is also cited as an example of government cost controls that have significantly lowered costs. Critics of this government role argue that such regulation imposes its own costs by stifling innovation, and preserving inefficient ways of delivering health care.

In sum, advocates of a stronger direct government role in health cost containment cite the Medicare and veterans health system experience, and point out that market-based approaches combined with greater individual financial responsibility can disadvantage those with limited financial resources and create barriers to needed care. Proponents of market-based approaches argue that consumers will benefit from a wider range of choices for their health coverage and that competition for enrollees will result in more effective cost containment benefiting consumers and all other purchasers of health care services.

Other political debates about health care costs have been focused on specific issues or parts of the market. Rapidly increasing costs for prescription drugs have generated several different cost containment proposals. One approach that receives substantial bipartisan support would permit people to purchase drugs that have been imported from Canada or other countries. These proposals would take advantage of price limits negotiated by other countries to lower the costs of drugs in the U.S. Opponents of this approach argue that it is merely importing government price controls. Moreover, lowering drug prices below market levels would reduce manufacturers’ financial incentives to develop new therapies. Supporters of this approach argue that Americans are subsidizing the citizens of other countries by paying higher prices for drugs, and that permitting drugs to be imported from other countries would result in a more fair allocation of drug costs across countries. The Congressional Budget Office has noted that this approach would have little long-run impact because both manufacturers and the governments in exporting countries would have strong incentives to end the practice. ¹²

Another focus of the health care cost debate has been medical malpractice; in particular the recent rapid increases in medical malpractice premiums and the overall impact of medical malpractice claims on health care costs. Proposals split largely but not entirely across partisan lines, with Republicans generally supporting caps on non-economic (pain and suffering) and punitive damages, and other changes to the legal system for resolving medical malpractice claims. Proposals often made by Democrats include: excluding amounts awarded in binding arbitration from taxable income (e.g., encouraging the use of alternative dispute resolution rather than the courts), elimination of the Federal antitrust exemption for insurers, establishment of a Federal reinsurance program to cover damage awards above a specified threshold, and tougher penalties for frivolous malpractice lawsuits.

There is substantial disagreement over the potential impacts of any of these different approaches, both on compensation for victims and on overall costs. However, a recent Congressional Budget Office report concluded that even large reductions in malpractice premiums would have only a “small direct impact on health spending.” The report also observes that the evidence for lower health costs as a result of reducing the amount of ‘defensive medicine’ is “weak or inconclusive. ¹³

The Impact of the Election

While the two major candidates for president have not released a specific set of proposals to slow the growth in health spending, both candidates talk about making health care more affordable – at least in some targeted way – by cutting the cost of drugs, reducing malpractice premiums, using information technology to make the system more efficient, or helping both employers and individuals reduce their insurance costs. Neither candidate has put forward a comprehensive plan for slowing increases in health costs in the aggregate.

Assessing Candidate Positions

1. How can health care be made more affordable without limiting access to necessary care?
2. What role should government play in controlling increases in the cost of care and the cost of health coverage?
3. What is the responsibility of individuals in the cost of their care? Are health savings accounts and high deductible insurance policies an approach that should be expanded?
4. What is the best approach to protect low-income Americans from unaffordable out-of-pocket costs for health care while containing health costs overall?
5. Should the government negotiate prices for prescription drugs? Should Americans be permitted to import drugs from foreign countries? How could the cost of malpractice insurance be reduced while assuring patients timely and appropriate compensation for medical injuries?

¹ Drew Altman and Larry Levitt, “The Sad History of Health Care Cost Containment As Told in One Chart,” Health Affairs, January 23, 2002.² Katharine Levit, et. al., “Health Spending Rebound Continues in 2002,” Health Affairs, v. 23, no.1, January/February 2004.³ Henry J. Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits: 2004 Annual Survey, September 2004, http://www.kff.org/insurance/ehbs/7148 (date accessed).⁴ “The Budget and Economic Outlook: An Update,” Congressional Budget Office, September 2004. ⁵ Current Population Surveys, Census Bureau, U.S. Department of Commerce, August 2004.⁶ “OECD Health Data 2004-Frequently Requested Data,” Organization for Economic Co-operation and Development, June 3, 2004.⁷ Katharine Levit, et. al., “Health Spending Rebound Continues in 2002,” Health Affairs, v. 23, no.1, January/February 2004. ⁸ Katharine Levit, et. al., Health Affairs, v. 23, no.1, January/February 2004. ⁹ Katharine Levit, et. al., Health Affairs, v. 23, no.1, January/February 2004. ¹⁰ “Limiting Tort Liability for Medical Malpractice,” Congressional Budget Office, January 8, 2004. ¹¹ Katharine Levit, et. al., Health Affairs, v. 23, no.1, January/February 2004. ¹² “Limiting Tort Liability for Medical Malpractice,” Congressional Budget Office, January 8, 2004. ¹³ “Limiting Tort Liability for Medical Malpractice,” Congressional Budget Office, January 8, 2004.

• pdf of Health Care and the 2004 Elections: Public Opinion

This paper, by Vicki Gottlich, J.D., of the Center for Medicare Advocacy, looks at issues related to the new Medicare prescription drug benefit for people with Medicare who live in nursing homes or other long-term-care settings. It is one in a series commissioned by the Kaiser Family Foundation that analyzes issues surrounding the implementation of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) and the proposed regulations.

Issue Brief (.pdf)

Women’s Health Policy

Download a printable .pdf of Health Care and the 2004 Elections: Women’s Health Policy.

IssueBackgroundReproductive HealthImproving Insurance Coverage and Affordability of CareBalancing Work and Family Health Care NeedsLong-Term CareClinical ResearchAssessing Candidate Positions

Issue

Health care is a major issue for women. Their greater health needs, longer lifespans, lower incomes, roles in their family’s health as mothers and caregivers, and reproductive health needs make their relationship with the health care system complex. Historically, reproductive health issues have dominated election campaigns’ attention to women’s health policy, with abortion taking center stage. However, women’s health policy intersects with a far wider span of health policies, including private sector cost containment, expansions and reforms of public programs, family-friendly workplace policies, long-term care financing, access to safe and comprehensive reproductive health care services, and medical research priorities.

Background

Women interact in the health care system, as patients, mothers, caregivers, and health care providers. They have more frequent doctor visits, higher use of prescription medicines, and greater need for long-term care services than men. In addition to their own health needs, women also take on primary responsibility for managing health care for their children as well as caregiving for other chronically ill or elderly family members.

Despite great strides in the workplace and workforce participation, women still earn a fraction of men’s salaries — median income levels are 45 percent lower for women than men. ¹ As a result, nearly 41 million women are low-income. ² As health care costs outpace inflation and the costs of health care are increasingly shouldered by individuals, women’s lower incomes put them at a greater disadvantage. Many women in the workplace also face a tremendous challenge balancing their work and family responsibilities with their own health care needs. As the primary managers of their family’s health care needs, workplace supports such as flex-time, family health coverage, and paid family leave can help assist women manage the different facets of their health care.

For many women, however, accessing health care is a challenge. One-quarter of women (27%) report that they have had to delay or forgo needed care, one in five (21%) could not afford to fill a prescription medicine, and 15 percent report that they could not obtain needed specialty care. ³ For the nearly 17 million women who are uninsured, access to high quality, comprehensive care is even more compromised. ⁴ There are also issues with regard to access to reproductive health services. There are broad differences from state to state in what services insurance plans must cover such as contraception, screenings, and preventive care, as well as limits on access to and coverage for abortion services. On the federal level, funding for family planning services under Title X has not kept up with inflation and international assistance for family planning has been severely curtailed.

Major Health Policy Issues of Importance to Women

Reproductive HealthWomen’s health policy has long been associated with reproductive health care. In previous campaign cycles, abortion has often dominated discourse about reproductive health and has emerged as a highly charged political issue. However, reproductive health policy extends far beyond abortion services, and includes other critical concerns such as family planning, coverage for pregnancy and maternity care, and sex education.

One area in which policy activity has flourished in recent years, primarily at the state level, is insurance coverage for contraceptives. It has been estimated that a typical woman who wants to have two children will need to use contraception for at least 20 years. ⁵ However, insurance coverage for contraceptives lags behind coverage for many other basic benefits such as maternity care and other prescription drugs.⁶ As of September 2004, twenty-one states now require private health insurance plans to cover prescription contraceptives if they cover other prescription drugs; however, the 54 percent of workers who are in self-funded plans are not affected by these laws. ⁷ Federal legislation has been proposed but not passed.

For low-income women, public financing of family planning services through the Title X and Medicaid programs provides both access to contraception and important primary care. However, Title X funding has not kept pace with inflation, potentially constraining access to family planning services for low-income women.

Sex education is another area affecting young women that has been squarely at the center of a highly polarized policy debate. The current Administration has shown strong support for abstinence-only programs that teach abstinence until marriage and prohibit programs that operate under federal funds from teaching about contraceptives and condoms. Federal funding for abstinence-only sex education has more than tripled since 2001. ⁸ Opponents of the abstinence-only policy argue for promoting comprehensive sex education, which teaches about abstinence as well as contraception and prevention of STDs. Supporters of abstinence-only programs argue that this sends mixed signals to students and that abstaining from sex is the only way young people can be protected from unplanned pregnancies and STDs.

Abortion remains the most highly regulated women’s medical service. At the federal and state levels, strategies have been increasingly adopted to limit access to abortion. These include federal and state laws banning so-called “partial birth” abortions, parental consent and waiting laws, refusal clauses that exempt health care providers from performing abortions, and the appointment of judges who are opposed to abortion. Abortion rights proponents would seek to ease some of these barriers and facilitate access to abortion services as well as access to family planning services. Opponents of abortion rights would endorse policies that further limit access to abortion services.

Reproductive health is one of the areas where the policy positions differ most clearly. Some proposals (generally Democrats’) emphasize broadening access to family planning by requiring insurers to cover contraceptives, increasing Title X funding, reversing current restrictions on international funding to family planning agencies and appointing judges committed to upholding Roe v. Wade. Others (generally Republicans) would focus on further increasing funding for abstinence-only education and upholding and promoting laws that require parent consent for minors and place limits on federal funding for abortion in the U.S. and abroad.

Improving Insurance Coverage and Affordability of Care

Like men, almost two-thirds of women receive their health insurance through employers. ⁹ With premiums rising at double-digit rates for the last four years, workers have increasingly had to make larger contributions toward escalating premiums yet without receiving comparable growth in salaries. Furthermore, the majority of workers with employer-based insurance face deductibles and/or copayments when they need health care services. ¹⁰ These are important concerns for women, because they are more likely to need health care services throughout their lives, yet have lower incomes and thus are less able to afford additional out-of-pocket expenses.

Some policymakers are looking to the individual insurance market as a possible avenue for expanding coverage to the uninsured. However, moving to greater dependence on this market also poses challenges for women. Although the premium costs for these plans vary and are sometimes quite low, the actual costs of these policies can be quite expensive including very high deductibles and large co-insurance charges. Individually purchased policies are also often limited by exclusions for prior health conditions or require special riders at additional costs for maternity care.

Medicaid, the nation’s health and long-term care coverage program for the poor, today assists nearly one in ten women. Women make up nearly three-quarters of adult beneficiaries covered by the program. Historically, Medicaid has provided several benefits of particular importance to women, including covering one-third of all births in the U.S., financing over half of nursing home care, and covering a broad range of preventive and screening services. Starting in the late 1980’s, Medicaid was used as a vehicle to extend coverage to many low-income children, pregnant women, and working parents. More recently, these expansions have been curtailed and benefits reduced in response to the fiscal crisis facing most of the states. Choices about the future of the program — who will continue to be covered, what will be covered, as well as how care will be financed — have important consequences for the nation’s 41 million low-income women and their families.

The future of Medicare is also a priority for women over age 65. Given their longer lifespans, women comprise the majority (57%) of Medicare beneficiaries, rising to 80 percent of the Medicare population over 85 years. Given their disproportionately lower-incomes (55% of women over 65 have incomes below 200% of the federal poverty level compared to 35% of men), the costs of Medicare premiums, deductibles and coinsurance as well as the affordability of medications are major concerns facing many women in their senior years. ¹¹ The future of Medicare will continue to be a central issue for the nation’s elderly women in the years to come.

With almost 17 million women uninsured, expanding health coverage to the nation’s 45 million uninsured is a policy priority for women. Some proposals would use a mix of public and private sector approaches, expanding public coverage under Medicaid and SCHIP to more of the nation’s low-income families and using various strategies to reduce costs so that more workers will be covered by their employers. Other major proposals aim to make individual health insurance plans more affordable to more people by subsidizing premium costs.

Balancing Work and Family Health Care Needs

Women take charge of nearly 90 percent of health care responsibilities for their children, including selecting their doctor, taking them to appointments, and choosing their health plans. However, for working mothers, this often presents challenges with their workplace responsibilities. Half of working mothers have to miss work when their child is sick, resulting in fears about job security and career advancement as well as tangible financial consequences. Half of working mothers do not get paid when they miss work to care for their sick children. ¹²

Women are also the major providers of informal caregiving for family members with disabling conditions, such as aging parents or spouses. These women shoulder heavy health care responsibilities, on top of their own health, family, and workplace responsibilities. There is often little in the way of physical or psychological supports for these women.

Comprehensive workplace benefits and supports, such as paid family leave, are particularly important for women. In 2003, California became the first state to enact a paid family leave benefit, and while federal legislation was introduced earlier this year, it has not been a major issue in this year’s election.

Long-Term Care

Long-term care is an under-recognized women’s health policy issue. Two-thirds of people who receive home health services (67%) and three-quarters of nursing home residents (75%) are women. ¹³ A year of care in a nursing home can cost $50,000 or more. Hiring a home health aide at $12 an hour for four hours a day, five days a week would cost over $12,000 for a year. However, m ost employer-sponsored health insurance plans do not cover long-term care and neither does Medicare, a particularly large gap for many seniors. Stand-alone long-term care insurance is expensive and cost prohibitive for many seniors. This leaves Medicaid as the major payer for long-term care services, but only for those seniors who are very poor or who have impoverished themselves with large health expenses. As the population ages, the need for policy solutions that address the cost of long-term will become more acute.

Clinical Research

Research has shown that many diseases and conditions, including heart disease, smoking, and lung cancer, affect women and men very differently. ¹⁴ There are also several diseases, such as breast cancer and osteoporosis, that primarily affect women, and another range of conditions, including pregnancy, menopause, and certain reproductive-related cancers that only affect women. Sex-based differences have been identified on several levels, including treatment efficacy, medication side effects, prevention strategies, and disease etiology. Today, there are dedicated clinical trials investigating women’s health, such as the NIH’s Women’s Health Initiative, and NIH policy requires that women be included in all federally funded clinical trials. Yet, there are still large gaps in knowledge about the effects of sex on many diseases and treatments. The amount of funding earmarked for women-specific research and for understanding the sex differences in the diseases that strike men and women have not been detailed by either candidate.

Assessing Candidate Positions

Health care has historically been an issue of particular significance to women. In a recent survey, women were more likely than men to report that health care will be one of the most important issues in determining their choice for president in the 2004 election. ¹⁵ However, it is important to understand that women’s health is not defined by any single issue. Women have much at stake in a host of larger health care debates, and the importance they place on health care as a voting issue reflects the influence of larger health policy matters on their own and their families’ health.

The following questions could be useful in understanding how the candidates propose to address some of the major areas of health policy affecting women.

• How can the government help improve women’s access to health care?
• What policies should be in place with regard to access to women’s reproductive health services?
• How should the federal government address the rise in health care costs? How can policies help ease the burden of shifting costs to consumers, such as higher premiums, deductibles, and co-pays?
• Should Congress pass federal legislation that requires health plans to cover contraceptives and other preventive services for women?
• What strategies can be used to ease some of the tensions women face in caring for their families while meeting their workplace responsibilities? Should the government enact legislation for paid family leave?
• What proposals would help improve health care access for low-income women and their families?
• What can be done to assist seniors and families with long-term care costs?
• What policies can be put in place to ensure that sufficient federal dollars are allocated to support health research of importance for women?

¹ U.S. Census Bureau, March 2003 Current Population Survey.² Low-income is defined as family incomes below 200% of poverty, which was equivalent to $30,520 for a family of three in 2003.³ Kaiser Family Foundation, Kaiser Women’s Health Survey, 2001.⁴ Kaiser Family Foundation, analysis of Urban Institute estimates from March 2004 Current Population Survey.⁵ Alan Guttmacher Institute, Contraceptive Use Factsheet, www.guttmacher.org.⁶ Alan Guttmacher Institute, State Policies in Brief: Insurance Coverage of Contraceptives, September 1, 2004.⁷ Kaiser/HRET Employer Health Benefits Survey: 2004.⁸ Bush-Cheney campaign, Agenda for America, www.georgebush.com.⁹ Kaiser Family Foundation analysis of Urban Institute estimates from March 2004 Current Population Survey. ¹⁰ Kaiser/HRET, Employer Health Benefits Survey: 2004. ¹¹ Kaiser Family Foundation analysis of Urban Institute estimates from March 2004 Current Population Survey. ¹² Kaiser Family Foundation, Kaiser Women’s Health Survey, 2001.¹³ Health, United States, 2000. Nursing home data from the 1997 National Nursing Home Survey. Home health data from the 1996 National Home and Hospice Care Survey.¹⁴ Institute of Medicine, Exploring the Biological Contributions to Human Health: Does Sex Matter? 2001.¹⁵ Kaiser Family Foundation, Health Poll, June 2004.

States’ Role in Administering the New Part D Low-Income Subsidy Program: A Conference Call Discussion

The Medicare Modernization Act (MMA) created a major new subsidy program for an estimated 14 million low-income Medicare beneficiaries that will provide assistance with their cost-sharing obligations under the Part D drug benefit. The MMA requires state Medicaid agencies, along with the Social Security Administration (SSA), to accept applications for the new low-income subsidy. MMA also specifies that people who apply at Medicaid agencies for the low-income subsidy must be screened for eligibility for Medicare Savings Programs and, if found eligible, offered the chance to enroll. The proposed MMA regulations issued on August 3, 2004 provide further information on how CMS contemplates handling issues raised by the low-income subsidy program, and SSA is expected to issue shortly its own proposed regulations on its administration of the low-income subsidy.

To discuss the implications for states in administering MMA’s new low-income subsidy program, the National Association of Medicaid Directors and the Kaiser Commission on Medicaid and the Uninsured will hold the third in a series of calls with state Medicaid officials on the MMA.

What: A Conference Call Briefing for State Officials and Staff

When: Thursday, September 23, 20042:00 p.m. – 2:40 p.m. EDT Presentations2:40 p.m. – 4:00 p.m. EDT Q&A and Discussion

How: Via conference call.The conference call-in number is (800) 863-3908.Password: KCMU.Please call a few minutes early to secure a line (let the phone ring) to get through to the call.

Background materials for the call are available below:

Enrolling Low-Income Medicare Beneficiaries in Subsidized Part D Drug Coverage (.pdf)The Medicare Prescription Drug Law – Fact SheetPapers on Issues For People With Medicare Raised By Proposed Drug Benefit Regulations