Bush administration to propose new Medicare drug discount plan

Revised program to have more structure, detail, administrator says


WASHINGTON - President Bush will try again to force drugstores to give discounts on medicines sold to elderly people, even though a federal court has ruled that he lacks the authority for such a program, administration officials say.

Within two weeks, the officials said, the Bush administration will formally propose a new plan to endorse and regulate drug discount cards issued to Medicare beneficiaries.

The Medicare program does not generally cover prescription drugs outside the hospital, and the new cards would not change that. But they would enable Medicare beneficiaries to obtain discounts.

"We're just trying to get seniors cheaper prices," said Thomas A. Scully, administrator of the federal Centers for Medicare and Medicaid Services.

Congressional efforts to authorize drug benefits as an integral part of Medicare have sputtered since Sept. 11, when concern about terrorism swept aside other issues on the domestic policy agenda.

The government says 27 percent of the 40 million Medicare beneficiaries have no prescription drug coverage - the others have coverage through other sources - even though most of the elderly use prescription drugs and half of them take more than five medications. In the presidential campaign last year, Bush said he would fill that gap.

But with no consensus on how to proceed, he took action July 12 to promote the use of cards issued by private companies that would pool the purchasing power of Medicare beneficiaries to negotiate discounts.

Tommy G. Thompson, secretary of Health and Human Services, said the savings with such cards "might be as high as 40 percent" of retail drug prices.

On Sept. 6, a U.S. District Court judge here blocked the Bush program, saying that the president had apparently "acted without legal authority."

In addition, the judge, Paul L. Friedman, said federal officials had apparently violated a 1946 law, the Administrative Procedure Act, by failing to provide proper notice and an opportunity for public comment on the plan.

Thompson told the court last week that the Bush administration was "effectively withdrawing" the original program but would propose a new version. The proposal, he said, "will be similar to the program announced in July, although it also will differ in important respects."

Scully said the new proposal "has a little more structure to it and is much more detailed" than the original plan.

He said he was confident that Friedman would approve the new initiative because the Bush administration would seek public comment on it, as the judge demanded, and would provide a clearer explanation of its legal authority.

The authority for the new program, Scully said, is the same as the authority for the original one: a section of the Medicare law that requires the government to establish an "advisory service" to educate beneficiaries about Medicare, Medicaid and other health insurance programs.

Friedman ruled that the original drug discount program was not the type of educational initiative contemplated in the statute. "This is far more than an educational or advisory service program," he said. The Bush program, he said, would have created an elaborate system of benefits, procedures, obligations and restrictions never envisioned by Congress.

The lawsuit against the administration was filed by the National Association of Chain Drug Stores and the National Community Pharmacists Association.

The organizations said their members would suffer financial harm because most of the discounts would be extracted from them. In addition, drugstores said, they would lose Medicare customers if they did not cut prices to the levels specified in the federal program.

Craig L. Fuller, president of the chain drugstore group, said he did not understand the legal basis for the drug discount program and was "more puzzled than ever."

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