Rules set on drugs benefit

Medicare will allow for more medicines

Insurers can limit choice

Automatic enrollment precludes coverage gap


WASHINGTON - The Bush administration yesterday unveiled rules for the new Medicare drug benefit that guarantee patients access to a wide range of medicines while giving insurance companies potent tools to control costs.

The rules, which were made final after a long and contentious public comment period, balance the competing interests of the elderly, drug companies, insurers and others who will be involved in delivering the new drug benefit.

On the one hand, the rules say that every prescription drug plan must provide "adequate coverage of the types of drugs most commonly needed" by Medicare beneficiaries. These include drugs to treat high blood pressure, heart disease, cancer, osteoporosis and Alzheimer's disease.

On the other hand, the rules say that a plan can establish a list of preferred drugs and can refuse to pay for other medicines.

In general, the list, known as a formulary, must have at least two drugs for treating each condition or illness.

The rules do not dictate which specific drugs must be covered - for example, by specifying Paxil or Zoloft among the anti-depressants, or Lipitor or Crestor among the cholesterol drugs. But Medicare officials said they could require insurers to cover "specific drugs" or types of drugs, to be identified in the future.

The rules also embody other important policy decisions that will determine exactly how the new program works and whether it succeeds. Consumers, insurers, drug companies and politicians have been sparring over almost every detail of the rules.

The final rules address many concerns that people expressed about a preliminary version that was issued in late July. Among these is the transition from Medicaid to Medicare for the elderly poor.

About 6.3 million low-income people are enrolled in both insurance programs. Medicaid, which is financed jointly by the federal government and the states, now pays for their drugs, but will not do so after Jan. 1, 2006. State officials and advocates for low-income people expressed alarm that many of these beneficiaries would lose coverage for months while they moved from Medicaid to a Medicare drug plan.

Dr. Mark B. McClellan, administrator of the federal Centers for Medicare and Medicaid Services, said yesterday that people eligible for the two programs "will have no gap in coverage," because they will be automatically enrolled in Medicare drug plans in the fall of this year.

Federal officials have been racing to prepare for the new Medicare law, which was signed by President Bush on Dec. 8, 2003, and takes effect Jan. 1 next year. Issuance of the rules is the most significant event between those dates.

The law, the biggest expansion of Medicare since its creation in 1965, depends on private health plans to deliver the new benefit. Insurers, eager to control costs, wanted to limit the number of drugs they must cover. Doctors, drug companies and advocates for beneficiaries wanted to maximize the number of drugs covered.

The government tried to strike a balance. It allows the use of formularies and says insurers have to cover only one drug in a therapeutic category or class if only two drugs are available and one is clearly superior.

But if a doctor certifies that a particular drug is medically necessary for a patient, the drug plan must cover it, regardless of whether it is on the list of preferred medicines.

The U.S. Chamber of Commerce, Blue Cross and Blue Shield Association and America's Health Insurance Plans, a trade group for insurers, praised the new rules. Howard G. Phanstiel, chairman of PacifiCare Health Systems, a large insurer based in Cypress, Calif., said the rules showed that the government would be "a good business partner."

But consumer advocates, including Families USA and the Medicare Rights Center, said they were somewhat disappointed.

Judith A. Stein, director of the Center for Medicare Advocacy, a nonprofit group that counsels beneficiaries, said the final rules allowed immense complexity and variation in drug benefits. Drug discount cards, offered as a temporary source of assistance, were too complex for many elderly people, she said, and the new drug benefit may be even more confusing.

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