What's the benefit? A new federal Medicare drug plan stimulates independent actions and new ideas, but what's the future role for states?

• Author: Cauchi, Richard

When the federal Medicare Prescription Drug Act was signed last December, it was hailed as a major landmark for health care--millions of people finally would get crucial help in paying for their medicines.

Along with the public and government cheers at its passage, however, came a chorus of questions and complaints, mostly from those who worked for different versions of a federal plan. In the states the view is quite different. State lawmakers are hoping Congress will add some money for the federal plan, but in the meantime they are busy piloting new features and ideas based on local needs and resources. Numerous existing state programs are already serving many seniors, while programs to save drug costs address issues not covered by Congress.

So what are the realities, myths, questions and the interestingly large number of choices that remain?

Surprisingly, in the same six-week period that the federal law was passed, several states launched their own major drug programs.

Ohio started the Best Rx discount program. Illinois seniors began using their state Rx discount cards. Maine inaugurated MaineRx+. More than a million seniors in Arizona received the CoppeRx discount card free of charge.

If Congress has mostly resolved prescription drug coverage, why are there so many other state-based initiatives?

A BUSY SIX MONTHS

Half a year after its passage, the federal Medicare Act is big news for the states, both for residents and for policymakers.

Briefly, the act's key features are:

* This year, most people enrolled in Medicare can apply to get a discount drug card, giving them immediate discounts of 10 percent or more below retail prices. Low-income people without private coverage or on Medicaid may receive $600 annually toward the purchase of their prescriptions in 2004 and 2005.

* In two years, Medicare's optional prescription drug benefit (Part D) will replace the cards. Part D will pay for a portion of pharmaceutical purchases for people covered by Medicare who choose the optional coverage.

Virtually all 50 states already have taken some action in response to the law. Some agencies view it as a vital opportunity and have launched outreach efforts to ensure participation. Others are designing far-reaching plans that will unfold over a two-year period. This year, the National Conference of State Legislatures tallied at least 50 bills in 24 states explicitly aimed at adjusting state pharmaceutical benefits in coordination with the new federal law.

"The new Medicare law exemplifies the tensions between efforts to lower prices through competition and to preserve profit incentives for the drug industry. No drug plan can minimize price without restricting choice," says Maine Representative Peter Mills. "This tension divides people at each end of the political spectrum."

DISCOUNT DRUG CARDS

For now, the most tangible parts of the federal law are the discount cards, which became effective in June. Thirty-one states already operate or have authorized some type of pharmacy assistance subsidy program. Separately, 11 states have their own operational discount programs.

Representative Mills says there will be few takers for the federal temporary card in Maine. The state program has better prices and no fee. States are able to keep prices down because officials are busy making bargains with manufacturers by using preferred drug lists and prior authorization techniques that trade market share for price concessions, he says.

Some cooperative solutions caught on quickly. Several state pharmaceutical assistance programs (known as SPAPs in federal jargon) are offering automatic enrollment into state-endorsed discount card options.

This fairly simple strategy can make a dramatic difference to confused consumers. For those already enrolled in a state program, they may get a better price on some products. Although not mandatory under state or federal laws, the single card selected by a particular state may help seniors who have never been signed up before. Some states are sending "opt-out" letters to current beneficiaries, in case they do not want to remain enrolled.

There also are dramatic financial...