Position Statement

Prescription Drug Coverage Under Medicare

This Position Statement was developed as an educational tool based on the opinion of the authors. It is not a product of a systematic review. Readers are encouraged to consider the information presented and reach their own conclusions.

The Medicare program currently provides hospital and physician insurance coverage to 39 million Americans age 65 and over and to qualified individuals with disabilities. Medicare does not, however, include coverage for outpatient prescription drugs, for approximately 35% or 12.8 million of its beneficiaries, which is considered by many to be a serious shortcoming. This lack of coverage can be a formidable barrier to effective treatment, especially for many beneficiaries with catastrophic, life threatening, and/or chronic illnesses who often rely on drugs prescribed on an outpatient basis.^1,2

Medicare beneficiaries without outpatient prescription drug coverage receive fewer medications and spend significantly more out-of-pocket for them than beneficiaries with coverage. This is especially evident among beneficiaries in lower income brackets. For example, non-covered beneficiaries with incomes at 136-150 percent of the poverty level paid almost twice as much for prescription drugs as beneficiaries at the same income level with coverage.^3,4

The American Association of Orthopaedic Surgeons (AAOS) believes that Medicare should provide outpatient prescription drug benefits for beneficiaries in financial need who otherwise cannot afford any coverage, especially those with catastrophic, life-threatening, and/or chronic conditions requiring on-going, costly drug therapies. In particular, the AAOS strongly supports Medicare outpatient prescription drug benefits for beneficiaries with debilitating arthritis, severe and chronic inflammatory conditions, and osteoporosis.

As various proposals come before Congress, the AAOS encourages legislators to support the following attributes in a prescription drug benefit for those in need with catastrophic, life threatening, and/or chronic conditions.

• A government administered prescription drug benefit that ensures quality, affordability and access for Medicare beneficiaries across all geographic regions.

The AAOS recognizes, however, that a new Medicare prescription drug benefit would be a costly and complicated program. While supportive in principle, the AAOS does not want such a benefit to bankrupt or weaken the existing Medicare program.

• Funding sources separate from Medicare Parts A and B.
• Open formularies that allow the physician, in partnership with the patient, to explore the most appropriate and cost-effective drug treatments.
• Patient participation through co-pays and deductibles in a tiered system based on ability to pay and including cost-sharing for those who can afford it; full coverage for those who cannot. Deductibles may vary by the cost of particular drugs.
• Outreach to people in need, without creating a costly system of adverse selection.
• Increased public disclosure of drug costs drug classes, and cost-effective alternative to high-cost drugs.
• Choice of lower cost drugs that work.

The AAOS believes that direct to consumer advertising may pressure patients to ask for and physicians to prescribe newer, costlier medicines, when more effective and less expensive medications are available.

• On-going drug research that supports the development of new, better, and more cost-effective solutions.

The AAOS believes that increasing government scrutiny of the pharmaceutical industry should not impede innovation in drug treatments.

• Honest and realistic pricing of prescription drugs to Medicare beneficiaries, reflecting the direct cost of drugs.

The AAOS recognizes that the high price of some new drugs may be due to research and development costs incurred by the pharmaceutical manufacturers. However, the AAOS believes that after a reasonable period of time on the market, a prescription drug should be priced at a lower, more competitive level for the consumer. This is especially true in the case of drugs for which the patent has expired, as well as those drugs beyond their active research phase.

The Medicare program has been a foundation of security for the health care needs of millions, especially the elderly, poor, near poor, disabled, and those with chronic debilitating illnesses.

The AAOS believes that an outpatient prescription drug benefit, despite the potential for its high cost and challenging administration, is a natural extension to the Medicare program’s basic coverage.

References:

1. Iglehart, J.K., “Medicare & Drugs: The Elusive Prize Revisited,” Health Affairs Journal, March/April 2000, Vol. 19, No.2, P.250.
2. Poisal, J.A. and Chulis, G.S., “Medicare Beneficiaries and Drug Coverage,” Health Affairs Journal, March/April 2000, Vol. 19, No.2, P. 250.
3. Poisal, et al, P.254.
4. Poisal, et al., P.254-256.

February 2001 American Association of Orthopaedic Surgeons.
Reviewed December 2007.

This material may not be modified without the express written permission of the American Association of Orthopaedic Surgeons.

Position Statement 1154

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