States' "clawback" payments to the federal government could be about $700 million less than expected this year because of greater use of generic drugs and competition among Medicare drug plans, HHS Secretary Mike Leavitt said on Thursday in a statement, CQ HealthBeat reports (CQ HealthBeat, 2/9). Under the 2003 Medicare law, Medicare assumes prescription drug costs for dual eligibles -- individuals eligible for both Medicaid and Medicare -- and states will have to pay the federal government as much as 90% of the estimated amount that they would have spent on Medicaid coverage for medications for dual eligibles. The rate will decrease to 75% over time (Kaiser Daily Health Policy Report, 2/3). States' clawback payments will be 25% less than previously anticipated through 2015, Leavitt said. According to CQ HealthBeat, the announcement "comes on the heels" of CMS' announcement last week that the Medicare drug benefit will cost $7.6 billion less in 2006 than previously estimated (CQ HealthBeat, 2/9). CMS Administrator Mark McClellan said last week that the net cost to the federal government of the Medicare prescription drug benefit in 2006 is projected to be $30.5 billion, 20% less than the government's previous estimate of $38.1 billion. In addition, McClellan said the average monthly premium for beneficiaries now is estimated to be about $25, down from a previous estimate of about $32.20 per month. He attributed the decreased costs to drug plans that are offering lower premiums than expected and to the fact that beneficiaries "are choosing the plans that offer them the best deal." McClellan also said "stronger-than-expected competition with lower drug costs" contributed to the reduced cost projections (Kaiser Daily Health Policy Report, 2/3).

Lawsuit Re-Evaluated
In related news, California officials are re-evaluating a lawsuit filed to challenge the clawback provision of the Medicare drug benefit after the Bush administration's announcement on Thursday, the Sacramento Bee reports (Benson, Sacramento Bee, 2/10). California Attorney General Bill Lockyer (D) last week said that California, Kentucky, New Jersey, Missouri and Texas would file a lawsuit later this month over the clawback provision. The states that plan to file the lawsuit allege the federal government is overbilling them because of flaws in the formula used to calculate the payments (Kaiser Daily Health Policy Report, 2/3). California would have lost $130 million over two years under the original calculation, but the administration of Gov. Arnold Schwarzenegger (R) said the state will save $60 million with the new calculation. Schwarzenegger spokesperson Julie Soderlund said the administration is "still evaluating whether or not we feel it's appropriate to move forward with the lawsuit." A spokesperson for Lockyer said state attorneys will consult with the governor before deciding whether to pursue the lawsuit (Sacramento Bee, 2/10).

Differing Enrollment Estimates
The Detroit Free Press on Friday examined differing estimates over how many Medicare beneficiaries have enrolled in the new benefit. HHS says 24 million of the 42 million eligible Medicare beneficiaries are enrolled in the program, while others say only 3.6 million beneficiaries have voluntarily enrolled, according to the Free Press. According to CMS, as of Jan. 13, 14.2 million U.S. residents were enrolled in Medicare drug plans, including more than 10 million who were automatically enrolled. CMS also counts in its total figure of 24 million an additional 10 million federal retirees and Medicare-age retirees who receive prescription drug coverage through their employers. Although neither group receives prescription drug benefits through Medicare, HHS "claims them as covered beneficiaries because the government system 'provides a safety net for them" and because Medicare provides subsidies to employers who retain retiree drug coverage, the Free Press reports. Sen. Debbie Stabenow (D-Mich.) said on Thursday, "The enrollment numbers for the new Medicare prescription drug program are inflated and misleading. This is just one more indication that the drug benefit is not working as it was intended or as it is being portrayed." CMS spokesperson Robert Herskovitz said, "It's too early to say where we're going to be in the next couple of months" with enrollment, adding, "Remember, early on, we were telling people to take time and learn about the plans" (Merx, Detroit Free Press, 2/10).

Additional Coverage

• Philadelphia Inquirer: The Inquirer on Thursday examined how many independent pharmacists "are facing a cash crunch" from providing no-cost medications to Medicare beneficiaries whose enrollment in the new Medicare drug benefit could not be verified. According to the Inquirer, some pharmacists have given out tens of thousands of dollars worth of medication, but the federal government has not yet promised to reimburse private pharmacies for such costs, as it has with states (Pugh, Philadelphia Inquirer, 2/9).
  
  
• Washington Times: The Times on Thursday examined how many health insurers have had to increase staff to handle problems related to the complexity and popularity of the new drug benefit. Aetna, Cigna and UnitedHealth Group are among the insurers who have made new arrangements to handle the increased customer service needs (Higgins, Washington Times, 2/9).