Pharmacare Cuts

May 13, 2003

Early Warning of Problems with "Fair" Pharmacare

The next time you go into a pharmacy ask the pharmacist what the experience has been in the early days of "Fair Pharmacare". I did that on Mother's Day and was told that some seniors are walking away from the counter rather than filling their prescriptions. A specific example given was for blood pressure medication. We shouldn't have to measure the consequences of government policy by monitoring age specific death rates.

My encounter at the pharmacy reminded me that I have not received a confirmation from the Ministry of Health for my Freedom of Information request with respect to the contract that the Minister claims exists for monitoring the effects of his policy changes. Consequently, I have sent the following letter by registered mail.

May 12, 2003

Manager of Information and Privacy
Ministry of Health Planning; and
Ministry of Health Services
2nd fl, 1810 Blanshard St by registered mail
Victoria, British Columbia V8W 9C3

Dear Sir/Madam:

On April 29, 2003, I faxed the enclosed Freedom of Information request. It asks for a copy of the contract mentioned by Minister Hansen when he spoke in the Legislature on October 31, 2002. That is when he said "We have already put in place a contract with officials at the University of British Columbia to make sure that this transition is properly monitored using PharmaNet data, to make sure that no senior and no British Columbian is negatively impacted in terms of their ability - based on their ability to pay - to get medications that they need." Since I have not received a confirmation of receipt of that request and a file number I am sending this registered letter so as to be able to prove the date of the request. My experience has been that various ministries do not take a request seriously until the statutory deadline has expired and an appeal is submitted to the Office of the Commissioner.

Since this request is for a contract that the Minister mentioned in the Legislature, I trust that a prompt response with a photocopy of the contract will arrive long before the expiration of time limits established in the Freedom of Information and Protection of Privacy Act. Failing that, it could raise questions as to whether the Minister misled the House.

Sincerely,

David D. Schreck

April 30, 2003

Measuring the Effect of Changes to Pharmacare

Could the Campbell government be so Machiavellian that it would embarrass itself so as to distract attention from offloading $100 million per year onto sick people? There is no question that registration for Unfair Pharmacare has been a disaster. Rather than telling people that everyone must register regardless of age or income, the government ran ads touting the "fairness" of its changes. The changes do not "save" money; they merely shift costs from government to people who are sick enough to require a lot of drugs.

On April 28th, using a "stooge question" from a backbencher, Health Minister Collin Hansen said "I am pleased to tell the member that if a British Columbian doesn't get themselves registered before May 1 and they would qualify for benefits prior to them becoming registered, we will, in fact, at the end of the year, be reimbursing those individuals for any overpayment they may have made from the period from May 1 until such time as they do get themselves registered." The only problem is that government ads the previous week said that those who didn't register by May 1st would not enjoy continuous financial protection. In other words, government backed down and "fixed" the backlog in registrations by making registrations retroactive until December 31st.

While it is a good step to retroactively fix the registration mess, government still has to face the basic policy problems around shifting almost $100 million per year in costs from government to people who are sick enough to require a lot of drugs. Seniors who previously faced maximum user fees of $25 per prescription, to a total of $275 per year, will now receive no government help until they have paid their annual deductible. If an elderly family has an income of $40,000 per year, their deductible will be $400. They must pay the full cost of their prescriptions until they reach $400, after which they must pay 25% of the costs until their costs exceed $800. (Note: Each family's situation differs depending on age and income.) Research on the changes in the Quebec plan showed that increasing user fees means that some people will not fill prescriptions for essential medications.

There is a connection between the Campbell government's approach to changes in Pharmacare and its apparent indifference to increases in the infant mortality rate. In opposition, the Campbell liberals claimed to be concerned about health outcomes rather than simply measuring how much is spent on health care. In government they answer almost every criticism by referring to how much more they are paying doctors and nurses. Objective observers want to know whether changes have improved health outcomes. The answer is clear when we look at infant mortality - it is worse than when the Campbell Liberals took power. The government should set objective standards for measuring the effectiveness of their changes to Pharmacare so that independent observers can evaluate the changes a year from now. We shouldn't have to look at the increase in mortality amongst seniors. We shouldn't have to look at the increase in emergency hospitalization for seniors. The American Medical Association study looked at the "Mean daily number of essential and less essential drugs used per month, ED visits, and serious adverse events (hospitalization, nursing home admission, and mortality) before and after policy introduction." At the beginning of their bold experiment in offloading costs on to seniors, the Campbell government should specify what objective measures should be used a year from now to evaluate the health outcomes of their experiment. They should be held to account for the consequences of their changes.

On October 31, 2002, Health Minister Collin Hansen said "We have already put in place a contract with officials at the University of British Columbia to make sure that this transition is properly monitored using PharmaNet data ..." I have submitted a freedom of information request for that contract in order to see how it compares to the research that was done in Quebec. BC needs a real evaluation of the effect of changes to Pharmacare, not the kind of sham research that the Ministry of Human Resources uses for its "exit surveys".

April 22, 2003

"Fair" Pharmacare Registration - Incompetence or Heartlessness?

The Campbell government launched a major advertising campaign to laud their new "Fair Pharmacare" program. Unfortunately, the ad campaign had more to do with defending government's cuts to the old program than it did with encouraging people to complete the necessary registration for the new program.

Health Minister Collin Hansen claimed that registration would be "automatic" for low income families who are already in receipt of premium assistance. That is not true. Registration for Pharmacare involves two steps. First, a family member must complete forms on the government website (https://pharmacare.moh.hnet.bc.ca/) or answer questions after phoning the toll free registration number, 1-800-387-4977. Second, government mails a personalized form with a scanner code to the person who completed step one so that person can complete, sign and return it so as to complete the registration. Step one is automatically done for low income people, people who receive premium assistance for MSP. Step two is not automatic. The very low registration for Pharmacare indicates that many people may have believed the government when told the registration was automatic. That mistake will cost them thousands in rejected claims.

Hansen also said that otherwise claimable expenses for families not registered would be retroactively allowed towards the deductible, but not towards any claim. For example, if your deductible is $1,000 and you have $1,500 in eligible expenses but have not registered, you will not be able to get any reimbursement for the $500 that otherwise would have qualified for 70% or 75% reimbursement. Government should change that rule and make registration retroactive.

How government handles this problem will show whether it is incompetent or mean spirited. If the breakdown in registrations was due to incompetence, the problem could easily fixed by collecting signatures at pharmacies and backdating the applications. If, on the other hand, the breakdown was a mean spirited attempt to beat people out of additional tens of million of dollars, no change will be made to the rules that were announced as part of the initial public relations campaign.

March 4, 2003

Everyone should Register for Pharmacare Right Now

Everyone, regardless of age, should register for the government's new Pharmacare program. Not registering now could costs some families dearly since government will not backdate registrations after you purchase drugs. Answering a question on CFAX's Joe Easingwood show, Health Minister Collin Hansen said that costs incurred prior to registration can be counted towards meeting the deductible but any costs that would be eligible for reimbursement will not be considered for payment until a family is registered. Government should change that rule and not try to penalize people who register late, but until they do, it is important for everyone to register now.

In 2001 Pharmacare paid $352 million for people in Plan A (seniors), $27 million for people in Plan B (long term care), $146 million for people in Plan C (income assistance), $0.7 million for people in Plan D (Cystic Fibrosis), $117 million for people in Plan E (universal), $3.1 million for people in plan F (at home program), and $10.6 million for people in plan G (psychiatric medication). "Fair Pharmacare" replaces Plans A and E.

If some catastrophic illness were to cause a young family to incur $10,000 in drug expenses, the current (former as of May 1) program would pay for $8,000 of those costs under Plan E . How much the new program will pay depends on family income. If the family income was $50,000, then the new program would pay $8,350 if the family was registered. If the family spent the money before registering, government would reimburse nothing but it would count the $1,500 deductible as being satisfied. The moral to this story is you should register now even if you have never used a prescription drug in your life. Not to do so, means that you could be beaten out of any protection you thought you had.

Government should change the registration rule, but don't count on it and don't wait until you are sick to register. To register click on https://pharmacare.moh.hnet.bc.ca/ or phone 1-800-387-4977.

February 26, 2003

Problems Ahead for "Fair" Pharmacare

BC's new "Fair" Pharmacare program uses a definition of income that gives a break to people who make big donations to a registered retirement savings plan. That is just one of the differences between line 150 and line 236 on the income tax form.

On April 1, 1996, Manitoba's Conservative government changed its Pharmacare program to an income tested system. Manitoba's program uses line 150 from the income tax form (total incoem before any deductions) to determine income.

Line 236 used by BC's program is line 150 minus various deductions including business investment loss, carrying charges and interest expenses and registered pension plan contributions. What is "fair" about giving two identical neighbours different Pharmacare benefits depending on whether one family contributes to an RRSP or not? Isn't it unfair to give higher benefits to the family that can afford to contribute to a RRSP?

In the overall scheme of things the RRSP factor is probably a relatively minor consideration. Others would point to their pet deduction that gets one from gross income to net income, and argue for or against considering that in determining the Pharmacare deductible. The point is that BC has taken a different path from Manitoba in defining income. There was no public discussion of what the income test should look like or what the cutoff levels should be. This problem gets much worse when one considers homeowners compared to renters. Seniors living in homes that they have long since paid for are in much better shape than seniors who rent. Nevertheless, renters and homeowners will be treated the same as long as their net income is the same. Is that "fair"?

In question period on February 25th, Collin Hansen attempted to defend his use of net income for determining Pharmacare eligibility by saying that is what is used to determine premium assistance. There is a big difference. Premium assistance is provided to low income people, but Pharmacare will be provided to everyone. Statistics from individual BC income tax returns for 2002 show that people with an average income between $25,000 and $30,000, as shown on line 150 of their return, made average RRSP contributions of $2,583. Those with average incomes between $100,000 and $150,000 made average RRSP contributions of $11,686. According to the Fair Pharmacare rules, lowering income by $2,583 for a family with less than $30,000 income lowers the deductible by $51.66, but lowering income by $11,686 for a family with an income over $100,000 lowers the deductible by $350.58. That looks just like the Campbell tax cuts - seven times more for the six figure set! Some may say that those with higher incomes will pay higher deductibles, but as a percentage the consequence of the net calculation is that the 3% will likely decline as income rises.

The government that is hiding behind claims of more for the poor as it cuts Pharmacare has stacked the deck with its definition of income. The definition of income is not the only way government has helped those most able to look after themselves. People not in receipt of premium assistance have to register for Pharmacare. Registration can be done by mail, phone or Internet but it requires that a person have handy their CareCard number, their last income tax return and those same documents for any dependents. Many people will not bother to register until they incur significant drug costs. Others won't register because they are not competent. Anyone carrying for a demented senior knows the difficulties of taking care of basic household finance. Some seniors who do not have an advocate are likely to miss registering and fail to claim benefits that they otherwise deserve.

Government doesn't have a particularly good reputation when it comes to processing premium assistance applications at MSP. There is enormous potential for a backlog developing as people apply for Pharmacare coverage. Difficulties will be increased by transition problems. The current plan uses the calendar year. The new plan starts May 1st. A person could have claimed under the old plan in the first part of the year, but someone else who has the same expenses in May will face different rules. How will claims be handled for someone who had a few hundred dollars in expenses in April? Can those costs be added to costs in May in order to submit a claim? How government will handle these types of interface problems has not been made clear. There are bound to be thousands of complaints and long waits for answers to letters.

February 25, 2003

"Fair" Pharmacare Shifts Costs

The backgrounder that accompanied the Fair Pharmacare news release says that under the new program, Pharmacare's expenditures will decline from 53 per cent of total drug costs to 47%. The backgrounder also acknowledged that BC will no longer have the most generous Pharmacare program in Canada. Some people will be better off and some will be worse off; if your total family income is over $33,000, you will be worse off.

The government that claims to be open and honest has not yet said how much it will spend on Pharmacare. Its budget shows a $87 million cut to Pharmacare, but Health Minister Collin Hansen maintains that is just a "placeholder" until they introduce the real health budget. Until that number is released, British Columbians are asked to believe that government has backed off from last year's plan to cut Pharmacare benefits by $87 million.

Some media reports say that as a result of increased federal funding, the province will spend $30 million more on Pharmacare in 2003-04. A $30 million increase is better than a $87 million cut. According to provincial figures, costs usually go up by 15% per year, so in real (constant dollar) terms there will still be a cost shift of over $70 million to people who are sick enough to claim from Pharmacare.

Some of the current Pharmacare plans will remain unchanged, including the plan for people on welfare and people with cystic fibrosis. Two plans, Plan A and Plan E, will be eliminated.

Plan E currently covers people under age 65. Under that plan families have a $1,000 deductible after which the plan pays 70% of the costs. Once a family's expenditures reach $2,000, the plan pays the full amount. Fair Pharmacare will replace Plan E with a deductible that is 3% of family income (line 236 from your income tax form summed for all family members) and a maximum that is 4% of family income. Maximum means that the plan pays 100% of costs beyond that point. The plan pays nothing until the deductible is reached. Families with incomes under $30,000 will have a 2% deductible and 3% maximum; families with incomes under $15,000 will have no deductible and a 2% maximum. Between the deductible and the maximum the plan will pay 70%.

Plan A for Pharmacare currently covers people over 65 by paying for 100% of the costs of eligible drugs except for a user fee of $25 per prescription up to an annual maximum of $275 ($10 per prescription to an annual maximum of $200 for those on premium assistance). Eventually everyone will be on the same plan regardless of age, but for the time being, government has "grandparented" people who are currently over age 63 (the release says those over 65 plus those born in 1939 or earlier). The plan for those who are "grandparented" is better than Fair Pharmacare for everyone else but not as good as the former plan for seniors. The new seniors plan is based on family income. For those with family incomes between $33,000 and $50,000 the deductible is 1% of family income, the maximum a family would pay is 2% of family income. The plan pays 75%. There is no deductible for those whose family income is under $33,000 and their maximum is 1.25% of family income. For those seniors whose family income is over $50,000, the deductible is 2%.

The government provides examples of families that will be better off under "Fair Pharmacare". One dramatic example is for a hypothetical person named Barbara, a single mother earning $28,000. If she had $2,000 in drug expenses, the old plan paid $700 and she paid $1,300 but under the new plan, Pharmacare pays $1,175 and she pays $825. In this example, Barbara is $475 better off. However, if Barbara's partner returns with an income of $30,000, it will raise their family income to $58,000. That would make their deductible $1,740. The new plan would then only pay $182. Barbara would be $428 worse off than under the current plan. Of course, the government doesn't intend to offer disincentives for families to get back together.

Consider a couple both over age 65 with a family income of $40,000, one of whom needs $2,000 a year in prescriptions. Under the old plan, that family would pay $275. Under the new plan, they will pay 1% of $40,000 plus 25% of $2,000 minus the deductible to a maximum of $800. This case just happens to equal the maximum of $800 so the family would be $525 worse off.

Consider a family under age 65 with a $60,000 family income and $1,500 in drug costs. Under the old plan they would pay $1,200. Under the new plan their deductible will be $1,800 so they will have to pay the full $1,500. They will be $300 worse off.

One thing is clear. Nothing in the change saves money. Government hasn't learned the difference between cost shifting and cost saving. Making some people who need prescription drugs pay more is nothing but cost shifting.