CA Should Collect Overpayments from Drug Companies, Not Force Seniors and the Disabled Into HMOs

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Santa Monica, CA — The Schwarzenegger Administration should cancel its proposal to force seniors and the disabled to join HMOs in the wake of new evidence that taxpayer-funded state and federal low-income health care programs are overpaying for prescription drugs by billions of dollars each year, according to the Foundation for Taxpayer and Consumer Rights (FTCR).

“Instead of forcing our most vulnerable populations to put their health at risk by joining HMOs, the governor should crack down on drug companies that are ripping-off state programs,” said Jerry Flanagan of FTCR.

The Schwarzenegger proposal to “save money” in the state MediCal program by forcing low-income seniors and the disabled to join HMOs was called into question yesterday by three reports released by the U.S. Department of Health & Human Services (DHHS) Office of Inspector General. The reports found that state and federal MediCaid programs (called “MediCal in California) overpay drug companies by as much as 70% — totaling as much as $1.2 billion annually.

In a plan to change the way that state safety-net hospitals serving the uninsured population are financed, the Schwarzenegger Administration and the federal government have negotiated a plan to require roughly half a million low-income seniors and disabled patients enrolled in the state MediCal program to join HMOs. The so-called “MediCal Waiver” would withhold $360 million in federal money from California if the switch to HMOs is not implemented within 2 years.

The plan to force seniors and the disabled to join HMOs has been criticized by health care and consumer advocates because HMOs limit access to specialized care, limit which hospitals and physicians a patient can visit, and have much higher administrative and overhead costs compared to state programs. While these limitations and extra costs are onerous for any patient, such restrictions on the ill and disabled could significantly undermine their health and quality of life.

“Sick, aged and disabled patients should not wait for HMO bureaucrats to approve appointments with physicians, needed treatments and access to prescription drugs when they already have established relationships with doctors,” said Angela Gilliard, Legislative Advocate for the Western Center on Law & Poverty. “In the long run, this plan could cost the state more because patients will be forced to wait until their conditions are critical and seek care in Emergency Rooms where treatment is much more expensive. This is a vulnerable population that often cannot afford to wait — Emergency Room treatment may not be an option.”

HMOs providing Medi-Cal coverage will be allowed to spend up to 15% of every taxpayer dollar they collect on overhead, administration, advertising, executive salaries and profit. In comparison, overhead costs for the Medi-Cal program are less than 5%.

Governor Schwarzenegger has received $561,000 in campaign contributions from HMOs and other health insurers that stand to benefit from the plan to require seniors and the disabled to join HMOs. Schwarzenegger has received $373,200 from drug companies.

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Consumer Watchdog
Consumer Watchdog
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