Policy analysis

Governor’s Budget Office MEMORANDUM
To: Harry Dalways, State Governor From: Jesus Velez, Policy Analyst Date: January 15, 1983 Issue: State Pharmaceutical Assistance Program Governor Dalways, Following your instructions, this document details the analysis and conclusions for the State Pharmaceutical Assistance Program (SPAP). The next table explains the general characteristics of this program:Provide economic support to the elderly to pay for their prescription drugs People 65 and over, with an income below 150% of the poverty levels established by the US Bureau of Census for the year 1982

Objective Eligibility Criteria

Eligible Population in 1983 Approximately 555,334 people (See Table III and IV in the appendix)

The specific goals for SPAP are the following: Coverage Eligiblepopulation, with income below 100% poverty level Eligible population, with income between 100% and 150% of poverty level 85% 75% Copayment 15% 25%

The total costs of the program are described in the next table (for further detail see table X in the appendix): 1983 1984 1985 1985 $ 62,666,400 $ 72,869,728 $ 82,502,878 $ 90,319,671 1987 1988 1989 1990 $ 102,011,191 $ 107,809,324 $ 104,324,769 $123,416,218

The total cost for this program along eigth years will be around 745 million dollar, this amount is equivalent to around 85 million of individual prescriptions.
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The recommendation is that the funds for SPAP can be taken from the State Lottery Fund, which has enough surplus to cover the expenses generated by this program at least until 1988. It is important tomention that according to the projections of this office, by 1998 the state lottery fund will have a sizeable surplus to continue providing the funds for subsequent years (See table XI in the appendix for additional information) The mechanic for the operation for this program will require an enrollment from part of the participants (see figure I in the Appendix for further information); the onlyrequisite will be to present valid income statements to prove their financial condition. People enrolled in the program will receive a card that they must show at the moment to buy their medicines; the copayment will be paid at the moment of the purchase and the pharmacies will send a weekly report about the transactions related with this program. Once this report is approved the pharmacy will receivethe correspondent refund1. The next table explains the alternative options that were analyzed (See figure II in the appendix for further information):

Policy
Bad Good Program including all the elderly 65 and over close to the poverty population, with a fix rate of line, with no copayment. The copayment. To make feasible the program is sustainable for some years,
program the copayment rate mustbe high, and at the end a program with this characteristics would have a very low political impact. but given that some elderly population are excluded the political impact of a “free-cost” program like this, could be negative.

Politics
Good

Bad

Program including all the elderly 65 and over close to the poverty population, with 100% of coverage line, with a fix percentage of (nocopayment). The cost is extremely copayment. The program is sustainable
high, but given the expected participation the political impact would be very important and is attending a high priority population, the copayment is low in comparison with similar programs in other states.

As it can be seen, the alternative included in this document is the best in terms of policy feasibility and politicaleffectiveness. If you need further details about the information included in this report, do not hesitate to contact me.
1

The related administrative cost for the pharmacies is estimated in 0.5%, this percentage is considered in the administrative cost of the program and will be added to the reimbursement for the pharmacy.

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Appendix

TABLE I Actual and Projected Number of...