State-based versus federal-based approaches to reducing the Medicare pharmaceutical coverage gap

A state-based approach, such as the Immediate Helping Hand proposal put forward by the Bush administration, is likely to be less effective than a federal-based approach at reducing the Medicare pharmaceutical coverage gap. In addition, the voluntary nature of a state-based approach, coupled with variations across states in existing coverage benefits and the limited reach of state pharmacy assistance programs, would likely lead to a perpetuation of uneven coverage. This article argues in favor of adding a federal-based universal prescription drug benefit to Medicare on the grounds of both equity and empirical evidence. Adding a universal drug benefit to the currently existing Medicare program would extend application of the social insurance concept across hospital care, physician service, and prescription drug coverage components of Medicare. As a result, a more equitable distribution of prescription drug coverage would be promoted while mitigating the effects of selection risk.