Lawmaker says administrative costs hurt Senior Rx

Wednesday, Feb. 12, 2003 | 9:45 a.m.

CARS0N CITY -- The state's low-cost prescription program could cover more senior citizens if its administrative costs weren't four to six times what they should be, state lawmakers said Tuesday.

Gov. Kenny Guinn proposes putting $5 million in state money into the program to cut drug costs for up to 12,000 low-income seniors. Currently, the program is limited to 7,500 participants. There are 1,325 people on the waiting list, officials said.

But Assemblywoman Chris Giunchigliani, D-Las Vegas, said the first place to find money for the program is in its administrative costs because they eat up 30 percent of the program's funding. An independent audit has noted that the administrative costs should be only 5 to 8 percent of the program's budget.

The administrative costs consist mainly of the amounts paid to people who handle paperwork and take applications. The state pays a private company to run the program.

Trimming the prescription program's administrative costs would provide additional money to cover hundreds more senior citizens. Otherwise, the 30 percent administrative cost will continue to "impede" the program, she said.

State Human Resources Director Mike Willden said he didn't think Giunchigliani's 30 percent figure was correct. It came from the Legislature's fiscal analysts, however.

Under a new contract, the state is paying $65 a month per enrollee to Professional Risk and Asset Management Insurance Service of Brea, Calif., which administers Senior RX, and to Fidelity Security Life Insurance Company of Kansas City, Mo., which provides the coverage.

Willden said the payments cover the cost of drugs, the fees for management, payment of the state's 3.5 percent insurance premium tax and re-insurance costs.

The state has a cap of $5,000 in benefits each year for a senior. The seniors enrolled are using far less than the maximum on average, he said.

The state is now paying $7 million a year but has the potential to shell out $35 million if every senior received the maximum benefit.

That's why the re-insurance policy is purchased: to shift the risk to the private insurance company if there are "runaway" costs, Willden said.

Assemblyman David Goldwater, D-Las Vegas, said the high administrative costs of the program may point to a more widespread problem, and greater potential savings for the state. Other state agencies have also shifted the risk to private carriers, he said. The state should take a look at how much money it could save by assuming the risk itself, he said.

To qualify for the prescription program, seniors must be: 62 years or older; Nevada residents for at least one year; have an annual income of less than $21,500; and not be eligible for Medicaid.

Guinn is suggesting raising the income limit to $28,000 a year. Those who qualify don't have to pay a monthly premium, but co-pay $10 for generic drugs or $25 for preferred drugs or any other drug deemed medically necessary.