CITIZENS   FOR  LIMITED  TAXATION
and the
Citizens Economic Research Foundation

 

CLT UPDATE
Wednesday, January 8, 2003

"The Best Legislature Money Can Buy" hesitates


The pay raise issue has lit up phone lines at talk radio stations, and many callers have objected to salary increases for lawmakers.

"I think it's a triumph of citizen involvement," said Barbara Anderson, executive director of Citizens for Limited Taxation. "Obviously, they've been hearing from their constituents."

The Boston Globe
Jan. 8, 2003
State senators vote to give up a pay increase


"This is all pretty arbitrary," said Alan Clayton-Matthews, a professor of public policy at the University of Massachusetts at Boston. "It makes no economic or mathematical sense whatsoever." ...

"[Gov. Romney]'s under no constitutional requirement to justify it, but the plain language of the amendment would have you expect that we at least have a method that's internally consistent," said Cam Huff, a senior research associate with the Massachusetts Taxpayers Foundation. "It's a real mix-and-match job."

And if there had been consistency? Legislators' 6.5 percent pay raise could have been a jaw-dropping 12.5 percent on the high end, if inflation was included in the numbers for both years. In the other direction, with inflation taken out of the equation, it could have been 1 percent or less. However haphazard Romney's methods, the number he came up with - 6.5 percent - was more politically palatable than either extreme.

The Boston Globe
Jan. 8, 2003
On legislative raises, the math is questioned


And, as they always add, this is a "voter-approved pay raise."

Yeah, right. The solons flim-flammed through their automatic pay raises in 1998, which was the same year the voters also approved Clean Elections. Yet Clean Elections is gone, because, we are told, the voters were bamboozled into voting for public financing of elections.

The income tax cut of 2000 - that was "voter-approved" as well, and the Legislature responded with the middle-finger salute. Hey, times are tough, the voters were lectured. We can't afford that last year of tax cuts. Ditto, charitable deductions. Sorry, has to go.

The Legislature deep-sixed income tax cuts and charitable deductions, but they had to ... for the children....

They doubled the per diems a couple of years ago, when Clean Elections was passed. Now Clean Elections sleeps with the fishes, but the doubled per diems live on.

The Boston Herald
Jan. 8, 2003
Pols fill snouts with tax dollars as Rome burns
by Howie Carr


There's a really easy way for both men and for this newest group of lawmakers to prove they are public servants in the truest sense of the word. They can meet, they can vote, and they can say to the taxpayers, "Thanks, but no thanks."

A Boston Herald editorial
Jan. 8, 2003
Legislators' option: Just say no to raise


Pretty plainly, legislators supported the amendment because, unlike most voters, they knew it would likely mean more and more regular raises.

Voters supported the amendment for the same reason so many supported a recent initiative to eliminate the state income tax. The reason is that people will vote for almost anything that even looks like it might possibly reduce the state's brutal tax burden.

In the case of the constitutional amendment governing legislative pay raises, voters got exactly what they voted for instead of what they thought they would get....

We think legislators should take the pay raise. The constitutional amendment giving them the raise was voted on by the people of the commonwealth, who may need to learn a lesson about referenda....

In the future, perhaps the voters of Massachusetts will be more cautious when asked to vote for a constitutional amendment.

A Fall River Herald News editorial
Jan. 8, 2003
Voters to blame for legislative pay raises


But for those just scraping by and with no drug coverage, the tax is indeed a hardship -- one that forces economic decisions the Medicaid patient simply does not have to make. It makes little sense to help the poor by adding yet another burden to those on the brink of poverty.

An Eagle-Tribune editorial
Jan. 7, 2003
Robbing Peter to pay Paul 
A tax on prescription drugs in Massachusetts should be repealed


State officials yesterday said nothing in state law prevents pharmacies from passing the new $1.30 prescription tax along to consumers, a decision that prompted one lawmaker to vow to change the law....

Larry Pearson, a resident of Harvard, calls the prescription tax poorly conceived.

"I have no objection to paying taxes to support people on Medicare or Medicaid, but taxing the sick has got to be one of the dumbest ideas to come out of our state government," he said.... "What were these people thinking?"

The Boston Globe
Jan. 8, 2003
Lawmaker speaks out on prescription tax
Wants to stop it from being levied on consumer


Independent pharmacy owners in Massachusetts fear low Medicaid reimbursement rates for prescription drugs are squeezing them out of the marketplace....

The 4 percent cut in Medicaid reimbursement enacted late last year hurts a small pharmacy's bottom line more than it might seem...

"They are penny-wise and pound-foolish," Marion E. Hoar, a retired professor at the Massachusetts College of Pharmacy, said of legislators....

State Rep. Benjamin Swan, D-Springfield, said he is sympathetic to the pharmacists' plight, but "the bottom line is times are tough." ...

The Legislature initially voted to cut reimbursement by 11 percent, but that figure was later reduced to 4 percent.

The Springfield Union-News
Jan. 8, 2003
Pharmacists say they're being squeezed out


They can fuss and fume all they want, but, truth be told, these two ladies really don't matter to the average Massachusetts legislator, whose most-pressing concern at the moment is how to pocket a pay raise while continuing to posture as a conscientious public servant.

One lives in Lynn, the other in Brockton, and they are among many readers who have called here in anger and exasperation over what some might see as a piddling matter, that $1.30 tax the commonwealth is now levying on every prescription....

Marie Antoinette wouldn't have given herself a raise in times like these; then again, she didn't reign on Beacon Hill.

The Boston Herald
Jan. 8, 2003
Prescription tax will be a tough pill to swallow
by Joe Fitzgerald


Chip Ford's CLT Commentary

Isn't this an interesting web of confusion the Legislature has brought upon itself when first they did their utmost to deceive voters into giving them constitutionally-mandated and protected automatic pay raises. As the old adage goes, "Be careful what you wish for."

What seems to have them most off-balance is being blindsided by that vote of The Silent Near-Majority last year to repeal the entire state income tax. (Thank you again Carla Howell!) Are we all brain-dead, as they've come to believe ... or are we still out here, the Beacon Hill pols are asking each other.

Will taking the pay raise translate into losing the best job most of them will ever have come their next election - a mere short-term Pyrrhic victory?

A very ponderous decision indeed.

Most state senators have decided not to risk their careers ... for now. They've agreed to forego immediate gains for long-term security ... for a year. Maybe they'll have a better feel by then whether we're all brain-dead, or still lurking.

House members will decide today. My money's on the majority taking the "modest" pay raise and pledging to give it away to charity (aka, a re-election investment) ... for now. All bets are off for next year.

So here is yet another classic example of how citizens allegedly lack the competence to draft initiative petitions, create laws that only "The Best Legislature Money Can Buy" is capable of writing. They forgot -- or intentionally left out -- a certain formula for determining the increase or decrease in median household income and left it to the vagarious determination of whoever the governor might be. Was this stupid, or sly?

But as the Fall River Herald-News editorial points out, the voters have only themselves to blame. If they repeat such ignorance or folly, they may next surrender up their right to the initiative petition to Sen. Stanley Rosenberg and his cohorts in the near future.

Also look at the mess the Beacon Hill Cabal has made of prescription drugs. At the same time they arbitrarily dropped the state's reimbursement for Medicaid prescriptions, they tacked on an $1.30 "assessment" (a tax by any other name is a tax) to the cost of each prescription the rest of us must purchase from our own pockets. Since it took effect only last week, the public has suddenly become aware of it and the uproar is loud. Oops, time to revisit that screw-up and find out just what they heck they voted on in that budget!

Still, "The Best Legislature Money Can Buy" agonizes over whether or not they can get away with grabbing another pay raise, with too many asserting they deserve it.

The big question on Beacon Hill these days is, "Are the unwashed masses brain-dead, or lurking out there?"

We're lurking, quietly massing, wound tight, and we're ready to spring.

Boston Herald columnist Joe Fitzgerald today noted: "Marie Antoinette wouldn't have given herself a raise in times like these; then again, she didn't reign on Beacon Hill."

It should also be noted that Marie Antoinette's extravagance in the end led her to the guillotine ... and for our entitled "decision-makers" that's only one step removed from being turned out into "The Dreaded Private Sector."

"Those who fail to learn from history ..."

Chip Ford


The Boston Globe
Wednesday, January 8, 2003

State senators vote to give up a pay increase
By Stephanie Ebbert
Globe Staff

All but one of Massachusetts' 40 state senators agreed yesterday to decline pay raises they were guaranteed under the Constitution, saying that in a time of economic crisis, they could not ask the public to withstand sacrifices without making some themselves.

This morning, majority Democrats in the House will hold their own closed-door meeting on the increase, which Governor Mitt Romney was required to calculate but then pressured legislative leaders to rethink. House Speaker Thomas M. Finneran appears likely to leave the matter up to individual members, rather than try to reach a consensus.

Senators characterized their decision to forgo the raises as a matter of principle. But, underscoring the heated politics surrounding the issue, several also took pains to note that they were saving the state money - $127,000 in all - unlike Governor Mitt Romney and Lieutenant Governor Kerry Healey, who announced last week they would forgo salaries over the next four years and use the money to boost pay for other top positions in their administration.

Several senators also complained that Romney had positioned legislators to follow his lead on the pay issue. "The administration is clearly trying to put pressure on the Democratic [controlled] Legislature," said Senator Jarrett Barrios, a Cambridge Democrat. He characterized the decision by Romney and Healey to forgo salaries for four years as "perhaps not so generous. They aren't saving the taxpayers dollars. They're giving it to their inner circle."

The decision followed days of intense discussion in the State House over whether legislators should accept the pay raise - even though it was an automatic adjustment mandated by a 1998 Constitutional amendment. The amendment requires a biennial adjustment calculated by the governor and based on the change in median household income during the previous two years. On Friday, Romney determined the one-time pay raise should be 6.5 percent, but he has sought to distance himself from the issue, and he held no public appearances yesterday.

The raise of $3,258 would have increased lawmakers' annual base pay from $50,123 to $53,381. House and Senate members are paid at the same rate.

Yesterday's 90-minute Senate Democratic caucus on the issue was an early test for newly installed Senate President Robert Travaglini, who was aiming for a unanimous vote. Though he declined to identify those who dissented, Senate sources said there were two members who wanted to accept the raise - Democrats Guy Glodis of Worcester and Brian A. Joyce of Milton. After speaking with his family yesterday, Joyce too said he would decline a pay raise. Glodis could not be reached for comment.

After the caucus, a beaming Travaglini emerged with a group of members and said the consensus was reached easily by the vast majority of senators, including the chamber's six Republicans, who met separately. "We want to lead by example," said Travaglini, of East Boston. "If we're going to administer pain, we've got to feel some of that pain."

Since the raises were prescribed by the constitutional amendment - intended to end the practice of legislators voting themselves pay increases - some lawmakers said yesterday the raises cannot be overturned by a simple vote. Instead, Travaglini said that individual senators will now write letters to the state treasurer, waiving the added pay and asking that the money be returned to the general fund. It is not specified for a particular use, he said.

It's not clear whether the lawmakers would accept the raise next year if the fiscal situation improves.

The 160-member House is expected to be far more divided on the issue than the 40-member Senate. There, many members say they depend exclusively on their legislative salaries. The 23 House Republicans met yesterday but no agreement was reached.

"I work very hard and I do not feel guilty about thinking about taking the raise," said Representative Marie Parent, a Milford Democrat. "I work day and night and weekends and people always see me. My phone is always ringing."

She also noted she lost $1,800 to an eight-day furlough Finneran called for last year to help ease the state's fiscal woes.

Last week's decision by Romney and Healey won praise from many citizens, but some senators yesterday criticized the move, saying it would have been more appropriate for the two to return the money to the state Treasury, rather than spend it on other salaries.

Three of Romney's top aides will earn $150,000 - $20,000 more than any aides earned under Acting Governor Jane Swift.

"What the governor and lieutenant governor did is not at all what we've done," said Senator Marc R. Pacheco, a Taunton Democrat. "Those of us who are not taking the salary increase are actually allowing for those monies to be used for services, and that's not what they did."

But Senate minority leader Brian P. Lees called it a bipartisan effort. "I felt very strongly we're all in this together - everyone in state government and everyone who receives services in state government," Lees said.

The pay raise issue has lit up phone lines at talk radio stations, and many callers have objected to salary increases for lawmakers.

"I think it's a triumph of citizen involvement," said Barbara Anderson, executive director of Citizens for Limited Taxation. "Obviously, they've been hearing from their constituents."

Globe correspondent Cynthia Roy contributed to this report.

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The Boston Globe
Wednesday, January 8, 2003

On legislative raises, the math is questioned
By Rick Klein
Globe Staff

It was the CEO governor's first exam, and some say he failed it.

The state constitution requires that the governor adjust legislators' pay every other year to reflect the change in median household income in Massachusetts over the previous two-year period. But Romney mixed apples and oranges: His estimate for income in 2001 eliminated growth that was due to inflation, while the number for 2002 included it. His method mystified some economists.

"This is all pretty arbitrary," said Alan Clayton-Matthews, a professor of public policy at the University of Massachusetts at Boston. "It makes no economic or mathematical sense whatsoever."

According to the US Census Bureau survey normally used to determine income levels in states, median household income in Massachusetts jumped 11.8 percent in 2001 - more than in any other year since the census surveys began in 1984. But the Romney administration ignored that number, instead relying on a different census report that estimated 2001 median household income to have increased 5.8 percent.

Romney aides explained that difference by saying the report they used was more reliable, since it was based on surveys of more Massachusetts residents. They said the lower number better reflects the state's economic health in 2001, when the downturn was already underway.

"The sample size was increased, and we felt that was the best information available to ascertain the number," said Nicole St. Peter, a Romney aide.

But in reality, Clayton-Matthews said, the difference between the two numbers appears to be mainly due to the fact that the report Romney relied on factored out inflation.

"There are differences in the underlying data, and important differences," he said.

Romney's task was more difficult in determining household income growth for 2002, since the Census data for last year won't be available until this fall. So Romney decided to turn to the state's last economic downturn for guidance, pegging his income growth estimate for last year at .7 percent, reflecting the average annual increase in median household income between 1989 and 1992.

Of course, that ignores the fact that the current economic slump - which is driven by the stock market's dive and has left the state with relatively low unemployment - is far from an exact replica of the last one. That .7 percent growth actually includes inflation; without inflation, median household income dropped by 4.3 percent in 1990 and 4.9 percent in 1991.

The constitution does not specify whether inflation should be included when the governor determines pay increases, but two years ago, then-governor Paul Cellucci included inflationary growth in the 7 percent raise he gave lawmakers. In any case, the Romney administration pointed out in a statement Monday that "no methodology is specified" in the constitutional amendment, leaving the governor broad discretion on how to act.

"He's under no constitutional requirement to justify it, but the plain language of the amendment would have you expect that we at least have a method that's internally consistent," said Cam Huff, a senior research associate with the Massachusetts Taxpayers Foundation. "It's a real mix-and-match job."

And if there had been consistency? Legislators' 6.5 percent pay raise could have been a jaw-dropping 12.5 percent on the high end, if inflation was included in the numbers for both years. In the other direction, with inflation taken out of the equation, it could have been 1 percent or less. However haphazard Romney's methods, the number he came up with - 6.5 percent - was more politically palatable than either extreme.

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The Boston Herald
Wednesday, January 8, 2003

Pols fill snouts with tax dollars as Rome burns
by Howie Carr

Don't you dare, you tax-fattened hyenas. Get your greedy little lard-encased fingers out of the cookie jar and leave our $650,000 alone.

How much do these solons want? How much have we got?

The problem is, it's tap city around here. No more pay raises for you sneaks. You know how the solons gripe among themselves - the Boston city councilors make $75,000, and we "only" make $50,123. Plus, they add, this raise is "modest" - a mere $3,250 a year.

And, as they always add, this is a "voter-approved pay raise."

Yeah, right. The solons flim-flammed through their automatic pay raises in 1998, which was the same year the voters also approved Clean Elections. Yet Clean Elections is gone, because, we are told, the voters were bamboozled into voting for public financing of elections.

The income tax cut of 2000 - that was "voter-approved" as well, and the Legislature responded with the middle-finger salute. Hey, times are tough, the voters were lectured. We can't afford that last year of tax cuts. Ditto, charitable deductions. Sorry, has to go.

The Legislature deep-sixed income tax cuts and charitable deductions, but they had to ... for the children.

It's not like their 50-large base salary is the only scam they've got going. Take the 50-mile write-off - if you live more than 50 miles from the state capital, and about a third of the 200 reps and senators do, you get to take a federal income tax write-off of about $150 a day for every day the Legislature is in session.

Do the math. What this means is that a third of them basically don't pay any federal income taxes. Sen. Guy Glodis just moved from Worcester to Auburn, which I believe puts him outside the magic 50-mile limit.

I called Glodis yesterday to ask if he moved to Auburn to assure himself of avoiding federal income taxes. Funny, he didn't get back to me. Glodis is chairman of a committee, you know - that's another $7,500, on top of the 50 large.

Glodis lives large, dining out at pricey steakhouses and Cape seafood restaurants and charging it to his campaign committee. Thousands upon thousands spent on big meals. Every night he's eating on the arm, at steakhouses where a 12-ounce filet mignon goes for $32.25.

And while we're on the subject of Glodis, he also collects per diems. He gets paid to drive to work. I kid you not. They doubled the per diems a couple of years ago, when Clean Elections was passed. Now Clean Elections sleeps with the fishes, but the doubled per diems live on.

In 2002, Glodis collected $8,352 for driving to work.

The No. 1 per diem collector in the Legislature was Rep. Dan Bosley (D-North Adams). Mister Chairman grabbed $12,780 last year. In the Massachusetts Political Almanac, he lists his occupation as "legislator."

Nice occupation - $57,000-plus, lives outside the 50-mile limit and he gets $12,780 to drive to work.

The per diem runner-up last year was Rep. Peter Larkin (D-Pittsfield). He grabbed $12,420. He just bought a house with his new bride - in Worcester County. When I called him to ask if he'd be taking the lower Worcester per diem, he seemed angry. Oh yeah, in 1994 he got caught filing for per diems for days he didn't come to Boston and had to pay $2,655 in restitution.

Another big "earner" in the Senate: Stan Rosenberg of Amherst. This is the guy who basically wants to kill the referendum process. In addition to his preraise $57,000, he lives beyond the 50-mile limit and he collected $7,920 last year in per diems. Scams? How about the no-heavy-lifting jobs that come when the reps leave. They made at least two reps judges in the last session, two more became clerks, one had her husband appointed to a clerkship and one became the sergeant at arms.

And where did they come up with this 6.5 percent alleged increase in household income? It gives new meaning to the term lies, damn lies and statistics.

Poor people have to pay an extra $1.30 for every prescription they fill, and yet the reps who saddled them with this onerous burden demand more, more, more.

This is ridiculous. What the solons don't seem to understand is that most of us want to cut their pay, not increase it. We're tired of slopping these hogs.

Howie Carr's radio show can be heard every weekday afternoon on WRKO AM 680, WHYN AM 560, WGAN AM 560, WEIM AM 1280, WXTK 95.1 FM or online at howiecarr.org.

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The Boston Herald
Wednesday, January 8, 2003

A Boston Herald editorial
Legislators' option: Just say no to raise

Massachusetts legislators are now caught in the unenviable position of facing down one of the toughest budgetary years in state history with a constitutionally mandated 6.5 percent pay raise in their pockets.

There's a real easy solution to this one: Just say no!

Four years ago voters went along with the idea of depoliticizing legislative pay raises by tying them to changes in the state's median household income. It seemed like a good idea at the time (although coming up with the number could give even an accountant a migraine).

But the law is the law and the number is the number and Monday the governor set the figure, which means a boost for rank-and-file lawmakers from $50,123 to $53,380. Collectively that will mean a $650,000 addition to the cost of supporting this Legislature.

A number of lawmakers are already talking about donating their individual pay raises to charity. That's a nice gesture, but one that won't do the state's bottom line any good. Nor is it a tenable position when court employees are taking furloughs and state college teachers dealing with a salary freeze.

House Speaker Tom Finneran has traveled from Boston to the Berkshires, speaking to any group that will listen in an effort to boost the reputation of his members in the eyes of the public. Senate President Robert Travaglini is the new leader on the block and, therefore, has a lot to prove to the public, especially that he isn't the same old, same old.

There's a really easy way for both men and for this newest group of lawmakers to prove they are public servants in the truest sense of the word. They can meet, they can vote, and they can say to the taxpayers, "Thanks, but no thanks."

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The Fall River Herald News
Wednesday, January 8, 2003

Editorial
Voters to blame for legislative pay raises

Back in 1998, Massachusetts voters liked the idea of linking legislative pay raises to the median household income in the state.

Massachusetts voters liked it so much that 1,170,031 of them voted for a constitutional amendment doing just that, while only 538,729 voted against the idea.

The idea sounded great. Voters liked it because they figured it would force legislators to live the way the people live. Legislators said they liked it because it kept them from the delicate need to approve their own pay raises.

Trouble is, it takes a major economic disaster to force median household income down, so this year, legislators are looking at a mandated raise of at least 6.5 percent.

Pretty plainly, legislators supported the amendment because, unlike most voters, they knew it would likely mean more and more regular raises.

Voters supported the amendment for the same reason so many supported a recent initiative to eliminate the state income tax. The reason is that people will vote for almost anything that even looks like it might possibly reduce the state's brutal tax burden.

In the case of the constitutional amendment governing legislative pay raises, voters got exactly what they voted for instead of what they thought they would get.

In other words, the pay raise for legislators reminds us that government by referendum isn't always a good idea. More important, it reminds us that states, like the nation, need to be very careful before amending their constitution.

Legislators themselves are at least pretending to be embarrassed by the raise, and numerous lawmakers are saying that they'll refuse the raise or donate the extra money to charity.

We think legislators should take the pay raise. The constitutional amendment giving them the raise was voted on by the people of the commonwealth, who may need to learn a lesson about referenda.

In addition, one of the philosophical underpinnings of linking legislators' pay to median household income is that it would show legislators how "ordinary" people live and sometimes suffer with upturns and downturns in the economy. Legislators should take the pay raise because "ordinary" people don't turn down a raise.

In the future, perhaps the voters of Massachusetts will be more cautious when asked to vote for a constitutional amendment.

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The Lawrence Eagle-Tribune
Tuesday, January 7, 2003

Editorial
Robbing Peter to pay Paul

OUR VIEW
A tax on prescription drugs in Massachusetts should be repealed

If you've had a drug prescription filled in Massachusetts this new year, you've noticed something different.

It costs more.

The reason is the new $1.30 "user fee" the state has imposed on each prescription sold. "User fee"? Apparently this means that, if you "use" prescription drugs, the state is entitled to extract a "fee" from you.

This absurd new tax came from the effort last summer to fill the gaping hole in the state budget. Gov. Jane M. Swift sought to save $60 million by reducing the reimbursement paid to pharmacies for filling Medicaid prescriptions.

The move, which would have sapped all profit on dispensing drugs, prompted the big pharmacy chains to refuse to fill Medicaid prescriptions.

The governor, the pharmacies and the Legislature worked out a compromise that increased the reimbursement to pharmacies to an acceptable level. But the plan included a new $1.30 tax on all non-Medicaid prescriptions that the state expects to raise $36 million.

The tax hits the elderly hardest. Those who do not qualify for Medicaid are not necessarily rich. Many take several prescription drugs and have no insurance to cover the cost. For someone taking 10 prescription drugs the added monthly cost is $13.

All this is supposed to ensure that the poorest of the poor get all the drugs their doctors say they need. Those who are merely poor must make the hard decisions on which of their medications they can afford to take.

It's hard to work up sympathy for the Medicaid patients, especially when federal law prohibits pharmacies from demanding the minimal co-payment (under $5) recipients are asked to make for their medicines.

For many of us, particularly those whose jobs provide them with prescription drug coverage, the new tax is merely an annoyance, another example of a money-hungry state dipping its fingers into citizens' pockets.

But for those just scraping by and with no drug coverage, the tax is indeed a hardship -- one that forces economic decisions the Medicaid patient simply does not have to make. It makes little sense to help the poor by adding yet another burden to those on the brink of poverty.

Gov. Mitt Romney and his economic team face tough fiscal challenges this year. Tax cuts are just not on the agenda.

But the governor ought to look at this one and see that the benefit gained is not worth the cost imposed. The prescription tax should go.

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The Boston Globe
Wednesday, January 8, 2003

Lawmaker speaks out on prescription tax
Wants to stop it from being levied on consumer

By Bruce Mohl
Globe Staff

State officials yesterday said nothing in state law prevents pharmacies from passing the new $1.30 prescription tax along to consumers, a decision that prompted one lawmaker to vow to change the law.

Representative Joseph F. Wagner of Chicopee, who had asked Attorney General Thomas F. Reilly's opinion on whether passing the tax along to consumers was legal, said there is broad-based support in the Legislature to make sure the pharmacies and not their customers pay the tax.

"If there's a loophole, then I think we need to move to close the loophole," Wagner said.

The prescription tax, which took effect Jan. 1, was passed as part of this year's state budget. It is an assessment on all non-Medicaid and non-Medicare prescriptions filled by pharmacies and is designed to raise $36 million a year. The tax money will be spent on Medicaid, the state-administered health insurance program for the poor and elderly and matched by the federal government.

Larry Pearson, a resident of Harvard, calls the prescription tax poorly conceived.

"I have no objection to paying taxes to support people on Medicare or Medicaid, but taxing the sick has got to be one of the dumbest ideas to come out of our state government," he said. "The tax should be broad-based, not just on people that need prescription drugs. What were these people thinking?"

During the budget debate on the tax, pharmacies argued they would have to absorb the prescription tax, at least initially, because their agreements with health plans prevented them from increasing a customer's copayment beyond an agreed-upon level.

But after the tax became law and passed additional regulatory hurdles, the pharmacies said their agreements with health plans did not prevent them from passing the tax on to consumers directly.

CVS Corp., the state's largest pharmacy chain, said it contacted the health plans it does business with and was told they would not absorb the tax. So CVS, like nearly every other pharmacy in the state, decided to charge consumers directly.

CVS spokesman Todd Andrews said CVS concluded that because the prescription assessment is a tax it could be tacked on to a customer's copayment.

Wagner challenged that view, suggesting that consumers with insurance coverage had agreed to pay a copayment for their drug and were now being charged their copayment plus the tax. He also said he resented the signs in CVS stores that say, "We are required to collect the $1.30 pharmacy tax."

"That statement is utterly false," Wagner said. "They're not required to collect anything from consumers."

While Reilly has not yet given his opinion on the tax, a spokesman for the state Division of Insurance said the language creating the prescription tax was silent on who ultimately should pay it. Spokesman Chris Goetcheus said the assessment was not designated a "covered service" under the state's managed care statute, and thus could be passed along to customers.

"Basically, this is a tax," Goetcheus said. "It's not a copayment. It's not a deductible, and it's not a coinsurance feature."

Beth Lindstrom, director of the state's office of consumer affairs, said she plans to survey pharmacies on the prescription tax and direct consumers to those pharmacies that don't charge the tax. She also noted consumers could avoid the tax by buying their drugs by mail order. Pharmacies outside the state are not subject to the tax.

BJ's Wholesale Club, which operates three pharmacies in the state and plans to open a fourth early this year, is the lone pharmacy not charging the tax so far.

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The Springfield Union-News
Wednesday, January 8, 2003

Pharmacists say they're being squeezed out
By Patricia Norris
Staff writer

Independent pharmacy owners in Massachusetts fear low Medicaid reimbursement rates for prescription drugs are squeezing them out of the marketplace.

The concern has driven 36 independents from across the state to band together to form the "Concerned Pharmacists" group.

Organizer Monty Schwartz, owner of Shoppers Drug in Springfield, said he plans meetings with legislators to explain the plight of independent owners.

"Changes have been made to pharmacy reimbursement that (are) uniquely discriminatory to independent pharmacies," he said.

The 4 percent cut in Medicaid reimbursement enacted late last year hurts a small pharmacy's bottom line more than it might seem, said Schwartz, adding the cut has cost his business "a half-million dollars." Medicaid is the state insurance program for the poor.

For example, Schwartz pays $322.10 for 60 Zyprexa pills. Zyprexa is used to treat schizophrenia.

Medicaid reimburses the store $277.40 for Zyprexa. If the drug manufacturer discounts the drug to the store, a common practice, the wholesale price of the Zyprexa drops to $270.

Yet what looks like $7 profit is actually a $3 loss, Schwartz said.

"It sounds like lot of money, but when the cost to dispense the drug is $10, it is not a good beginning."

The cost includes paying technicians, pharmacists and drivers who deliver the drug. Independent pharmacies, which handle 30 percent of prescription business in the state, offer more services than most chain stores, said Schwartz.

Independents deliver - especially to elderly shut-ins, they extend credit, specialize in compounding drugs and offer other specialty services, said Schwartz.

"How do you cut services to make up for reduction in payments by Medicaid and still care for all of those people?" he asked.

State Rep. Joseph F. Wagner, D-Chicopee, said the cut was not intended to adversely affect independents or chain pharmacies.

Wagner said federal reports indicate states overpay pharmacies. Massachusetts needed to slow down the growth of its $6.5 billion Medicaid program.

"Medicaid is the second-biggest budget-buster there is," he said.

Wagner said pharmacies often get discounts from drug manufacturers that lower their costs. But part of his frustration is that the three main pharmacy chain stores, Walgreens, Brooks and CVS, will not open their books to officials to show how much they pay for drugs. Lack of disclosure makes it difficult to realistically assess the situation, he said.

But Schwartz and others in his group say their plight is the result of ill-conceived government planning, not the big chains.

"They are penny-wise and pound-foolish," Marion E. Hoar, a retired professor at the Massachusetts College of Pharmacy, said of legislators.

Hoar said chain drug stores can weather the reimbursement reduction and further down the road usurp the business provided by independents once they close. Such a scenario is bad for consumer health, he said.

Nicholas E. Creanza, owner of Campus Drugs and Specialty Service, said the Legislature does not understand the predicament.

"The services we have offered in the past are going to be reviewed to see if we can provide the same service," he said.

State Rep. Benjamin Swan, D-Springfield, said he is sympathetic to the pharmacists' plight, but "the bottom line is times are tough." Eric Kriss, budget chief for Gov. W. Mitt Romney, has said the state is experiencing its most serious financial crisis since the Great Depression.

"One of the things we as citizens need to understand is that things are not really good," Swan said, adding that the reduction could have been much worse. The Legislature initially voted to cut reimbursement by 11 percent, but that figure was later reduced to 4 percent.

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The Boston Herald
Wednesday, January 8, 2003

Prescription tax will be a tough pill to swallow
by Joe Fitzgerald

They can fuss and fume all they want, but, truth be told, these two ladies really don't matter to the average Massachusetts legislator, whose most-pressing concern at the moment is how to pocket a pay raise while continuing to posture as a conscientious public servant.

One lives in Lynn, the other in Brockton, and they are among many readers who have called here in anger and exasperation over what some might see as a piddling matter, that $1.30 tax the commonwealth is now levying on every prescription.

An 83-year-old veteran named Jim first railed about it in a piece that ran here two weeks ago, charging, "They're ripping us off. Who do you think is hurt most by something like this? My generation, that's who. It's not someone 25 or 30 waiting to be taxed for a prescription; it's my generation."

Jim went on to confide he'd found a way to acquire pharmaceuticals outside this country, which is why he didn't want his last name used "because I don't need the grief."

That's what triggered many of the calls.

"I'm so disgusted," the Brockton reader said. "My husband is 70 and we need a lot of prescriptions, which is what makes it such an unfair tax. Oh, I know it affects everyone who buys prescriptions, like young people who aren't well, or people who have lifelong illnesses. But mostly it's older people like us."

Her husband happens to be a public personality and their life is reasonably comfortable, but that isn't the point, she argues.

"It's what I call a captive tax, taking advantage of a segment of society that's vulnerable. That's what makes it so wrong. Why not raise the tax on something like alcohol, which people don't have to purchase? Why tax something people absolutely must have? And how do you fight it, except telling people to do what that man (Jim) does. I wish he'd let us know how we can do it, too."

This is the stuff of genuine public service; indeed, this is what legislators ought to be contemplating instead of looking for ways to justify pay hikes at a time where services are being slashed, jobs are vanishing, and some economists are suggesting we're entering the most treacherous financial waters since the days of the Great Depression.

Marie Antoinette wouldn't have given herself a raise in times like these; then again, she didn't reign on Beacon Hill.

The lady from Lynn, like the lady from Brockton, wasn't crying poor-mouth, but the more she talked, the hotter she got.

"We eat well and have a roof over our heads, and I thank God for that every day. We're both 71 and all we really need is a little better health.

"My husband came home from the Korean War with a box of medals and ended up working for himself as a carpet installer. Times were good when we were young, but towards the end his knees were gone, so now he's got a new one, plus he's had a quadruple bypass. I've had some skin cancer and have to watch my blood pressure - you know, all the things that come with growing older.

"We had a house up by Goldfish Pond that we sold for $170,000 before prices began soaring. Then we spent $142,000 for the condo we're in now. It's just four rooms, no property, but we have to pay $2,050 in taxes. And we had to pay $15,000 in capital gains when we sold the house; we almost dropped when they told us that.

"Between us, we have at least a dozen prescriptions, meaning every time we have to refill them, it's now another $15.60 the state is taking from my purse.

"What I want to know is what's the government doing with all the money we give it? When I see people who've never contributed a dime to anything having all of their needs met, I get very upset, especially when I see that same government putting the screws to the elderly.

"God forgive me if that sounds hateful - I'm a Eucharist minister and a member of our parish council - but it makes me so damn mad. Sometimes, I feel like just screaming at our legislators, but when I call I get a recording asking me to leave a brief message, and when I tell them I'm calling about the pharmacy tax, no one calls back."

So she called here instead.

"Something is happening to this country and it's not good," she said. "I'm looking at the future and, really, I must tell you, I don't like what I see."

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