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It's not completely clear how the federal government pays for Trump's $ 200 Medicare playing cards

President Donald J. Trump shares his vision for healthcare and signs an ordinance on September 24, 2020 in Charlotte, NC, USA.

Peter Zay | Anadolu Agency | Getty Images

In a speech in which he unveiled his “vision” of health care for America, President Donald Trump made a surprising announcement: Money cards will soon be sent to millions of seniors under the state health insurance program Medicare.

"Under my plan, 33 million Medicare beneficiaries will soon receive a $ 200 card in the mail that they can use to pay for prescription drugs," Trump said Thursday evening in North Carolina.

However, it is unclear how exactly the administration will pay for the cards. A White House official told CNBC in an email that the money on the debit cards would be paid for through a "Medicare 402 demo" and the cost would be "offset by the savings of the Most Favored Nation."

The officer did not immediately respond to a request for more details about the 402 demo or how to provide the funds. Medicare waivers under Section 402 apply to experimental methods of cost recovery and service delivery.

"These will be real discount cards for prescription drugs," and they will be mailed out in the coming weeks, the official wrote.

The Wall Street Journal reported Friday, citing an administrator, that the money would come from a Medicare trust fund. According to a Medicare 402 exemption request, such demonstrations must be "budget neutral," which means that "the expected costs of the demonstration cannot exceed the expected costs if the demonstration did not take place".

The $ 6.6 billion provision is possible, Trump said Thursday, "in part because of the tremendous money we'll be saving with beneficiary nations and various other things we've done."

The president appeared to be referring to an order announced earlier this month and instructing his health and welfare chief to work on "testing a payment model" to ensure that products compatible with Medicare Part B does not cost more than the most favored nation rate. Part B deals with critical medical treatments and preventive measures. Medicare Part A deals with inpatient care.

Here the term "Most Favored Price" means the lowest price for a product that a drug manufacturer sells to members of the Organization for Economic Co-operation and Development of comparable size.

"Nations of preference" is a term often used in health law contracts that require providers to provide one party with the same or better tariffs for services than other parties.

However, the White House's plan for "nations of preference" is not yet enforced, and the pharmaceutical industry and some groups focused on the health of seniors have already resisted.

"The policy is based on false assumptions about how other countries would react, where the high costs for seniors were actually coming from and what it would mean for the US to adopt cost-effectiveness standards applied by foreign governments," said Susan Peschin, CEO of Alliance for Aging Research, a nonprofit based in Washington, DC, wrote last week.

In a call to reporters on Friday morning, a senior administration official revealed few details about the plan to pay for the cards.

"Unfortunately, the details of the 402 program's compensation requirements are not yet known. Expect more details from the White House in the near future," the official said. "Again, the savings and the way they are paid for are detailed by the White House."

"The time to run out of cards, as soon as it is mechanically possible," said the official, noting that "not all cards will run out before the election".

The move appeared to be at the core of a plan between the White House and the drug industry to cut drug prices reported by the New York Times, which was abandoned after Chief of Staff Mark Meadows insisted that drug makers have $ 100 cards for drug makers Seniors loaded shipped before November.

The Times reported, citing four people familiar with the discussions, that drug companies were concerned about being involved in what would look like a late game on Trump's re-election efforts.

The nearly $ 7 billion handout announced less than six weeks before election day quickly spawned allegations that the Trump administration was using government funds to target older voters. For example, health news agency STAT News called the promise "a political ploy to show favor to seniors who consider drug prices a priority."

Seniors have historically been one of the most reliable voting blocks to emerge in elections. Trump outperformed Democrat Hillary Clinton by 7 percentage points in the 2016 race, polls show.

However, some surveys show that Trump's support for seniors is waning. An AARP poll last week found that Trump is just one point ahead of Democratic candidate Joe Biden among voters in Florida over 65. In 2016, Trump beat Clinton in this group by 17 points.

Trump's remarks in North Carolina made it hard to ignore the policies associated with sending money to seniors.

"Nobody has seen this before. These cards are amazing. The cards will be mailed in the coming weeks. I will always take care of our wonderful seniors. Joe Biden won't do that," Trump said.

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