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WILL MEDICARE BENEFICIARIES REALLY GET HELP  WITH PRESCRIPTION DRUG BILLS?

During the next two weeks, the Senate plans to debate legislation to add, among other things, a prescription drug benefit to Medicare. But will the benefit they are proposing really help most older people and people with disabilities who rely on Medicare? And what trade offs are they considering that may affect how people get their Medicare?

What prescription drug benefit is under consideration?

The benefit, which would begin on January 1, 2006, would provide as follows:

Not all expenses count towards the stoploss amount. Contributions made by the beneficiary, the beneficiary's family, Medicaid, or a state pharmacy assistance program count, but contributions made under an employer sponsored retiree health plan are not considered. Beneficiaries who don't have other forms of drug coverage would have to spend about $5288 before the stoploss coverage begins; those with other drug coverage might have to spend $10,000.

Estimates are that people with chronic conditions who spend around $5,000 on prescriptions would still have to pay two thirds of the cost of their medicines. Adding in the cost of premiums and co-payments, individuals whose drug costs are less than $1,100 would probably get no relief from the benefit.

How would beneficiaries obtain the prescription benefit?

The majority of Medicare beneficiaries who are in the traditional Medicare program would have the choice to purchase a separate, stand-alone, prescription drug policy. Congress envisions that these policies will be offered by private, profit-making insurance companies. Each private insurance company would sign an agreement with Medicare to offer prescription drug insurance in a region of the country for a period of one year. Private prescription drug plans will be free to enter and leave a region, just as current Medicare HMOs are able to stop serving a community.

If two private insurance plans are not offered in an area, then beneficiaries may purchase insurance coverage from Medicare, referred to as "fallback" coverage. However, if private insurance companies decide later on to offer coverage in an area previously served by the Medicare fallback plan, the Medicare plan will no longer be available. Beneficiaries who have enrolled in the fallback plan will have to purchase a different prescription drug policy from one of the private insurance companies.

Many analysts question whether private insurance companies will even want to offer separate prescription drug insurance to older people and people with disabilities. They fear that such coverage will be inefficient and costly. Private plans will also be able to restructure their premiums and formularies (lists of drugs for which they provide coverage) on a yearly basis.

The proposed system for providing drug coverage varies from current Medicare in that it does not provide for a stable, guaranteed benefit. Because private insurance companies may choose to stop serving an area, beneficiaries run the risk of having to change plans on a yearly basis. Some may find themselves switching among private plans, the Medicare fallback, and private plans again every year. They may also have to switch the prescriptions they use, depending on the formularies offered by each different insurance plan.

Will prescription drug coverage be offered by HMOs and PPOs?

Medicare HMOs and PPOs will be required to offer the prescription drug benefit as part of their plan. These plans will no longer be called Medicare+Choice plans, but will be called Medicare Advantage. PPOs would be required to serve a geographic region of the country, and not just a county or small areas as HMOs do now. They would also be required to offer some kind of stoploss or catastrophic coverage to limit Medicare expenditures overall.

Although most Medicare+Choice plans are currently paid more than traditional Medicare, Congress would pay PPOs even more by adding 2% to their reimbursement rate to encourage them to join Medicare. Thus, more of Medicare's resources would be allocated to PPOs, although even the head of the Medicare Agency concedes that most people are expected to remain in traditional Medicare. According to many analysts, the money put aside for PPOs could be used, instead, to improve the drug benefit for everyone.

Joining a PPO or an HMO to get a prescription drug benefit that is integrated into the other benefits offered by the PPO or HMO has its tradeoffs. For example, although PPOs claim that enrollees can see any doctor of their choice, enrollees will pay substantially more in co-payments if they use doctors who are not part of the PPO's network. As with current Medicare HMOs, the new Medicare Advantage HMOs and PPOs will be able to charge different co-payments than traditional Medicare. They often charge co-payments that are substantially higher for services such as hospital care, home health, labs, and skilled nursing facilities, all services used by people with the greatest health care needs.

What about protections for low-income individuals?

The Senate proposal divides low-income individuals into different categories. The protections being discussed are still changing, but may involve the following:

Individuals who are eligible for full Medicaid coverage as well as Medicare are referred to as "dual eligibles" under this proposal. These individuals generally have incomes up to 75% of the federal poverty level, though the income levels vary depending on each state's Medicaid program. They currently receive some prescription drug coverage under their state's Medicaid program. The Senate proposal would not provide drug coverage for them under the new Medicare benefit even though each state's Medicaid program differs and these individuals have paid into the Medicare system. In addition, most states are reducing their Medicaid programs and their Medicaid drug benefits as a result of budget shortfalls

The proposal would eliminate the deductible and premium for the drug benefit for individuals with up to 135% of the federal poverty level. These individuals would have to pay a 2.5% co-payment for most of their prescriptions up to the $3450 coverage amount. They would pay only a portion of costs of prescriptions in the "gap" and 2.5% co-insurance above the stop-loss amount. Those states that administer an asset test to determine eligibility for the Medicare Savings Programs (QMB and SLMB) would administer an asset test for low-income protections under the Medicare prescription drug benefit.

Individuals with incomes between 135% and 150% of the federal poverty level would pay a $50 deductible, have a sliding scale premium from $0 to $35, and a 10% co-insurance up to the$3450 cap. They would pay a higher co-insurance amount for prescriptions in the gap and above the stop loss.

Many states provide assistance for individuals with incomes of up to 200% of poverty. Yet, under the Senate proposal, individuals with incomes of 151% who have very large prescription drug costs will get little relief. Again, if their drug costs are high, they may still be required to pay two-thirds of the cost of their prescriptions - meaning that, despite the new benefit, they still may not be able to afford the cost of their medicine.

In addition, states would be required to administer the low-income assistance, raising concerns about the effectiveness of the protections. States have not been successful in getting eligible individuals to enroll in the Medicare Savings programs. There are also questions whether the Senate proposal allocates sufficient funds for the states to cover the cost of administration.

What else does the proposed legislation do?

The Senate proposal also contains provisions that address concerns for providers, particularly those in rural areas. In order to finance these proposals, the Senate may be considering adding co-payments for home health services and laboratory services under traditional Medicare. If these provisions remain in the legislation, individuals with chronic conditions will be paying more for the cost of their health care.

Conclusion

The Senate proposal is an improvement over the president's plan. Older people and people with disabilities will not be forced to join private health insurance plans in order to get a prescription drug benefit.

However, the Senate's structure of relying on private insurance plans to provide the coverage will add instability and inefficiencies to the benefit. The incentives provided to PPOs could be better used to provide a more generous prescription benefit to all beneficiaries, or to provide assistance to more individuals with low incomes.

Elders and people with disabilities would be better served if a uniform, stable drug benefit were added to the Medicare program.

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© Center for Medicare Advocacy, Inc. 01/08/2010