The press is reporting that members of the congressional conference committee considering the Medicare prescription drug bills are close to announcing a compromise. (As reported, all of the House Democrats and two of the four Senate Democrats appointed to the conference committee have been excluded from negotiations.)

From what we are hearing, the conferee’s bill would do more to privatize Medicare, and perhaps eventually reduce current coverage, than to add a valuable prescription drug benefit.

The proposal, according to reports on November 13:

• Includes a "premium support" or voucher component. The voucher component has phase-in and other trigger language. However, the net result is to cap Medicare spending - and only Medicare spending - with a resulting shift in costs back to beneficiaries. Beneficiaries who want a plan that is more expensive than the voucher will have to pay the additional costs themselves. No longer will Medicare guarantee a standard package of benefits.
  
  

• Creates a first-ever cap on the total amount that can be expended on Medicare out of general revenue. Financing mechanisms and restrictions would be imposed that aren't placed on any other general revenue expense or tax cuts. Increases in Medicare spending, whether for new services or prescriptions or to fill in the "doughnut" hole in the drug benefit, would have to be offset by cuts in other Medicare benefits.
  
  

• Fails to address adequately the potential for employers to drop existing retiree health coverage.
  
  

• Fails to address rising drug costs by precluding the Secretary of Health and Human Services from negotiating drug prices the way the Veterans Administration does.
  
  

• Continues to promote enrollment in private plans by overpaying private HMOs and PPOs even more than they are currently overpaid. These overpayments will help ensure that the cap on Medicare expenditures is reached even sooner, making it more likely that the traditional Medicare program will be weakened while payments to HMOs continue to rise.
  
  

• Includes a tax shelter that allows wealthy individuals to get tax breaks for setting aside money in health care IRAs known as "Health Savings Accounts." An editorial in the 11/14/2003 Washington Post says that, even though this provision is less generous than the provision originally enacted by the House, the result is that it will benefit a wealthier portion of the population and can take health workers away from employer-based plans.
  
  

• Requires people who are dually eligible for Medicare and Medicaid to pay more for their prescriptions by precluding Medicaid from wrapping around or filling in the gaps in the Medicare benefit. The compromise also retains an asset test, meaning that many low-income individuals won't qualify for protection.
  
  

• Does not provide a plan similar to that which Congress and other federal employees. Useful Background Information: October 2003 Report by Karen Davis, Barbara Cooper, Rose Capasso, for the Commonwealth Fund, The Federal Employee Health Benefits Program: A Model for Workers, Not Medicare. The report explains why one needs to look to FEHBP, not as the model for how to run Medicare, but as the model for how not to run Medicare. The report is available on Commonwealth Funds website, www.cmwf.org.

   

Example of Prior Expansions

• People with disabilities added: 1972

• Limitations on home health coverage removed: 1980

• Medicare Catastrophic Coverage Act of 1989

  • (Rx; 150 days calendar year SNF coverage with no prior hospital stay; respite benefit; beneficiary out-of-pocket expense limit)
    Repealed due to income-related annual premium
    

Prescription Drug Benefit:

Limited Benefit

• Not FEHBP / like Congress, as asserted:

  • (Congress: No separate Rx premium; no separate deductible; no doughnut hole; one out-of-pocket limit for all Med costs)

• Monthly premium: Approx. $35/mo.

• Annual deductible: $275

• Co-pay: 25% (?)

• "Doughnut" hole (no coverage): From approx. $2,000 - $5,000

  • Monthly premium still due

• "Fall-back?": If not, millions will find they actually get all the new costs and limiting restructuring with no Rx benefit

• CT - 2 HMOs in 3 of 8 counties only have 2 (choice) in New Haven County
  Thus, no Rx benefit in much of CT if no "fall-back?"

Reform / Restructuring:

• v. Social Insurance, all in risk pool regardless of health or wealth w/ same payments and same benefits

• Note: those with greater income pay more as employees + MCCA repeal

• Starting March 2004 - if estimate that 2 years in row all Medicare funding will be greater than 45% gen revenues (Part A, B, D/Rx combined, not just Part A as has been concern.) v. solvency of Part A Trust Fund

• PPOs allow out of network provider for higher payment

  • Already allowed in M+C

  • Traditional Medicare = "One large PPO," all Medicare certified providers in the large

  • Medicare "network"

Premium Support / "Voucher" (aka: Comparative Cost Adjustment)

• Office of Actuary: premiums would vary

• v. now Part B premium same everywhere in US

• But competition has been anemic

  • Fewer than 5 million of 40 million Medicare beneficiaries (12%) are in M+C now

  • Down from 6+ million 1999

  • Access to M+C down from 74% of beneficiaries with access in 1999 to 59% with access in 2003

  • Former CMS Administrator Bruce Vladeck: "Managed care has not saved Medicare a nickel." ( See also GAO, MedPAC. studies)
    
    

• Admin costs more than traditional - Traditional approx. 2% v. managed care approx.16%
  
  

• Government pays more per beneficiary than traditional

  • (Although costs per beneficiary are less)
    
    

• Why not have general private insurance mirror Medicare rather than have Medicare mirror private insurance?

Bottom Line: Greatest restructuring in Medicare history, not greatest expansion of benefits.
Is this restructuring / "reform" worth the uncertain, limited prescription benefit?

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