THE TRUTH ABOUT THE MEDICARE PRESCRIPTION DRUG LEGISLATION

HIDDEN CHANGES TO THE MEDICARE PROGRAM

S. 1 and H.R. 1, the prescription drug legislation that passed the Senate and the House of Representatives, respectively, on June 27, 2003, do more than add a prescription drug benefit to Medicare. Both bills make substantial changes to the Medicare program, including imposing additional costs on beneficiaries for current Medicare services. Both bills increase reliance on private insurance to provide Medicare services. These changes are so dramatic in scope that, given the inadequacy of the prescription drug benefits proposed, they raise serious questions about the overall merits of both bills.

DID YOU KNOW THAT:

• Both bills are designed to force elders and people with disabilities who rely on Medicare into HMOs and other private insurance plans.
  
  

• Both bills would increase the cost of traditional Medicare, making the traditional program too expensive for many people. Both dramatically increase the Part B deductible, the House starting immediately and the Senate in 2006. The House bill would make traditional Medicare even more expensive starting in 2010, when the program would have to compete against private plans. Both bills also add co-payments for services for which Medicare currently charges no co-payment.

• Both bills require HMOs and private plans to offer benefits like catastrophic coverage and coordinated care for chronic conditions that will not be available in traditional Medicare. These benefits are crucial for all beneficiaries and should be added to the traditional program as well.

• Both bills increase the reimbursement for HMOs and private plans so that these plans will receive even more funding than traditional Medicare. HMOs are already paid more than Medicare pays on behalf of people in the traditional program. The majority of beneficiaries who prefer the traditional program need assurance that traditional Medicare will be adequately funded.
  
  

• Both bills increase the bureaucracy and complexity of Medicare by creating a second government agency to share in the running of the Medicare program. This will result in duplication of effort and the need for coordination of activities, and will cause confusion for beneficiaries who seek assistance.
  
  

• Once a beneficiary makes a choice of a plan, the beneficiary will be stuck with the plan. Currently, beneficiaries may enroll in or disenroll from an HMO or other private plan at any time. Both bills will limit the ability of beneficiaries who realize an HMO is not meeting their health care needs to change plans in order to get the required health services. Under the House bill, beneficiaries could only change plans during the annual enrollment period in the fall. The Senate bill phases in this "lock-in" a little more slowly, allowing one change early in the year during the first two years the law is in effect.
  
  

• Both bills weaken beneficiary rights. Changes made by these bills to the traditional Medicare appeals process will weaken the ability of beneficiaries to present all of the evidence on their behalf and to be assured of an impartial hearing by an independent administrative law judge.
  
  

• Although Congress wants to promote "choices" by beneficiaries, the House bill would allow Medicare to provide less of the information beneficiaries need to make those choices. Currently, Medicare mails to all beneficiaries, in the Medicare & You Handbook sent out in the fall before the annual coordinated enrollment period, information about any HMOs or other plans in their community. The House bill says that Medicare will only have to mail the information required by law "if it is available." Thus, an HMO that plans to increase its co-payments or otherwise changes its benefits may decide not to make that information available until after the Handbook is mailed, meaning that beneficiaries will not know about the changes when they decide which, if any, plan is best for them.
  

These and other hidden changes to the Medicare program made by the prescription drug legislation currently under debate call into question Congress' intentions in enacting these bills. If Congress truly wants to improve Medicare and protect this important program for elders and people with disabilities, they should develop modifications that truly reflect the needs of the people who rely on the Medicare program.

HOW ADEQUATE IS THE PRESCRIPTION DRUG BENEFIT?

S. 1 and H.R. 1, the prescription drug legislation that passed the Senate and the House of Representatives, respectively, on June 27, 2003, differ in their benefit design. Several factors should be taken into consideration when evaluating whether either proposal provides the coverage that elders and people with disabilities who rely on Medicare need and deserve.

DID YOU KNOW THAT:

• Both bills rely upon private insurance companies to provide prescription drug coverage instead of creating a benefit that is part of Medicare. Medicare was enacted in 1965 because private insurance companies did not want to provide health insurance to older people. Even today, private insurance companies have abandoned Medicare+Choice plans, and have not indicated that they will offer the separate prescription drug insurance plans through which Congress intends to provide drug coverage.

• Both bills require people who rely on Medicare to spend substantial amounts out-of-pocket before they receive any help. Someone would have to spend $775 under the House bill or $1155 under the Senate bill before getting help with prescription drug expenses.

• Both bills require people who rely on Medicare to continue to pay a substantial amount for their prescriptions. Under the House bill, beneficiaries would be required to pay 20% of the cost of each drug. The Senate bill would require beneficiaries to pay 50% of the cost. And, if a drug is not included on the insurance company's formulary, the beneficiary would pay the full cost.

• Both bills fail to establish a set premium for the prescription drug insurance. Insurance premiums would be based on a national average that is only estimated to be $35 per month. The premiums could vary with each different insurance company, and they could vary in different parts of the country. And, someone who delays enrolling in the voluntary prescription drug benefit could be charged a premium that reflects her health care costs, making the insurance virtually unaffordable if she needs expensive medications.

• Both bills create large gaps in coverage, or "doughnut holes," where beneficiaries would continue to pay premiums but would receive no help with their prescription costs. Once an individual reaches the doughnut hole, she gets no assistance with the cost of her prescriptions until she reaches the catastrophic limit. Under the House bill, even people with very low-incomes would be required to pay for the full cost of their prescriptions once they reached this gap.

• The House bill does not guarantee that a drug benefit would be available everywhere. Unlike the Senate bill, the House bill does not provide for a drug plan offered through Medicare when private insurance plans don't want to offer coverage in a community. Instead, the House bill would try to induce coverage by paying private plans more money. This approach has not worked to get HMOs to serve rural areas.

• People with retiree health insurance coverage could be worse off. Both bills require people with retiree health coverage to spend more out of pocket than others before they are eligible for the catastrophic drug coverage. As a result of this and other problems, the Congressional Budget Office estimates that one-third of retirees with health insurance, about 4 million people, could lose their coverage, forcing them into the less generous Medicare plan.

• Both bills allow the private insurance companies who offer coverage to set their own formularies, meaning many drugs commonly used by Medicare beneficiaries may not be included. Beneficiaries may be forced to choose between the drug prescribed by their doctor and the drug the insurance company puts on the formulary. In addition, private insurance companies could decide to cover only generic drugs, leaving people with Alzheimer's disease, multiple sclerosis, cardiovascular disease, and other diseases or conditions for which there are no generic drugs without any assistance.

• Both bills create an unstable prescription drug benefit. They allow the private insurance companies who offer coverage to change co-payments, premiums, and formularies on a yearly basis. The House bill allows plans to come and go from areas on a yearly basis; the Senate bill allows plans to leave communities every two years. Thus, beneficiaries may have to change prescription drug insurance each year as plans change their benefit package or leave a market.
  
  

• Both bills lock beneficiaries into a prescription drug plan for a year. If, during the course of the year a beneficiary's prescriptions change so that they no longer are included on the plan's formulary, the beneficiary would be required to remain in the plan - and continue to pay premiums - until the next annual enrollment period.

• Both bills destroy the universal nature of Medicare, which has always been available to everyone who pays taxes into the system regardless of income. The Senate bill would keep low-income people out of the Medicare drug benefit. The House bill would require people with higher incomes to pay substantially more in order to get catastrophic coverage.

• Both bills completely fail to reduce the cost of prescription drugs. In fact, both bills prohibit the Secretary of Health and Human Services from using the purchasing power of 40 million Medicare beneficiaries to negotiate better and reduced prescription prices.
  
  

• The House bill gives wealthier people an additional tax credit instead of providing for a richer Medicare prescription drug benefit for all. The House bill creates an additional tax credit, costing $174 billion over 10 years, to wealthier people who can afford to save more than $500/year in a special savings account for health care costs. That extra money could be used instead to improve the drug benefit by closing the "doughnut hole" (approximately $64 billion) and fixing the problem of the catastrophic limit for people with retiree health insurance (approximately $65 billion).

• Although the President and Congress promised to provide Medicare beneficiaries with the same drug coverage available to them and other federal employees, they have not kept their promise. The Medicare drug benefit is so inferior to the drug benefit offered under the Federal Employees Health Benefit Program (FEHBP) that the House of Representatives passed a bill to prevent FEHBP from reducing the drug benefit currently available to federal employees to the same level as the Medicare drug benefit.

Neither the House bill nor the Senate bill creates an affordable, uniform, stable drug benefit for all Medicare beneficiaries. Congress should reject both bills and create a drug benefit, that is part of the Medicare program, upon which elders and people with disabilities can rely.

© Center for Medicare Advocacy, Inc. 05/05/2008