Newspapers are reporting that the House and Senate conferees are close to finishing the outlines of the Medicare prescription drug legislation, and they have even reported some details about what the prescription drug benefit will look like.  However, staff for members of Congress and the Centers for Medicare & Medicaid Services (CMS) caution that all of the news reports may not be accurate, and that provisions of the bill are subject to change depending on cost estimates and other factors.

Here’s What We Know For Sure as of October 23, 2003:

Letters from the Senate

• All but two of the Democrats appointed to the prescription drug legislation conference committee have been excluded from the negotiations.  Senators Daschle and Rockefeller and Congressmen Dingle, Rangel and Berry  sent a letter to the Republican conferees on October 20^th complaining about the process, particularly since conferees are considering changes to Medicare that were not included in either the bill passed by the Senate or the House of Representatives.  Although Democrats duly appointed to the conference committee are not allowed to participate, staff of CMS regularly join in the discussions.
  
  

• Senator Daschle, on behalf of a group of 41 tri-partisan senators, sent a letter dated October 21^st  to President Bush stating, ”... A conference report that guarantees more affordable prescription drugs to all senior citizens (sic) and protects Medicare’s basic commitments to the elderly will receive strong bipartisan support.  A partisan conference report that jeopardizes Medicare and does not provide meaningful assistance to the elderly and disabled should not and will not pass.”  The letter identified the following critical outstanding issues to be resolved:
  

• The bill cannot restructure Medicare so that premiums increase and beneficiaries are forced to join a private insurance plan.

• The drug benefit must be universal and include a “fallback” provision, available when private insurers don’t offer a drug-only insurance plan, comparable to the Senate provision.

• The bill must provide assistance to prevent employers from dropping drug coverage for their retirees.

• Low income beneficiaries must receive benefits through Medicare, and the benefit package should provide the protections for low income individuals included in the Senate bill.

• The bill should improve availability of generic drugs.

• The bill cannot impose caps or arbitrary limits on Medicare spending, and must protect Medicare as an entitlement.

• The bill cannot include tax provisions with no relationship to Medicare, in particular the health savings accounts.

Release of Reports

• The Joint Economic Committee, Democratic staff, released a fact sheet showing the proportional relationship between income and contribution to Medicare in response to press reports that conferees may require beneficiaries with higher incomes to pay more for Part B.  The fact sheet explains that people with higher incomes already contribute more to Medicare as there is no cap on Medicare taxable income, and that requiring them to pay a higher premium constitutes a double tax.  The fax sheet suggests that a preferable means of generating additional revenue for Medicare, which would be easier to administer, is to increase the percentage of payroll tax on taxpayers with the highest incomes.
  
  

• An analysis by the Office of the Actuary, CMS, alluded to in several news articles, demonstrates clearly the negative impact on beneficiaries in traditional Medicare if the House premium support provisions are adopted.  Medicare would become a voucher program for most beneficiaries, as the premium for traditional Medicare would exceed the government payment.  In addition, premiums would vary not only between states, but within different regions of a state.

Outline of Drug Benefit

According to a power point presentation circulated by Congressional staffers:

• The drug benefit would more closely resemble the House bill than the Senate bill:

• $275 deductible

• 25% coinsurance between $275 and $2,200

• “doughnut hole” between $2,200 and $3,600 ($5,000 in total out-of-pocket spending)

• 5% or other nominal cost sharing above $3,600

• estimated monthly premium of $35

• Low income protections would combine the structure of the House bill, keeping those dually eligible for Medicare and Medicaid, in Medicare, while providing subsidies that more closely resemble the Senate bill.

• Below 135% of poverty

• no deductible or premium

• $2 co-payment for generic drugs and $5 co-payment for brand name drugs, through the doughnut

• no cost-sharing above $3,600

• $6,000 assets for individuals, $9,000 for couples

•   Between 135% and 150% of poverty

• $50 deductible and sliding scale premium

• 15% co-insurance through the donut

• 5% or nominal cost-sharing above $3,600

• $10,000 assets for individuals, $20,000 for couples

However, reports indicate that some conferees may want to prohibit Medicaid from providing assistance that wraps around the Medicare drug benefit.

According to News Reports, General Agreement May Also Have Been Reached To:

• Include a “fallback” provision to help beneficiaries in areas in which no private, drug-only plan is offered
  
  

• Increase payments to entice private insurers to offer HMOs and PPOs
  
  

• Provide subsidies to employers to encourage continuation of retiree health drug benefits
  
  

• Relate Part B premiums to income so wealthier people pay more for Medicare
  

When Analyzing What’s Being Reported:

• Remember, nothing is final until a final conference report is released.  Agreements can change to reflect compromises or to reduce the cost of the legislation, especially if the Congressional Budget Office (CBO) finds that a particular provision is too costly or the entire bill exceeds the $400 billion set aside in the budget.
  
  

• Words used may not have the same meaning to everyone involved, so that  the details of the conference report, rather than the general outline, will be critical.  For example, Democrats describe a “fall back” plan as a drug plan administered by traditional Medicare.  House Republicans describe a “fall back” as the provisions in their bill which increase payments to entice private insurance companies to offer a drug-only plan in an unserved area.  An agreement to provide a “fall back” plan that takes the House approach would not be acceptable to most beneficiaries advocates.
  
  

• Seemingly innocent compromises, when joined with other provisions in the bill, may adversely affect the traditional Medicare program.  For example, a premium support demonstration project may still turn Medicare into a voucher program.  HMOs and PPOs already are paid more than traditional Medicare pays for basic Medicare benefits, and the conferees have agreed to increase this disparity by increasing  payments to private plans even further.  As MedPAC has reported, when the playing field isn’t level between private plans and traditional Medicare, i.e., when their payments aren’t equal, private plans can offer enticements to get  beneficiaries to enroll, making the traditional plan more costly.
  
  

• The conferees have not reached agreement yet on provisions that would increase beneficiaries’ out-of-pocket costs, in addition to the new premium for the prescription drug benefit.  These include provisions to add beneficiary cost sharing for home health benefits and for lab services.  In addition, both bills contain provisions that would increase the Part B deductible.  If the cost of the bill exceeds the $400 billion budget, conferees may be even more inclined to fund the drug benefit by passing additional costs on to beneficiaries.  At some point, the additional costs imposed on beneficiaries may exceed the amount of the drug benefit they might receive.
  
  

• Conferees still have to grapple with cost containment overall.  While beneficiaries want Congress to address the continually rising costs of prescriptions, that issue is not even part of the negotiations.  Both bills preclude the Secretary of Health and Human Services from negotiating prescription drug prices.  Some conferees want to hold down the cost of the additional drug benefit by capping the amount that could be spent for Medicare out of general revenue, thereby destroying Medicare as an entitlement program.
  
  

• Conferees have yet to resolve the issue of premium support.  If they adopt the House provision which turns Medicare into a voucher in 2010, then it is very unlikely that the bill will pass the Senate.
  

Newspaper reports indicate that Republican conferees are optimistic that they will reach agreement very shortly and have a bill ready to be voted on by both the Senate and the House of Representatives by mid November.  It remains to be seen whether this deadline will be met, and whether the compromise bill simply adds a prescription drug benefit, or is used as a vehicle to destroy the nature of the Medicare program that has worked so well for elders and people with disabilities.

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