07-13-2002

HEALTH: Will This Be the Year for a Medicare Drug Bill?

The passage of a Medicare prescription drug bill in the House is hardly a
reason for seniors to pop open the champagne. The Senate must still act on
its version, and a difficult-to-achieve compromise undoubtedly will be
necessary before any bill can reach President Bush's desk. The House bill
and the Senate version are so different in cost, philosophy, and detail
that many experts say the competing plans will provide assistance only to
dueling political candidates in the 2002 elections.


A third bill-a Senate measure backed by many Republicans, a few Democrats,
and one independent-may offer a basis for compromise. This tripartisan
effort is being led by Sens. John Breaux, D-La., Charles Grassley, R-Iowa,
Orrin G. Hatch, R-Utah, James M. Jeffords, I-Vt., and Olympia Snowe,
R-Maine. Although its benefits are no more generous than those in the
House bill, this plan offers health insurance companies more incentives
for signing up with any new Medicare program.


A peek at price tags reveals the huge gulf between the Republicans' House
bill and the Democrats' Senate measure. The GOP bill that passed the House
by 221-208 would cost $350 billion over 10 years to help seniors with
prescription costs and modernize other parts of the Medicare program. The
Senate bill is estimated to cost at least $750 billion over 10 years, just
for the drug benefit.


The fewer dollars the government spends, the more dollars must come out of
a consumer's pocket. The Senate bill proposes a $25 monthly premium and no
annual deductible; Republicans estimate that under their House bill,
private insurance companies would charge a monthly premium of $33 and a
$250 annual deductible. But there's no guarantee of that, since private
insurers can adjust copayments and out-of-pocket expenses so long as they
don't alter the overall value of the benefit.


Democrats maintain that giving so much flexibility to private insurers
invalidates GOP contentions that their plan is an entitlement. Democrats
also argue that the GOP bill forces seniors to get drug coverage through
private insurance plans or managed care plans, and thus it is not a true
benefit like Medicare's existing Part A and Part B, under which every
senior gets guaranteed benefits at one price.


"The Republican bill moves Medicare toward a defined contribution
program with the ultimate goal of turning Medicare over to the private
insurance market," said a statement from Democrats on the House
Energy and Commerce Committee.


Republicans counter that the Senate Democratic bill is the one that isn't
a true entitlement. Although the plan would provide standard benefits for
all seniors, it would sunset after five years. House Ways and Means
Committee Chairman Bill Thomas, R-Calif., blasted the Democratic Senate
plan as "a demonstration project" and "a cruel hoax,"
because the drug benefit eventually would be taken away.


Another point of contention is the benefit gap-called the "doughnut
hole"-in the GOP bill. Seniors who spend up to $2,000 a year on drugs
would get some help under the Republican plan. But seniors would have to
pay $3,700 of their own money on drugs in less than a year before they
could qualify for catastrophic coverage and full payment by Medicare.
Ironically, the Democratic bill has a higher catastrophic
threshold-$4,000-but the proposal provides significantly more help for
seniors until they reach that spending level, with no gap in
coverage.


The doughnut hole, critics contend, would mean trouble for many seniors.
According to the Henry J. Kaiser Family Foundation, 22 percent of seniors
spend between $2,000 and $4,000 a year on prescription drugs, while
another 8 percent of seniors spend between $4,000 and $6,000. Seniors
"don't need a benefit that pays pennies on the dollar for ...
medicines," said Sen. Edward Kennedy, D-Mass. "They don't need a
benefit that offers the pretense of relief but not the performance."
But Thomas said it would simply be too expensive for the government to do
more.


Beyond prescription drugs, Democrats and Republicans are expected to butt
heads over proposals for modernizing Medicare. Republicans are expected to
push vigorously for modernizations in their bill, which would lower
outpatient copayments; cut down on regulatory burdens; add money to the
Medicare HMO system and launch a competitive bidding process; repeal a 15
percent cut in home health care that is about to take effect; and allow
competitive bidding for durable medical equipment. Republicans argue that
it's irresponsible to add a drug benefit without fixing some of Medicare's
other problems. Democrats don't necessarily disagree with these proposed
changes. Instead, they're more worried that nonprescription provisions
will complicate the legislative process by making Medicare reform even
more expensive and thus potentially jeopardizing the passage of any
bill.


Marilyn Werber Serafini

National Journal