AMNews: May 20, 2002. Competing plans mark start of drug benefit wrangle ... American Medical News

Competing plans mark start of drug benefit wrangle

Measures will pit House Republicans against Senate Democrats once again.

By Markian Hawryluk, AMNews staff. May 20, 2002. Additional information

Washington -- House Republicans and Senate Democrats have fired the opening salvos in what promises to be a sticky election-year battle this summer over a Medicare prescription drug benefit and reform bill.

In early May, House Speaker Dennis Hastert (R, Ill.) announced the principles that Republicans will use to fashion an outpatient prescription drug benefit and named a 43-member action team to shepherd the GOP plan through the House by Memorial Day. On the same day, Sen. Bob Graham (D, Fla.) released his prescription drug proposal, which shared many of the same tenets.

Hastert said House Republicans would support a drug benefit that immediately lowered the cost of prescription drugs and guaranteed coverage for all seniors while improving Medicare by offering beneficiaries more coverage options and strengthening the program for the future.

Based on these principles, House Ways and Means Committee Chair Bill Thomas (R, Calif.) described a voluntary Medicare prescription drug plan that would set a $35 to $40 premium and a $250 annual deductible. Seniors who signed up for the plan would receive coverage for 70% to 80% of the first $1,000 of their drug costs and coverage for 50% of their costs between $1,000 and $2,000 each year. Beneficiaries would be responsible for all of their drug expenses above $2,000, but the bill would cap their out-of-pocket costs at $5,000.

The plan would cover all drug costs for seniors with incomes up to 135% of the federal poverty level and would provide assistance on a sliding scale for beneficiaries above that income level. Thomas said the plan eventually would involve a buyout of state low-income drug assistance programs.

"There is a hit-or-miss, crazy-quilt pattern of prescription drugs available to seniors through a Medicaid state structure," Thomas said. "That's unacceptable. We will over 10 years buy out the states involved with low-income seniors to produce a uniform national plan, so that a senior who qualifies as a low-income senior will not have to depend on the place of residence to determine if they get a decent prescription drug benefit."

Seniors' median annual spending on prescriptions is less than $1,500.

Under the proposal, the drug benefit would be administered by private pharmacy benefit managers who would compete to sign up beneficiaries and would share financial risk with the government under the arrangement. The Republican plan also would authorize President Bush's prescription drug discount card, which ran into legal troubles when introduced last year.

By contrast, the Graham plan would set a $25 monthly premium with no deductible. It would cover 50% of drug costs up to $4,000 a year and all costs above that cap. Like the GOP plan, it would cover all prescription expenses for seniors with incomes up to 135% of the poverty level. It would offer reduced premiums for beneficiaries with incomes up to 150% of the poverty level.

Graham's proposal also would rely on private sector entities that would share risk with the federal government to administer the program.

"The proposal covers all the bases. It is universal, comprehensive, affordable and accessible," Graham said. "The addition of a prescription drug benefit to Medicare is the most important reform we can make to the program."

The announcements immediately drew potshots from both sides of the aisle. Senate Majority Leader Tom Daschle (D, S.D.) called the GOP measure a "Trojan horse" because of other Medicare provisions, including a physician payment update fix, that Republicans plan to attach to the drug bill. But Daschle did not back Graham's plan either, and it is unclear whether Senate Democratic leaders would be willing to support a plan that relies on the private sector to administer the benefit.

Thomas defended his plan and said one strength is that it is an entitlement program that would not need to be renewed. The more-generous Graham bill would cost $425 billion over 10 years but would require reauthorization after five years. Thomas said his plan, including both the drug benefit and the Medicare modernization measures, would not exceed the $350 billion over 10 years set aside by the House budget plan.

"Something that is a bird in hand is certainly worth much more than a bird or two or an entire flock in the bush," Thomas said.

AARP backed the Graham proposal and expressed concern about potential gaps in coverage under the Republican plan.

Thomas countered that, because median annual spending on prescription drugs is less than $1,500 for seniors, most beneficiaries would receive a generous benefit.

"If we're going to wait for the perfect plan, we're going to wait forever," Thomas said.

While most of the early debate focused on the differences between the two proposals, Thomas was quick to highlight the similarities between the plans. Both rely on private sector administration with risk sharing; provide stop-loss coverage for beneficiaries; and include additional assistance for low-income seniors.

"That kind of common thinking is now the core of two different plans, one in the Senate and one in the House," Thomas said. "[Graham] obviously has been cribbing on the concepts that we have moved forward. I have no problem with that."

Election-year pressure

Still, the two parties have been unable to find much common ground in the past on prescription drug measures. But Health and Human Services Secretary Tommy Thompson said the urgency of the looming election may be enough to bring the two sides together.

"I think that come August or September, the pressure is going to be very high to deliver on prescription drugs," Thompson said. "I think if we play our cards right, we can get a modernized Medicare system, and I think we can have it with prescription drug coverage, stop-loss coverage and one with competition."

Thompson, though, admitted that few in the Bush administration share his optimism. "I'm a minority of one," he said.

ADDITIONAL INFORMATION:

The details make the difference

A comparison of the prescription drug plans:

HOUSE GOP PLAN

Premium: $35 to $40 monthly
Deductible: $250 annually
Coverage: 70% to 80% of annual drug costs from $251 to $1,000; 50% of costs from $1,001 to $2,000; none for costs from $2,001 to $5,000; and 100% of costs higher than $5,000
Low-income assistance: 100% coverage for beneficiaries with incomes up to 135% of the poverty level and subsidies for some beneficiaries above 135% of poverty

GRAHAM PLAN

Premium: $25 monthly
Deductible: None
Coverage: 50% of annual drug costs up to $4,000 and 100% coverage of costs higher than $4,000
Low-income assistance: 100% coverage for beneficiaries with incomes up to 135% of the poverty level and premium subsidies for beneficiaries between 135% and 150% of the poverty level

GOVERNMENT & MEDICINE