An Excellent Look at Senate/House Medicare Drug Bills

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An Excellent Look at Senate/House Medicare Drug Bills

Wall Street Journal
June 11, 2003 10:33 p.m. EDT WALDHOLZ ON HEALTH
By MICHAEL WALDHOLZ What a Medicare Drug Bill
Could Mean for SeniorsCongress is moving quickly this week on a historic effort to provide a drug benefit for Medicare beneficiaries.By next week, committees in the House and the Senate are expected to approve similar versions of the proposed legislation and send them to the full chambers for debate. Both versions include an option, sought by President Bush, that would allow seniors to join privately run health-insurance plans with drug benefits. But both versions also provide a drug benefit to people who want to stay in the government-run Medicare plan.The legislation could still stall, as Congress hammers out the details in the coming weeks. Here's a rundown on what the plans now moving through Congress would mean for Medicare beneficiaries.Q: What is Medicare, and what kind of prescription drug coverage is available to Medicare recipients now?A: Medicare is the federal health insurance program for about 40 million Americans, mostly people 65 and older and some people under 65 with disabilities. In the traditional, fee-for-service scheme, Medicare beneficiaries receive most hospital care for free after paying an annual deductible of $840. Physician services and other outpatient care is provided for a monthly premium of $58.70. Beneficiaries usually are billed about 20% of the charges for these outpatient services, after paying an annual deductible of $100.At present, the fee-for-service plan only covers the cost of drugs administered while a person is hospitalized. It also pays for a few other types of medicines, such as the drugs given after an organ transplant, oral-cancer drugs and medicines administered though injections.About 10% of Medicare beneficiaries get their care as members of a program called Medicare + Choice. This is an HMO option offered by private insurers. These plans charge a premium that can be higher than the traditional Medicare coverage, depending on geographic location and the range of benefits offered. The advantage is that they often provide drug coverage and other services not available on Medicare. Some Medicare beneficiaries get additional drug coverage from their last employer's retiree health plan or from a private provider such as the AARP (formerly known as the American Association of Retired Persons).Q: The Senate is working on a Medicare drug bill. What kinds of new drug coverage does it provide?A: Under the proposed bill, Medicare beneficiaries can join one of several preferred provider organizations that would be offered in their region. These PPOs are managed-care plans offered by private insurers that generally aren't as restrictive in terms of doctor choice as an HMO. Each PPO would offer a competitive drug benefit similar to what employer-paid insurance now provides.In an effort to stay within a budget of $400 billion over 10 years, the Senate has come up with a complicated drug benefit that also would be offered to Medicare beneficiaries who choose not to joint a private PPO. For a $35-a-month premium, and after paying an initial $275 annual deductible, enrollees would have 50% of their first $3,500 to $4,000 of drug bills covered each year. Coverage would kick in again after a beneficiary's total bills reached $5,300, at which point the government would pay 90% of costs.Q: So exactly what would a Medicare beneficiary have to pay for prescription drugs under the Senate plan?A: Under the Senate plan, someone who stayed in the fee-for-service plan with a drug bill of $6,000 a year would still wind up paying $3,927.50, or 65% of their drug costs. Here's the math: $420 annual premium ($35 x 12 months) + $275 (the deductible) + $1,862.50 (50% of $3725 (which is $4000 minus the $275 deductible)) + $1,300 (until the $5,300 annual level met) + $70 (10% of the next $700),Using the same formula, someone with a $10,000 drug bill would be responsible for $4,120 in payments, or 41% of their drug bill.In other words, the coverage would still require beneficiaries to pay a significant portion of their annual drug bill.Q: What are the "private health plans" referred to in the news, what would the new legislation require of them?A: At present, neither the Senate nor the House version is very clear about the types of coverage a PPO would provide. Indeed, many private insurance firms say they will await further details before they agree to offer such coverage.The Bush administration has said it would like the PPOs to offer benefits competitive with those the companies offer to employers. In theory, under such an arrangement, beneficiaries could enroll in plans with reduced benefits that have low annual premiums and deductibles, or pay a higher premium to buy a plan with a richer array of benefits.A report this week by the Congressional Budget Office predicts that only about 2% of Medicare beneficiaries would join a PPO. The Bush administration says that the actual figure will be much higher. The CBO also says a beneficiary in a PPO will cost the federal government more than someone who remains in fee-for-service Medicare. The government contracts with these private plans, and fees involved could be more than what the government pays for Medicare.Bush administration officials, however, maintain the PPOs will save money in the long run, as the private plans often provide more preventive care than Medicare does. The administration officials also say competition among the plans for members will help keep health-care costs in check, though critics say there is no guarantee this approach will result in savings.Q: Is there any reason I would want to join a private plan if I could get a drug benefit through traditional Medicare?A: It may be possible that for a lower total premium, beneficiaries in PPOs may receive a better drug benefit. In addition, the PPOs may cover more of the costs for a wider range of services than Medicare covers. But it isn't clear if PPOs will be mandated to cover a set of services at a set premium, or whether the coverage and premium costs will vary.One proposal would require the PPOs to maintain coverage and premiums for at least two years, to avoid the kind of annual changes that have proved a terrible frustration to enrollees in the Medicare + Choice plan.Q: Might this new program end up limiting the choice of drugs available to me?A: Many PPOs and other private insurance plans use companies called pharmacy benefit managers, or PBMs, to keep drug costs down. The PBMs do this by encouraging doctors and pharmacists to use generic drugs if available or by negotiating for discounts from drug companies on certain drugs.In some of these plans, the PBM creates a list of preferred drugs for which it has received a discount. Doctors can prescribe drugs not on this list, but often must make a special request to the insurer, a time-consuming procedure many doctors don't like.It is possible that Medicare may also contract with PBMs to handle its new drug benefit.Q: I live in a sparsely populated area. Might my location affect the options available to me under the new scheme?A: This could be a problem. The Bush administration wants insurers to provide PPO coverage in numerous geographic areas in an effort to offer the private plans to every American. However, it isn't likely this will be possible, at least at the outset.Q: I understand the House also has a bill. How does its approach differ?A: Under the House's bill, drug coverage would kick in after a $250 deductible and would pay 80% of drug costs up until the first $2,000 of annual drug bills. Beneficiaries would be responsible for all drug bills until annual costs reached $5,300. After that all drug costs would be covered 100%.In the House version, a person with $6,000 or more in annual bills would be responsible for $3,900 -- about the same as under the Senate bill. However, under the House bill, people who made more than $60,000 might have to pay more than $3,900, though how much more hasn't been determined yet.Q: What was the Bush administration's original goal with a drug benefit, and what compromises does it appear the White House will make with Congress to get a bill through?A: The Bush administration has argued that a stand-alone drug benefit in traditional fee-for-service Medicare would be more expensive for the country to provide than one included in a private PPO-like plan. It originally hoped to encourage people to join private PPOs by extending the drug benefit only to those who left traditional Medicare. Officials say that a system of competing PPOS would offer more choices than traditional Medicare does, and would provide preventive health care and other services for less than it would cost Medicare to do the same.In an effort to get a drug plan enacted this year, the Bush administration says it will go along with a law that adds a drug benefit to the traditional Medicare plan. Administration officials believe that over time, more and more people will opt for the PPOs. Meanwhile, by accepting the versions being developed in Congress, President Bush would arguably have a "win" on the Medicare drug coverage issue in next year's presidential campaign.Q: What are the odds a bill will pass, and when would it likely take effect? A: The chances of a bill getting passed are the best they've been in many years. If the House and Senate pass a bill in the next few weeks, the two chambers will then have to agree on a version to send to President Bush. The bill is still controversial. Senate Democrats are divided over the plan, with some worried the new drug benefits won't do enough to help cash-strapped seniors and others concerned that the changes could lead to privatization of the government program. As for Republicans, while some welcome adding the stand-alone drug benefit to the traditional Medicare plan, others are fearful about the costs it will generate.Both versions of the pending bills would become effective in 2006.Write to Michael Waldholz at Mike.Waldholz@wsj.comURL for this article:
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