Forces Gather to Push for Change in New Medicare Drug Benefit
By: Source: AARP Bulletin Today Date Posted: 2004-03-11 15:07:00-05:00
What are the chances of the new Medicare drug benefit being improved before the law goes into effect in January 2006, thus making it more attractive to older Americans who must decide whether to sign up for it?
That question is shaping up as a major battle in this election year, as Republicans seek to claim credit for having finally enacted a drug benefit and Democrats seek to show that it falls short of what many beneficiaries expected or need.
Usually, when a bill is signed into law, "the curtain comes down, the actors go off and enter another play," says Robert Reischauer, president of the Urban Institute and an expert on Medicare. "But that isn't happening this time. We're as much embroiled in the Medicare drug issue as we were in the months before this legislation was enacted."
THE BATTLE LINES
Democrats in Congress have already introduced bills to change significant parts of the law. AARP has also called for improvements. Republican leaders, meanwhile, say they have no intention of "reopening" the legislation this year.
"I have not seen a proposed change that I'm supportive of yet," Senate Majority Leader Bill Frist, R-Tenn., told a group of health care reporters in February. He accused Democrats of mounting "huge campaigns to discredit" the new law and said it should be given a chance to work.
But politically, a lot may depend on how older Americans react as they weigh how much the law will help them afford medications.
Among those with no other drug coverage, the benefit will offer big savings to low-income enrollees and large subsidies to others with fairly modest or with very high drug expenses. But people with incomes and drug costs in the middle range may not benefit as much.
For them, the central issue is the gap in coverage known as the "doughnut hole." Under the standard benefit for 2006, the government will pay 75 percent of drug expenses between $250 and $2,250 a year. But after that enrollees must foot the whole bill for the next $2,850 until "catastrophic" coverage kicks in, when the government will pick up as much as 95 percent of costs.
People who qualify for low-income subsidies and those whose drug expenses rise no higher than $2,250 a year will not be affected by the doughnut hole. But there will still be a great many who, in Reischauer's words, "will feel its bite up close and personal."
Moreover, the law prohibits enrollees from filling the drug coverage gap with medigap insurance, as they can do for other out-of-pocket Medicare expenses.
BRIDGING THE GAP
What about beneficiaries who join the private plans that will run the managed care part of the new program?
The new law would allow these plans to offer extra coverage to fill or narrow the gap. That could soften the gap's effects—though it would also take enrollees longer to qualify for the more generous catastrophic level of coverage.
But there may be strong reasons for plans not to offer this option. According to the Senate-House committee that wrote the law, there are "significant disincentives" for private plans to provide extra coverage to fill the gap—because, if they did, other rules in the law would disqualify them from receiving some hefty federal payments.
In fact—with the law still being interpreted and government regulations yet to be issued—it will take the plans many months to decide what options they'll offer enrollees. And current rules could change between now and 2006.
Several Democrats are seeking more drastic changes. In particular, Sen. Edward Kennedy of Massachusetts, the Democrats' long-time champion of health care, has sounded a clarion call for his party in harshly criticizing the new law as a "fraud" and pledging to "fix it."
He is sponsoring a bill that aims, among other things, to close the doughnut hole or allow enrollees to fill it with medigap insurance.
Closing the gap would cost an extra $200 billion over 10 years, according to the Congressional Budget Office. How to afford it? Kennedy's response "is that it's just a question of priorities," says his spokesman Jim Manley. "Instead of tax cuts for the wealthy, that money should be used to narrow or eliminate the gap in coverage."
With President Bush committed to making his tax cuts permanent, the chances of Congress forking over more money to close the gap are close to zero, experts say. The spiraling federal deficit is the main reason.
Another is the White House's estimate that the Medicare benefit will cost taxpayers not $395 billion over 10 years—Congress' estimate—but $534 billion, nearly a third more. Administration officials explain the discrepancy in part by saying they assume that many more people will sign up for the benefit than Congress predicts.
'AS LONG AS IT TAKES'
But as yet, nobody has a clue what beneficiaries will do. How many will see it as insurance against future costs, even if what they get out of the program initially may be less than they pay in? And how many will decide—based on their present costs and the doughnut hole—that the benefit is not worthwhile?
If public concern over the gap escalates, Reischauer says he "would not be at all surprised" if Congress decides to remove the prohibition on private insurance supplements to narrow it. This, he says, would be an "easy way out" because it wouldn't cost the government much money.
The Kennedy bill calls for other changes in the new law. It would abolish asset tests that are expected to deprive 1.8 million beneficiaries of generous low-income subsidies; remove federal subsidies given to private plans; repeal the prohibition on the government negotiating prices with drug manufacturers; and allow lower-cost drugs to be imported from abroad.
AARP—which supported the new law while describing it as "imperfect"—is also calling for changes that would help more beneficiaries.
"We believe there are some trade-offs that could be made to lower drug costs and narrow the doughnut hole before 2006," says John Rother, AARP's director of policy. "And we'll be pushing for this for as long as it takes."
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