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Medicare Prescription Drug Benefit to Become a Reality

After years of debate and a roll-call vote that lasted for close to three hours early Saturday morning, the House approved, 220-215, the conference report for H.R. 1, a bill that would provide a prescription drug benefit to seniors through Medicare. The Senate overcame a Democratic filibuster and a number of budget points of order before finally approving the conference report by a vote of 54 to 44 on November 25. The historic legislation will now go to the White House for the President’s signature.

Beginning in 2006, H.R. 1 would provide Medicare beneficiaries with the option of purchasing private coverage of prescription drugs, either through stand-alone “drug only” insurance plans, through existing health maintenance organizations (HMOs), or through preferred provider organizations (PPOs). Beneficiaries would pay an average monthly premium of $35, then a $275 annual deductible, after which the plan would cover 75 percent of the first $2,250 a year in drug costs. After exceeding $2,250, beneficiaries would be responsible for 100 percent of costs up to an out-of-pocket cap of an additional $3,600. Those with “catastrophic costs” exceeding the $3,600 cap would have 95 percent of their drug costs covered for the rest of the year. For an individual to reach the $3,600 out-of-pocket cap, his or her total drug costs would have to exceed $5,000.

Medicare beneficiaries would be guaranteed access to at least one prescription drug plan and one integrated plan in each region. Two prescription drug plans would be required in a region where no integrated plan is available. Finally, the measure would offer a “fallback” plan for the government to step in to help seniors in geographic areas where at least two private plans do not offer coverage.

Under H.R. 1, seniors who are eligible for both Medicare and Medicaid would have access to the Medicare prescription drug benefit. In addition, seniors with incomes of up to 150 percent of the federal poverty level would get a benefit with no gaps in coverage but would be subject to premiums based on a sliding scale and co-payments.

The measure would establish a prescription drug discount card that would be available to Medicare beneficiaries in April 2004. The Department of Health and Human Services (HHS) estimates that the discount card could provide seniors with savings of 15 to 25 percent per prescription. Low-income beneficiaries would receive an additional $600 in annual assistance in 2004 and 2005.

The bill would allot $70 billion in subsidies and tax credits over 10 years to encourage employers to continue offering health care insurance to their retirees. Employers would be allowed to provide cost-sharing assistance for retirees who choose to enroll in a Medicare drug plan or integrated plans.

H.R. 1 would provide at least $25 billion to hospitals, doctors, and other health care providers that have a disproportionate share of low-income patients in rural areas.

The measure would provide coverage for cholesterol and blood lipid screenings and would waive the Part B deductibles for colorectal cancer screening tests. In addition, it would provide immediate coverage for oral anticancer drugs through a demonstration project.

The HHS Secretary would be authorized to create regulations allowing pharmacists and wholesalers to import prescription drugs from Canada as long as the Food and Drug Administration has certified the safety of the drugs.

The bill would establish a system under which private insurers would compete with the traditional Medicare program to offer hospital and physicians services currently provided under Medicare Part A and Part B in six metropolitan statistical areas beginning in 2010.

Finally, legislation to establish tax-free, employer-sponsored Health Savings Accounts, as approved by the House on June 26 (see The Source, 6/27/03), would be incorporated into H.R. 1. Under the proposal, individuals could contribute an amount equal to their health plan deductibles, with an annual maximum of $2,600 for an individual and $5,150 for a family. Both individual and employer contributions would be tax deductible, although employers would not be required to make contributions to the accounts.

In the House, Rep. Jennifer Dunn (R-WA) lauded passage of H.R. 1, stating, “…it is time to keep our promise and provide a comprehensive and voluntary prescription drug benefit for all seniors. Seniors cannot afford the frighteningly increasing cost of drugs any longer. This bill will protect the poorest seniors by helping pay for their drug costs immediately. By using the same principles already used by private companies, this bill will lower drug costs for seniors by passing along to them larger discounts from manufacturers.”

Speaking in opposition to the measure, Rep. Ellen Tauscher (D-CA) contended, “This legislation prohibits Medicare from negotiating lower drug prices; gives big drug and insurance companies $82 billion in subsidies just to compete with Medicare; and will privatize Medicare by pushing seniors into HMOs.”

Rep. Jan Schakowsky (D-IL) agreed and pointed out that seniors would not want to choose between Medicare and other insurance plans. “Seniors want a choice all right. They want to choose their doctor. They want to choose the drug that their doctor prescribes for them. They want the choice of their pharmacy if they want to go to their neighborhood pharmacy. They want the kind of real choice they get under Medicare, the Medicare that they know and love,” she argued.

Dismayed by the number of women Members opposing the bill, Rep. Nancy Johnson (R-CT) asked, “Do my colleagues understand that of the Medicare population, 57 percent are women? Mr. Speaker, 57 percent are women, and half of them, half of those women will pay no more than $2 per generic or $5 per [brand name] prescription. They will have no other obligation, all the way up through catastrophic. Half the women on Medicare. This is a giant stride forward in women’s health.”

In the Senate, Sen. Olympia Snowe (R-ME) stated that, in H.R. 1, Congress “preserved the universal principle of Medicare, and that is not to be underestimated for a variety of reasons. It is comprehensive. It is a wide-ranging benefit. It is affordable, particularly for those at the low-income scale. It is voluntary participation and not mandatory. Seniors can choose to participate if they want to. It is permanent…Everybody will have access to the same benefit, regardless of what plan they choose.”

Sen. Susan Collins (R-ME) noted, “This legislation, which represents the largest expansion of Medicare in the program’s 38-year history, is long overdue, and it deserves our support. Prescription drugs are as important to the health of our seniors today as a hospital bed was back in 1965 when the Medicare Program was first created.”

Sen. Hillary Rodham Clinton (D-NY) disagreed and argued, “There are many reasons to oppose this bill, and my colleagues have been going through them one after another. I think the bottom line is…this bill does very little of what it actually advertises doing. It advertises it is going to be a sea of change a positive sea of change for seniors, and that is not the case.”

Expressing her disappointment with the bill, Sen. Debbie Stabenow (D-MI) stated, “Nothing would please me more than to be able to stand here today and declare a victory for our seniors and a victory for all members because we have finally done the right thing. Seniors have waited too long, there is no question. They have waited way too long. Unfortunately, under this plan, they are still waiting. Not only will an awful lot of people continue to wait, some of them will find instead of a step forward…for too many it is a step off the cliff.”

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