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Life Health > Health Insurance

Medicare Reform Battle Intensifies

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NU Online News Service, Nov. 20, 2003, 4:05 p.m. EST –Washington

Supporters and opponents of an industry-backed Medicare prescription drug program mustered their forces ahead of a possible vote on Friday, Nov. 21.

At issue is a massive expansion and reform of the Medicare program, not to mention enormous political stakes for Republicans and Democrats heading into the 2004 elections.

If enacted, the legislation would provide Medicare beneficiaries with a major new benefit, establish a test program in which Medicare would face competition from private health plans and allow creation of health savings accounts (HSAs).

The legislation is drawing intense reactions among industry and health care activist groups.

Karen Ignagni, president of AAHP-HIAA (the recently merged American Association of Health Plans and Health Insurance Association of America) says the legislation will provide seniors with more health care choices as well as prescription drug coverage.

“With the bipartisan passage of this legislation, Congress will finally give seniors the same range of choices that are available to working Americans,” Ignagni says.

“Seniors and other disabled beneficiaries will receive much-needed prescription drugs and the choices they deserve to choose a benefit structure that is right for them,” she says.

Mohit Ghose, an AAHP-HIAA press representative, adds that association members are looking forward to providing this benefit to Medicare beneficiaries, whether as part of an integrated program or as a stand-alone coverage.

But, he adds, the details still matter, and it will be important to see the regulations that will be promulgated by the Department of Health and Human Services, assuming the legislation passes.

There are issues involving how the regions are structured as well as whether health plans will have the tools needed to manage drug costs, Ghose says.

But he emphasizes that AAHP-HIAA members are eager to serve Medicare beneficiaries and are confident they can help beneficiaries save money.

William K. McGreevy, president of the Association of Health Insurance Advisors, Falls Church, Va., praises the HSA language.

HSAs, he says, would make affordable health options available to small employers and their employees.

The legislation also is drawing strong support from business groups. Businesses that currently provide retiree prescription drug benefits will receive a $70 billion subsidy to continue doing so.

“This agreement is fantastic news,” says Neil Trautwein, vice president of health policy for the National Association of Manufacturers, Washington.

“We are finally ready to move forward with the Medicare reforms that we and so many others have sought for so long,” he says.

And in a major political boost for the legislation, the American Association of Retired Persons, Washington, has endorsed it.

AARP says in a prepared statement that while the legislation is far from perfect, “it represents an historic breakthrough an important milestone in the nation’s commitment to strengthen and expand health security for its citizens at a time when it is sorely needed.”

But the legislation is drawing sharp criticism from some health care activist groups.

Ron Pollack, director of Families USA, says the legislation provides too little help for poor seniors and does too much harm to traditional Medicare.

“It still can and should be changed,” he says.

Gail Shearer, director of health policy for Consumers Union, Washington, says the legislation requires seniors to pay too high a price for relief that is modest at best.

She charges that in developing the legislation, the Congressional supporters “relied on profit-seeking insurance companies and private health plans to make this work, which guarantees a perpetual flood of lobbyists coming back to Congress requesting larger and larger subsidies.”

On the political front, sharp divisions have emerged both among Republicans and Democrats.

On the Republican side, members of the leadership, such as Ways and Means Committee Chairman Bill Thomas, R-Calif., says the legislation will strengthen Medicare.

“In my view, complete success means that Medicare?a program headed toward bankruptcy?would not just reverse course but be made sustainable for future generations of seniors,” Thomas says. “By definition, we’ve achieved success.”

But some Republicans, such as Rep. Mike Pence, R-Ind., say the legislation fails to enact enough free-market reforms in the Medicare program. With a $400 billion deficit, Pence says, the legislation is not fiscally responsible.

On the Democratic side, Senate Majority Leader Tom Daschle, D-S.D., blasts the legislation.

“It keeps drug prices high, causes two to three million retirees to lose drug coverage and coerces seniors into HMOs,” Daschle says. “It is hard to imagine a plan less faithful to what seniors have been promised, but with help from drug companies and HMOS, that’s what Republicans have written.”

But Sen. Max Baucus, D-Mont., ranking Democrat on the Senate Finance Committee, says that while the legislation is not perfect, it is a good bill and will accomplish the goal of providing seniors with a prescription drug benefit.

Under the legislation, the prescription drug benefit would begin in 2006. The premium would average $35 per month, and there would be a $275 deductible.

Medicare would then cover 75% of all drug costs up to $2,200. There would be no coverage for costs between $2,200 and $3,600. But above $3,600, Medicare would cover 95% of costs for beneficiaries above 150% of the poverty line and 100% for those below 135% of the poverty line.

Beneficiaries in between those percentages would have a copay of between $2 to $5 per prescription.

Beneficiaries could receive the prescription drug benefit as either stand-alone coverage or as part of a private health plan that offers drug coverage.

Private health plans that offer basic health coverage would receive a $12 billion subsidy also to provide the drug coverage.

In addition, beginning in 2010, the legislation launches a pilot program under which Medicare would face competition from private health plans in six Metropolitan Statistical Areas for six years.

The demonstration sites would have two local private plans and enroll at least 25% of local beneficiaries.

Beneficiaries who chose to remain in the traditional Medicare program would be assured that their premiums could not increase by more than 5% in any year during the six years of the pilot project.

The legislation also creates health savings accounts. Individuals would be allowed to put $1,000 annually ($2,000 for couples) into an HSA, which would be tax deductible, would earn tax-free interest and would allow tax-free withdrawals to pay for qualified medical expenses.


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