Benefits, Drawbacks of Medicare Legislation for Beneficiaries, Other Groups Assessed

Under legislation (HR 1) passed last week to add a prescription drug benefit and make other changes to Medicare, beneficiaries, health providers, drug companies and insurers would face "pluses and minuses," but the "long-term impact probably won't be known for years," the Baltimore Sun reports (Hirschfeld Davis, Baltimore Sun, 11/27). While the "vast majority" of beneficiaries would likely receive some benefits when the drug program begins in 2006, the extent of those benefits would differ based on individuals' annual prescription drug spending, and many beneficiaries would continue to pay "substantial out-of-pocket" costs, the Washington Post reports (Walsh/Brubaker, Washington Post, 11/27). Beneficiaries with annual incomes of no more than $8,980 and assets of no more than $6,000 -- or $12,120 and assets of no more than $9,000 for a couple -- would generally "fare well under the plan," with no premiums or deductibles and copayments of $1 for generics and $3 for brand-name drugs, according to the Sun. Beneficiaries who are eligible for both Medicare and Medicaid -- who will be shifted to the Medicare program -- could experience higher out-of-pocket drug costs because some state Medicaid programs cover 100% of prescription costs, while the Medicare legislation would require copayments (Baltimore Sun, 11/27). Beneficiaries who do not qualify for Medicaid and have incomes of up to 135% of the federal poverty level would likely benefit most from the bill, Families USA Executive Director Ron Pollack said (Walsh/Brubaker, Washington Post, 11/27). According to the Sun, Medicare beneficiaries with health coverage sponsored by a former employer are "at greatest risk of seeing their health and drug benefits reduced or eliminated," with the Congressional Budget Office estimating that 3.8 million beneficiaries would lose retiree insurance benefits.

The Medicare bill represents a "big victory" for pharmaceutical companies, which likely will see increased sales, the Sun reports. Pharmacy benefits managers could profit under the bill, but some may not find Medicare plans to be cost-effective. Private health plans stand to receive subsidies and higher reimbursement rates from Medicare, and the bill also would cancel a scheduled reimbursement cut to health providers. The Sun reports that Republicans "won a major domestic policy victory on an issue that has traditionally worked to Democrats' advantage," but the Republican party could face a "backlash" from beneficiaries who are unhappy with the new plan. And while Democrats "lost a rare battle on the health care front," they could benefit if beneficiaries "sour on the plan," according to the Sun (Baltimore Sun, 11/27).

In what is possibly "the biggest revolt in its ranks since the 1980s," some AARP members are "flooding the lobbying group's Internet message board with complaints" or destroying membership cards because of the group's endorsement of the Medicare legislation, the AP/Philadelphia Inquirer reports. Between 10,000 and 15,000 people have discontinued their membership with AARP over the issue, according to AARP CEO Bill Novelli (Finucane, AP/Philadelphia Inquirer, 11/28). AARP members have staged public protests -- in some cases burning their membership cards -- in locations across the country including Washington, D.C.; Missouri; and San Francisco, the Newark Star-Ledger reports (Spoto, Newark Star-Ledger, 11/27). In interviews, seniors in Florida "questioned the priorities of officials in Washington," the New York Times reports. Some seniors said AARP and Republicans created a bill that would not provide adequate benefits but added that Democrats did not work hard enough for more comprehensive drug coverage (Pear, New York Times, 11/30). Some seniors also said that small Medicare reforms are not enough and a larger overhaul of the U.S. health system is needed, the Washington Post reports (Roig-Franzia, Washington Post, 11/29). Isaac Ben Ezra, president of the Massachusetts Senior Action Council, said the bill "destroys one of the most successful programs in the history of this country." Edward Coyle, executive director of the Alliance for Retired Americans, said there is a "firestorm" of criticism from seniors of AARP's support for the bill. Robert Blendon, a professor of health policy and political analysis at Harvard University, said seniors "just can't understand why you have to settle for a half a bagel here, with a hole in the middle" (AP/Philadelphia Inquirer, 11/28).

Biotechnology companies, which produce treatments that can cost about $10,000 or more per year, have been experiencing "lower than expected" sales and are "banking on the Medicare bill" to increase revenue, the New York Times reports. While CMS and private insurers have balked at reimbursing the cost of more expensive biotechnology drugs, the new Medicare bill contains language that would set a minimum reimbursement level for such treatments for hospital outpatients. It also would restrict Medicare from deeming newer drugs "functionally equivalent" to older treatments, according to the Times (Pollack, New York Times, 12/1). Meanwhile, the "immediate boost" in reimbursements to managed care companies that provide Medicare+Choice plans scheduled in the Medicare bill have prompted some companies to consider moving back into areas they had previously left or restoring some benefits that had been cut, the Wall Street Journal reports. According to the Journal, benefit improvements under Medicare+Choice plans are expected to vary from county to county depending on the size of the reimbursement increase in each area. The largest reimbursement increases -- up to 25% -- are expected to go to areas in which payments have been lowest, while some areas of the country with more stable reimbursements would have smaller reimbursement growth. Some insurance officials said they would use most of the higher reimbursements to pay doctors and hospitals to keep them in networks, while other insurers said they would use the money to fund benefits under their Medicare health plans (Fuhrmans/Rundle, Wall Street Journal, 11/28).

The "most politically charged feature of the Medicare legislation" -- a plan to start pilot programs to test competition between private insurers and traditional, fee-for-service Medicare -- is "the least likely to come to fruition," the New York Times reports. Four previous attempts at introducing such competition have been blocked before they started, and some analysts have said that private insurers would have "little incentive" to reduce prices to compete because the government would reimburse care under private companies at the same rate as under traditional Medicare, according to the Times. Joseph Antos, chief health economist at the American Enterprise Institute and a former Medicare official, said, "The legislation just describes the outline of what can be," adding that the feasibility of the competition provision depends largely on the draft regulations that would be published by CMS in preparation for the plan. Charles Kahn, president of the Federation of American Hospitals, said, "I think the experimentation [with competition] can be done, but it's not a slam dunk." However, both Dr. John Rowe, chief executive of Aetna, and Karen Ignagni, president of the AAHP-HIAA, said they expect the competition plan to be successful (Freudenheim, New York Times, 11/28).