Criticisms Mount as Medicare Reform Proposal Moves to Senate Floor

The Medicare reform proposal that the Senate Finance Committee approved Thursday and the Senate is scheduled to debate today "has a long way to go" before it passes and "could change significantly" before it reaches President Bush because of concerns from members of Congress, health policy experts and advocacy groups, the Chicago Tribune reports (Neikirk, Chicago Tribune, 6/15). The Finance Committee's Medicare reform proposal would increase the participation of private plans and would give all beneficiaries an equal drug benefit beginning in 2006. Beneficiaries would pay a $275 annual deductible and a $35 monthly premium for the drug coverage, which they could obtain by remaining in traditional Medicare and enrolling in a stand-alone drug plan or by enrolling in a new coverage option called "Medicare Advantage." Either way, beneficiaries would pay half of their annual drug costs from $276 to $4,500 and all drug costs between $4,501 and approximately $5,800. After about $5,800, beneficiaries would be required to cover 10% of drug costs, with Medicare paying the remainder. Under the new coverage option, private plans would offer coverage for catastrophic health expenses and preventive care services in addition to the required Medicare benefits, giving beneficiaries an incentive to move out of traditional Medicare and into a private plan. The government itself would provide a drug benefit through a contractor in areas in which drug-only health plans decide not to participate (California Healthline, 6/13).

In the Democrats' weekly radio address on Saturday, Sen. Debbie Stabenow (D-Mich.) criticized the provisions in the Finance Committee's plan that would allow private plans to charge different premiums, offer varying levels of benefits in different parts of the country and allow private health plans to "drop service at any time," the AP/Akron Beacon Journal reports. She said, "Does this make sense? Only if you're a pharmaceutical company or an insurance company" (McDonough, AP/Akron Beacon Journal, 6/14). Other health policy experts questioned the extent of coverage the plan would offer. According to the Tribune, the Finance Committee's proposal would cover less than 25% of the $1.8 trillion over the next 10 years that seniors are expected to spend on prescription drugs. Robert Reischauer, former director of the Congressional Budget Office and president of the Urban Institute, said, "The benefit is rather skimpy and has a bizarre structure. It is an insurance structure that exists nowhere in the private sector or in nature. It is motivated by a desire to gain political support while saving money." John Rother, policy director for AARP, added, "I don't think people are going to necessarily flock to this." Rother said, however, that his group supports the Senate Finance Committee's proposal because it is a "good start toward providing a comprehensive prescription drug benefit," the Tribune reports. The CBO estimates that for 35% of beneficiaries, the costs of signing up for the benefit -- about $695 per year for the premium and deductible -- would be higher than what they would receive in benefits (Chicago Tribune, 6/15).

According to Columbia University business professor Frank Lichtenberg, only individuals whose drug costs are above about $1,100 per year would benefit by enrolling in the plan. Approximately 67% of seniors spent less than $1,100 on prescription drugs in 1999, according to the federal government's Medical Expenditure Panel Survey. Lichtenberg said, "This just seems like a creature of political expediency or compromise. It's not plausible to me that there's really an economic logic to the political policy that's being proposed." Princeton University economics professor Uwe Reinhardt said, "If you had certainty about your future drug needs, you wouldn't do the deal." If healthier beneficiaries, who do not require as many medications, opt out of the benefit, the program's costs would rise and even fewer beneficiaries would enroll, analysts predict. In addition, the New York Times reports that the proposal could lead to more spending because beneficiaries who purchase between $275 and $4,500 worth of drugs would effectively reduce their costs by half, leading to "potentially wasteful" spending (Altman, New York Times, 6/14). Gail Shearer, director of health policy analysis for Consumers Union, said that because the increase in drug costs and spending over the next four years is likely to exceed the value of the drug benefit, most Medicare beneficiaries "will find that their out-of-pocket expenses will be higher in 2007 than in 2003" under the Senate plan.

The CBO on Friday estimated that 37% of retired employees who have drug coverage under their former employer would lose that coverage if the Senate proposal becomes law, the New York Times reports. The Times reports that if the Senate plan takes effect, some employers might "see less reason to" offer coverage for outpatient medications. Further, employers might drop coverage because of a provision in the plan "that appears to penalize retirees who receive drug coverage from former employers," the Times reports. According Douglas Holtz-Eakin, director of the CBO, the proportion of retirees who could lose employer-sponsored drug coverage if the Senate plan is enacted equals 11% of the 40 million Medicare beneficiaries. Senate Finance Committee Chair Charles Grassley (R-Iowa) and Sen. Max Baucus (D-Mont.), the committee's ranking Democrat, said they were surprised by the CBO's estimate. Baucus called the figure "shocking" and said he and his colleagues would attempt to reduce it, according to the Times (Pear, New York Times, 6/14). An unidentified member of the Finance Committee's staff said the panel's proposal is a "compromise" between immediate drug benefits for Medicare beneficiaries and catastrophic coverage, adding, "The policy gives upfront benefits, but it also gives catastrophic coverage on the back end." Joseph Antos, a health care and retirement policy scholar at the American Enterprise Institute, said that some provisions in the committee's proposal would encourage beneficiaries to opt for the drug coverage immediately. According to Antos, beneficiaries enrolling in the benefit in the years after they become eligible would be required to pay a penalty (Altman, New York Times, 6/14). Reischauer said that he believes most beneficiaries would enroll in the drug benefit because it would cover about 25% of their drug costs on average, adding, "Twenty-five percent is better than nothing." He added that many beneficiaries would enroll because the proposed catastrophic coverage would give them "peace of mind" (Chicago Tribune, 6/15).

Grassley and Baucus worked together over the weekend to reduce the number of potential amendments to the bill, the Washington Times reports. According to the Times, Republicans will likely attempt to "strengthen" the bill's language to steer beneficiaries toward private health plans. Democrats are likely to seek amendments that would add more money to the drug benefit, ensure that employers do not drop retiree drug coverage and eliminate any requirement that beneficiaries must enroll in private plans to obtain drug coverage (Fagan, Washington Times, 6/16). In a news conference Friday, Grassley said, "You can't satisfy everyone within your own party and expect the other party to just come along for the ride. It's a little give and take" (Heil, CongressDaily, 6/13). He added, "I believe that we're in a good position, but I would not want to say that victory is at hand." Baucus said, "It's going to pass, and the president will sign it. But in the meantime there are very legitimate questions that we're going to be answering" (CQ Today Midday Update, 6/13).

Newspapers today report on several provisions in the Senate Finance Committee's Medicare reform proposal that were not included in previous coverage. Under the proposal:

• Hospitals on the U.S. border that pay for the cost of treating undocumented immigrants would receive $1 billion over five years (AP/New York Times, 6/14);
  
  
• A 1996 law change that prohibits many undocumented immigrants from receiving Medicaid coverage would be reversed. The provision, sponsored by Sen. Bob Graham (D-Fla.), would allow federal funding to cover all children and pregnant women who are undocumented immigrants (Dinan, Washington Times, 6/16); and
  
  
• The federal government would establish six test sites nationwide to determine if visits by trained health care workers to Alzheimer's patients' homes could improve the quality of the patients' lives and reduce the cost of their care (O'Rourke, Sacramento Bee, 6/15).
  

The following newspapers in the past few days have published analysis and feature pieces:

• Baltimore Sun: The Sun features a profile of Senate Majority Leader Bill Frist (R-Tenn.), who the paper says "has more at stake" than anyone else in the debate over Medicare reform (Hirschfeld Davis, Baltimore Sun, 6/16).
  
  
• Los Angeles Times: In a question and answer format, the Times addresses some of the "most commonly raised questions and concerns about the proposed changes" to Medicare (Kemper, Los Angeles Times, 6/15).
  
  
• New York Times: The Times examines how a changing political climate has helped make Congress "more willing than ever before to pass a major overhaul of Medicare and create prescription drug benefits" (Toner, New York Times, 6/15).
  
  
• USA Today: According to USA Today, "there are big political risks for Bush and congressional Republicans as they attempt to deliver the prescription drug benefit desired by seniors: They could bear the brunt of senior anger if the benefit proves a disappointment to those who have been clamoring for it for years" (Welch, USA Today, 6/16).
  
  
• Wall Street Journal: The Journal examines the "odd-couple alliance" between President Bush and Sen. Edward Kennedy (D-Mass.), "who each have different perspectives on the role of government in health care, yet each is "willing to wager" on the Senate Finance Committee's proposal (Rogers, Wall Street Journal, 6/16).
  
  
• Washington Post: The Post explores how even though Congress might approve Medicare reform, the bill might not "achieve the basic goals that Bush and many other Republicans have in mind" (Goldstein, Washington Post, 6/15).
  

The following broadcast programs include reports on the Medicare reform proposals:

• NPR's "The Diane Rehm Show:" Diane Rehm today talks with health policy experts about proposals to revamp Medicare (NPR, "The Diane Rehm Show," 6/16). The full segment will be available in RealPlayer after the broadcast online .
  
  
• CBS' "The Early Show:" HHS Secretary Tommy Thompson discusses how he and several senators will promote the new Medicare bill by riding to Capitol Hill on Harley Davidson motorcycles (Storm, CBS, "The Early Show," 6/16). The interview is available in RealPlayer online .
  
  
• NPR's "All Things Considered": Julie Rovner on Sunday reported on Senate and House progress on Medicare legislation (Rovner, NPR, "All Things Considered," 6/15). The segment is available in RealPlayer online.