House Republicans Finalize $350B Prescription Drug Benefit Plan
House Republicans yesterday unveiled a final version of their Medicare reform package, which in part would provide Medicare beneficiaries a prescription drug benefit through private health insurers, the New York Times reports. The bill will move through the House Ways and Means and Energy and Commerce committees today and tomorrow, with the full House expected to vote on the plan next week (Pear, New York Times, 6/18). However, Republicans, including the two committee chairs, are divided over whether the bill should include "broader changes" to Medicare or focus solely on a drug benefit for the program. Majority Leader Richard Armey (R-Tex.) has "pleaded" with Ways and Means Chair Bill Thomas (R-Calif.) to remove provisions within the bill that could be viewed as "tilting Medicare more toward the private sector," the Washington Post reports.
Under the $350 billion, 10-year House GOP plan, Medicare beneficiaries would purchase drug coverage directly from private insurance companies (Goldstein/VandeHei, Washington Post, 6/18). While such "drug-only" coverage does not currently exist, Republicans maintain that the bill offers seniors billions of dollars in subsidies to purchase coverage, which would create a market for drug-only policies. The bill outlines a "model" drug plan for insurers to offer to Medicare beneficiaries. Insurers' plans can differ in terms of premiums and benefits, but the overall value of each plan must be equivalent to "standard coverage" defined under the model plan (New York Times, 6/18). Under the model plan, Medicare beneficiaries would pay a $250 annual deductible and a $35 monthly premium. Low-income seniors would be exempt from the premiums and deductible. The government would cover 80% of seniors' annual prescription drug costs up to $1,000, 50% up to $2,000 and none of the costs between $2,000 and $4,500, after which a catastrophic benefit would begin (Carter, AP/Nando Times, 6/17). Thomas said he plans to lower to less than $4,000 the amount of out-of-pocket expenses seniors must spend before a catastrophic benefit takes effect. Under the bill, Medicare would "directly compete" with the private insurers offering drug-only coverage in a four-region pilot project (New York Times, 6/18). The drug benefit would not begin until 2005.
The House GOP Medicare plan also would increase payments to Medicare providers over 10 years, including:
- $11 billion for doctors;
- $9 billion to $10 billion for hospitals;
- $3 billion to $4 billion for Medicare+Choice plans; and
- $2 billion for nursing homes.
Further, the bill would eliminate a scheduled 15% cut in payments to home health agencies (Kirchhoff, Boston Globe, 6/18). In addition, the bill would impose a copayment of $40 to $45 for every two months of home care services. The Energy and Commerce Committee is expected to drop the home health care copayment during its markup of the bill (Fulton, CongressDaily/AM, 6/18). The bill also would provide coverage for a physical examination for each beneficiary within six months of enrollment (New York Times, 6/18).
The Wall Street Journal reports the House Republican plan, which is less expensive than competing plans, "highlights the philosophical differences" on how to structure a Medicare drug benefit (Lueck, Wall Street Journal, 6/18). Under the Senate Democrats' plan, which would cost between $400 billion and $500 billion over 10 years, Medicare beneficiaries would pay a $25 monthly premium with no deductible, a $10 copayment for generic drugs and a $40 copayment for brand- name drugs, and Medicare would cover their annual prescription drug costs that exceed $4,000. The plan also calls for reduced premiums and copayments for low-income beneficiaries (California Healthline, 6/17). House Democrats have proposed a plan, which would cost between $750 billion and $800 billion over 10 years, that would cover 80% of seniors' annual drug costs up to $2,000 and 100% above that figure. Seniors would pay a $100 annual deductible and a $25 monthly premium (California Healthline, 6/13). Regarding the House Republican plan, Sen. Edward Kennedy (D-Mass.) said, "The only thing worse than not passing a Medicare prescription drug reform would be to pass a phony program that undermines the coverage that already exists -- but that is what the House Republicans have offered." AARP policy director John Rother did not endorse any of the plans but did say he is "concerned" that the House GOP bill would not offer seniors coverage for drug costs between $2,000 and $4,500 (Wall Street Journal, 6/18). Thomas, however, defended the House plan for providing a drug benefit "at a price that taxpayers can afford" and criticized the Senate Democratic plan as a "political ploy" (CongressDaily/AM, 6/18).
In related news, the pharmaceutical industry is running television advertisements in support of Republican congressional candidates, who support the House Republican Medicare drug bill. The drug industry supports the Republican Medicare drug benefit plan because it believes the proposal is less likely to lead to medication price controls, the Journal reports. Paid for with a block grant from the Pharmaceutical Research and Manufacturers of America, the ads are sponsored by the United Seniors Association. The ads are running in more than a dozen districts of GOP lawmakers (Hamburger, Wall Street Journal, 6/18).
While both the House Republican and Senate Democrat Medicare drug benefit plans are "election-year gesture[s]," the Republican plan would "quickly turn into a fiasco," columnist Paul Krugman writes in the New York Times. Conversely, the Senate Democrats' plan "can be criticized but is definitely workable." Besides the House Republican plan's coverage gaps -- "a crippling expense for many families" -- its reliance on private insurance companies is "an even bigger flaw" because "few if any" seniors would take advantage of subsidies offered within the bill, Krugman says. He adds that insurance companies have been unsuccessful in their attempts to create business models for senior prescription drug coverage, noting, "[T]here is no reason to believe that the House Republicans have found a way to change [insurers'] minds." Because House Republicans are unlikely to accept the Senate Democrats' plan, it is possible that a Medicare drug benefit will not be enacted this year, which is "what the Republican leaders really want in any case," Krugman concludes (Krugman, New York Times, 6/18).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.