House, Senate Pass Medicare Reform Legislation

Both chambers of Congress early this morning approved Medicare bills that call for a prescription drug benefit and a larger role for private health plans in the program, the New York Times reports. If enacted, the legislation would represent the largest expansion of the program in 38 years (Toner/Pear, New York Times, 6/27). Both bills also aim to address the rising cost of prescription drugs by permitting the reimportation of U.S-made drugs from Canada and by easing the market entry of generic drugs, the Washington Post reports. The Post reports that the Senate bill was crafted by members of both political parties, while the House measure was devised mostly by Republicans (Goldstein/Dewar, Washington Post, 6/27). In the House, lawmakers voted 216-215 to approve their bill (HR 1) in a "dramatic" roll call vote that lasted nearly 40 minutes, according to the New York Times. The bill appeared close to failure until several Republican representatives changed their votes in the final few minutes. In an "overwhelmingly bipartisan" 76-21 vote, the Senate approved its bill (S 1) minutes before the House did (New York Times, 6/27).

Senate Majority Leader Bill Frist (R-Tenn.) said, "Tonight, we are one step closer to providing real health security for seniors all across the nation," adding that the Senate bill "combines the best of the public and private sectors and positions Medicare to evolve with the medical treatment of the future." House Ways and Means Committee Chair Bill Thomas (R-Calif.) said, "This day, in my opinion, has been too long in coming" (Goldstein/Dewar, Washington Post, 6/27). Sen. John Breaux (D-La.) said, "This is an historic effort to combine the best of what government can do with the best of what the private sector can do." Senate Finance Committee Chair Charles Grassley (R-Iowa) said, "After five years of talk about prescription drugs, this Congress is within reach of helping senior citizens with life-enhancing medicines and to strengthen Medicare for both consumers and for taxpayers" (Hook, Los Angeles Times, 6/27). President Bush said, "Seniors have waited too long for more choices and better benefits" (Meckler, AP/Long Island Newsday, 6/27). However, Senate Minority Leader Tom Daschle (D-S.D.) said, "It's not the kind of bill I would write. We can simply no longer allow the perfect to be the enemy of the good" (New York Times, 6/27). Rep. Rosa DeLauro (D-Conn.) added, "I did not come to Congress to privatize Medicare" (Los Angeles Times, 6/27). Rep. John Dingell (D-Mich.) said, "[The bill] destroys Medicare as we know it" (AP/Long Island Newsday, 6/27).

The approved House plan would expand the participation of private health plans and give all beneficiaries a drug benefit. Beneficiaries beginning in 2006 would have access to a stand-alone drug benefit for which they would pay an estimated average $35 monthly premium and a $250 annual deductible. The plan would cover 80% of beneficiaries' drug costs from $251 to $2,000 per year, after which there would be a gap in coverage before catastrophic coverage would take effect. The amount that a beneficiary would pay before qualifying for catastrophic coverage would be determined on a sliding scale based on income (California Healthline, 6/26). For most beneficiaries, coverage would resume once they have purchased $4,900 worth of drugs in a year, which would result in beneficiaries spending about $3,500 out of pocket (Goldstein/Dewar, Washington Post, 6/27). The Los Angeles Times reports catastrophic coverage would begin after beneficiaries spent $4,000 on drugs per year (Los Angeles Times, 6/27). Individual beneficiaries with annual incomes of $60,000 or more would have to pay more before catastrophic coverage began. The bill would raise the deductible beneficiaries pay for physician services and would include new preventive care coverage options, such as a free physical for each beneficiary. The bill also would establish direct price competition between traditional Medicare and private health plans beginning in 2010 (California Healthline, 6/26). The House bill would also provide interim assistance in the form of a drug discount card, which would be offered to Medicare beneficiaries beginning in 2004. The card could provide discounts of between 15% and 25%(Los Angeles Times, 6/27).

Shortly before the House voted on the main Medicare bill, lawmakers defeated on a 255-175 vote an alternative plan offered by some Democrats that would have called for the government to have a larger role in delivering the drug benefit and would have offered beneficiaries twice as much in subsidies for drug coverage (Goldstein/Dewar, Washington Post, 6/27). To obtain more support from Republican members, House leaders combined the reform bill with a measure that would allow all Americans to set up tax-exempt medical savings accounts (New York Times, 6/27). Any individual whose annual health insurance deductibles are at least $1,000 or family whose deductibles are more than $2,000 per year would be eligible to establish the accounts. Uninsured or self-insured people would be permitted to establish tax-exempt "health savings security accounts," to which individuals could contribute $2,000 annually, and families could contribute $4,000 per year (Rovner, CongressDaily, 6/26). The House voted 237-191 to approve the measure, which is expected to reduce tax income for the federal government by $174 billion over the next 10 years. The Senate bill does not include such a provision (New York Times, 6/27).

The Senate bill calls for increased participation by private plans in Medicare and would give all beneficiaries an equal drug benefit beginning in 2006. Beneficiaries would pay a $275 annual deductible and an estimated $35 average monthly premium for the drug coverage, which they could obtain by remaining in traditional Medicare and enrolling in a stand-alone private drug plan or by choosing 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 their 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 only in areas in which drug-only health plans decide not to participate -- a provision not included in the House bill (California Healthline, 6/26). Like the House measure, the Senate bill would provide a drug discount card beginning in 2004 to bridge the gap before the drug benefit begins in 2006. The Senate also approved on a 71-26 vote a plan on how to spend an unallocated $12 billion of its $400 billion, 10-year plan. Senators agreed to allocate half the funds to a five-year demonstration project that would implement a new competitive bidding payment system for private plans in certain regions. The other $6 billion in funds would go to a demonstration project that would pay for preventive and chronic care services under traditional fee-for-service Medicare (Goldstein/Dewar, Washington Post, 6/27).

The Senate yesterday also approved, on a 97-1 vote, an amendment proposed by Senate Majority Whip Mitch McConnell (R-Ky.) that would provide drug coverage subsidies to cancer patients whose annual incomes are less than 160% of the federal poverty level. In addition, the Senate voted 68-30 to approve a modified amendment proposed by Sen. Jeff Bingaman (D-N.M.) that would raise the "assets test" for low-income beneficiaries to qualify for federal premium subsidies from $4,000 to $10,000 (Rovner, CongressDaily, 6/26). The Senate approved and later dropped an amendment by Sen. Dianne Feinstein (D-Calif.) that would have raised premiums for Medicare Part B, which covers outpatient care, for beneficiaries with annual incomes higher than $100,000 (Los Angeles Times, 6/27).

The House and Senate bills "differ in important ways," suggesting that conference committee negotiations expected to begin after the July 4 recess could be difficult, the New York Times reports (New York Times, 6/27). For instance, the House bill goes further in attempting to establish private-sector competition into Medicare (Los Angeles Times, 6/27). Daschle warned that the bipartisan agreement in the Senate could "fall apart" if the Senate bill is significantly altered during conference committee, according to AP/Newsday. Sen. Max Baucus (D-Mont.), who helped frame the Senate proposal, said, "This is a fragile agreement. If the balance tips one way or another, we could lose it" (AP/Long Island Newsday, 6/27). Meanwhile, Thomas -- who supports increased private-sector participation in Medicare -- "positioned himself" to chair the conference committee, instead of Grassley, Long Island Newsday reports (Hoy/Povich, Long Island Newsday, 6/27).

For many Medicare beneficiaries, Congress' push toward Medicare reform and a prescription drug benefit "promises some relief" from high drug costs but also "poses a raft of questions," the Washington Post reports (Brubaker, Washington Post, 6/27). The Los Angeles Times reports that there could be a "backlash" from seniors if the bills fall short of their expectations and call for more out-of-pocket costs than beneficiaries are willing to pay (Los Angeles Times, 6/27). AARP Policy Director John Rother said, "There are a lot of ifs. ... Which bill you're better off with depends on your level of drug expenses in any particular year." Rother added that many beneficiaries "feel the benefit under the new [proposals] is not what they had hoped it would be. On the other hand, the greater disappointment would be to fail to get anything done" (Brubaker, Washington Post, 6/27). USA Today reports that many seniors are "lukewarm" about the two proposals passed by Congress. The article features excerpts from interviews with seniors nationwide, many of whom the paper says are "confused and suspicious" of the House and Senate proposals (Stone, USA Today, 6/27).

The following broadcast programs reported on the Medicare prescription drug legislation:

• ABCNews' "World News Tonight": The segment includes comments from Kaiser Family Foundation President and CEO Drew Altman, Bush and House Majority Leader Tom DeLay (R-Texas) (Douglass, "World News Tonight," ABCNews, 6/26). The full segment is available online in RealPlayer.
  
  
• CNN's "Inside Politics": The segment includes comments from Donna Brazile, former campaign manager for former Vice President Al Gore; Rep. Billy Tauzin (R-La.); and Rep. Steve King (R-Iowa) (Karl, "Inside Politics," CNN, 6/26). The full transcript of the program is available online.
  
  
• NBC's "Nightly News": The program reports on how the Medicare legislation could affect payments to oncologists who administer medications to beneficiaries in their offices (Bazell, "Nightly News," NBC, 6/26). The full segment is available online in Windows Media.
  
  
• NPR's "All Things Considered": The segment reports on the history of efforts to add a prescription drug benefit to the Medicare program. The segment includes comments from Rep. Michael Bilirakis (D-Fla.) in 1999, Breaux in 1999, then-Texas Gov. George Bush in 2000, former President Clinton in 1999, former House Speaker Newt Gingrich (R-Ga.) in 1995 and Gore in 2000 (Silberner, "All Things Considered," NPR, 6/26). The full segment is available online in RealPlayer.
  
  
• NPR's "Morning Edition": The segment includes comments from Frist, Daschle, DeLay, Sen. Judd Gregg (R-N.H.) and House Minority Leader Nancy Pelosi (D-Calif.) (Welna, "Morning Edition," NPR, 6/27). The full segment is available online in RealPlayer.