Medicare Conferees Release More Details About Prescription Drug Benefit

As negotiators working to reconcile the House and Senate Medicare bills (HR 1 and S 1) continue their discussions, more details about the proposed prescription drug benefit have emerged, the Wall Street Journal reports (Rogers/Lueck, Wall Street Journal, 10/22). Media reports last week indicated that conferees are considering a prescription drug benefit under which the federal government would pay 75% of beneficiaries' drug costs up to $2,200 per year. Beneficiaries whose drug costs exceed the $2,200 annual cap would pay out of pocket for their drug costs until their costs reach about $3,700, when catastrophic coverage would begin. The overall drug benefit structure conferees reportedly are considering would be similar to the structure proposed in the House bill. That bill calls for beneficiaries to pay an estimated average $35 monthly premium and a $250 annual deductible for prescription drug coverage. 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 at $4,900 a year -- or $3,500 out of pocket -- for most beneficiaries (California Healthline, 10/17). Under a tentative agreement among some Medicare conferees, the government would fully subsidize monthly premiums and annual deductibles for drug coverage for beneficiaries with annual incomes up to 135% of the federal poverty level. Those beneficiaries would contribute a $2 copayment for generic drugs and a $5 copay for brand-name drugs until catastrophic coverage took effect at $5,000 in total prescription costs; the federal government would assume all drug costs after $5,000. Beneficiaries with annual incomes between 136% and 150% of the federal poverty level would receive less-generous subsidies, although their costs would be lower than those of beneficiaries who have annual incomes higher than 151% of the poverty level, according to the AP/Las Vegas Sun. The AP/Las Vegas Sun does not include further details on subsidies for beneficiaries with incomes between 136% and 150% of the poverty level (Espo, AP/Las Vegas Sun, 10/21). Negotiators also are considering a provision that would end the additional drug coverage subsidies for beneficiaries with incomes above 150% of the federal poverty level, the Journal reports. Such a proposal is more similar to provisions in the House bill than those in the Senate bill, which would end subsidies for beneficiaries with incomes beyond 160% of the poverty level. The Journal reports that the tentative agreement on subsidies "reflect[s] the pressure on negotiators to craft a compromise that meets the $400 billion, 10-year limit" called for in the fiscal year 2004 budget (Wall Street Journal, 10/22).

Rep. Bill Thomas (R-Calif.), chair of the conference committee, on Tuesday presented a small group of negotiators with a proposed framework for an agreement. The framework reportedly "tilt[s] toward the House bill" and includes a provision that would require fee-for-service Medicare to compete directly with private health plans beginning in 2010, a provision calling for Congress to intervene in Medicare spending increases, a provision that would allow health savings accounts and a provision that would reduce by "several billion dollars" planned federal payments to hospitals, the AP/Sun reports. The framework also reportedly includes a provision that would relate Medicare premiums under Part B, which covers outpatient care, to beneficiaries' incomes. According to the AP/Sun, Sen. Charles Grassley (R-Iowa) told Thomas that neither he nor his staff had been made aware of the framework. Grassley also said that he objected to some of the framework's provisions, the AP/Sun reports. Also on Tuesday, Sens. Max Baucus (D-Mont.) and John Breaux (D-La.) "tried to bring fellow Democrats up to date on the progress of the talks," the AP/Sun reports (AP/Las Vegas Sun, 10/21). Some Democratic members of the conference committee have not been invited to participate in the closed-door sessions at Thomas' office, according to CongressDaily/AM. Five Democrats on the conference committee sent a letter to Thomas on Tuesday asking to be included on talks (Rovner, CongressDaily/AM, 10/22).

Baucus said the "biggest bugaboo" in negotiations is the House-passed competition provision. He said that many senators worry that such a change would "undermine" traditional Medicare (Wall Street Journal, 10/22). One participant in the Democrats' meeting said that opposition to the competition proposal is "overwhelming, to the point that it might endanger passage of the final bill in the Senate if it were included in the final compromise." The competition provision calls for premiums under traditional Medicare to be determined by competition with private plans, rather than by a fixed formula. According to some Democrats, such a proposal would cause fee-for-service Medicare premiums to rise and would prompt healthier beneficiaries to join private plans, leaving beneficiaries who are sicker in traditional Medicare (AP/Las Vegas Sun, 10/21). An analysis by the HHS Medicare actuary found that the proposal could result in beneficiaries in different parts of the United States paying "sharply different premiums," CongressDaily reports. Beneficiaries now pay the same premiums. According to the actuary, beneficiaries in North Carolina and Oregon would pay as little as $58 per month in 2013 under traditional, fee-for-service Medicare, while beneficiaries in states like New York and Florida could pay as much as $175 per month, CongressDaily reports. According to the actuary, premiums also could vary within states. The projected national average premium under traditional Medicare in 2013 is $107 per month (Rovner, CongressDaily, 10/21).

Sen. Edward Kennedy (D-Mass.) said that many senators also are "nervous" about proposals that would have higher-income beneficiaries pay larger costs, the Journal reports (Wall Street Journal, 10/22). Senate Minority Leader Tom Daschle (D-S.D.) has threatened to filibuster any final Medicare bill if it includes a provision that would require higher-income beneficiaries to pay more for Medicare Part B premiums, The Hill reports. Many House Democrats also oppose such a provision, an unnamed House Democratic aide said. However, some Democrats, including Sen. Dianne Feinstein (D-Calif.), support the measure, and Daschle "will need to point to other provisions in the bill to support a filibuster," The Hill reports (Cusack, The Hill, 10/22). Some Democrats also are concerned about a proposal to contain Medicare costs (AP/Las Vegas Sun, 10/21). Sen. John Breaux (D-La.) said earlier this week that negotiators are developing a plan that would require Congress to intervene if general tax revenues accounted for more than a certain percentage, perhaps 40%, of Medicare spending (California Healthline, 10/20). On Monday, conferees also discussed provider payments, allowing U.S. residents to purchase prescription drugs from Canada and other industrialized nations and proposed copays for home health care services (CongressDaily/AM, 10/22). The Journal reports that lawmakers are working to finalize a framework of a final compromise so a bill can be presented to Congress next month (Wall Street Journal, 10/22). House Energy and Commerce Chair Billy Tauzin (R-La.) said, "We're still looking at several weeks of work" (CongressDaily/AM, 10/22).

In related news, the Congressional Budget Office has "slightly altered" its projection of how much money could be saved by enacting legislation that would enable U.S. residents to purchase prescription drugs from other countries, CongressDaily reports (CongressDaily, 10/21). In July, the CBO released an analysis saying that such provisions in the House and Senate Medicare bills would not likely reduce medication costs in the United States. The analysis attributed its prediction to the fact that brand-name pharmaceutical companies "are unlikely to increase their sales in Canada enough to permit a significant share of their United States market to be imported from Canada." In addition, "Canada's market for prescription drugs is much smaller than that in the United States. If manufacturers were unable to limit the supply of drugs entering the U.S. market from Canada, the likely result would be that brand-name drug prices in Canada would rise much more than the price in the U.S. would decline," the CBO analysis said (California Healthline, 7/24). Moreover, the FDA is not likely to certify the safety of any drug importation program, as it is required to do under the both the House and Senate provisions. In the CBO's analysis of a House-approved bill (HR 2427), which is separate from the provision contained in the Medicare bill, the agency says that the measure would decrease drug expenditures by $40.4 billion over 10 years. That bill does not require FDA safety certification, and it includes language that would authorize imports from some two dozen industrialized nations, in addition to Canada. The CBO said, however, that the new provision will not save "much money" overall, because the $40 billion is less than 1% of the estimated $4.36 trillion that the United States will spend on prescription drugs between 2004 and 2013 (CongressDaily, 10/21).