Quotes of the Day
"Mark my words," Senator Max Baucus, one of the Democratic drafters of the legislation, said last week of the historic Medicare-reform bill, "seniors will see that the benefits of this bill are extraordinary." Perhaps, but here are six issues that could generate debate when the elderly begin living under the plan.
1 How generous is the drug plan?
It isn't as generous as what Senators and members of Congress give themselves under their federal program and what most employers offer their workers. That is largely because the bill drafters had only $400 billion to work with over 10 years under the federal budget cap that Congress set back in February. Here is how it will work for senior citizens who sign up: beginning in 2006, they will be required to pay a $35 monthly premium and a $250 yearly deductible. The program will then cover 75% of drug costs up to a maximum of $2,250. At that point, because of the budget restriction, a gap in coverage (known in Washington as a "doughnut hole") occurs. The next $2,850 in prescription-drug bills must be paid out of pocket. But once out-of-pocket expenses reach $3,600, the catastrophic provision kicks in, and Medicare pays 95% of any remaining costs (see chart above).
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And here's another problem: the $35 monthly premium figure is just a guess at this point. Since private insurers will administer the drug benefit, some senior citizens might have to pay a higher premium, depending on what part of the country they live in or the insurer they use. In addition, there is no guarantee that the particular prescription drug a person needs will be covered. That will be up to the insurance firms, and it could vary from company to company.
2 Does the bill really modernize Medicare?
Not if you mean reinventing the way health care is delivered to older people. But it does help bring it into the 21st century by emphasizing preventive care and encouraging the use of the latest technology. Medicare will pay for the initial physicals when seniors join the program and will cover heart-disease and diabetes screenings to catch problems before they become expensive. It will also provide incentives for reducing medical errors, notably by supporting electronic-prescription programs to cut down on mistakes resulting from bad handwriting and by encouraging doctors to share patient information via computer programs.
3 Will private competition for seniors be a good thing?
In theory, yes. Pressure must be applied to the overall Medicare program to bring down its costs. "Everybody 64 and younger is in some kind of HMO or managed-care network," says Gail Wilensky, who ran Medicare and Medicaid in the first Bush Administration. There's no reason to exempt seniors. The bill will set up a test program to have Medicare compete with private insurers in six metropolitan areas beginning in 2010. Republicans say seniors can opt to stay with Medicare, but Democrats complain that private firms will have the unfair advantage of a $12 billion subsidy and will be able to enroll healthier people, leaving Medicare stuck with the sicker and more expensive ones. They say that could drive up premium costs for people who remain in Medicare.
4 Will drug prices go down?
Probably not. Republicans say the bill gives private insurers financial incentives to negotiate lower prices with drug companies. The bill also has a number of regulatory provisions that help cheaper generic drugs enter the market more quickly. But two of the most powerful weapons that could lower drug costs, which the pharmaceutical industry fought, aren't in the bill. The measure prohibits Medicare from using its immense bargaining power to reduce prices. And it maintains the ban on importing cheaper drugs from abroad. Drugs could be allowed in from Canada, but only if the Department of Health and Human Services certifies their safety, which so far it has refused to do. As a result, critics say, you can expect drug prices to go up. According to the Consumers Union, a senior who spent $2,318 a year for drugs before Medicare reform could end up paying $2,911 under the new plan by 2007.
5 Will seniors get new discounts on drugs?
Perhaps. Beginning in 2004, senior citizens will be able to buy a Medicare-subsidized prescription-drug discount card for about $30 a year. Although the Department of Health and Human Services estimates that the card will save the elderly perhaps as much as 25% when they buy prescription drugs, the General Accounting Office maintains that the savings will probably be closer to 10%. Furthermore, outside analysts believe that seniors will be able to save just as much by shopping around on their own rather than locking themselves in to a drug card.
6 Does the program benefit the rich or the poor?
It depends on whom you believe. Democrats like Senator Edward Kennedy say about 6 million of the poorest and sickest elderly receive better drug benefits under Medicaid, the state-administered federal program for the poor. Under the new Medicare plan, an elderly couple earning less than $16,362 will copay only $1 to $3 per prescription, and Kennedy has argued that even such a modest amount can be a burden. Ten states currently exempt their poorest seniors from paying for drugs at all. According to a report released by Kennedy's staff, these 6 million beneficiaries "will be worse off. Their out-of-pocket expenses will be higher, and their access to needed drugs will be reduced."
Meanwhile, the bill establishes a program to allow workers 64 and younger who buy insurance with high deductibles to shelter income from taxes by putting money in special savings accounts. Earnings can be withdrawn tax free as long as the money is used for health care. Republicans believe the accounts will help workers buy plans that better suit their individual needs and accumulate tax-free money to pay for health care in retirement. Democrats argue that the program is a boon to the wealthy who can afford to put money aside.
- Douglas Waller