... And the House bill vs. the Senate's
Now that both the House and the Senate have passed prescription-drug legislation for the 40 million retired and disabled Medicare recipients, the two bills will go to a conference committee where their differences will be resolved. As with most legislative matters in the Congress, the devil is in the details. Prescription-drug legislation is certainly no exception.
The cost of the prescription-drug benefit in both bills is $400 billion over the next 10 years. Drug coverage provided through insurance policies will not begin until 2006. For 2004 and 2005, all seniors will be given a discount drug card, which congressional leaders estimate will generate savings of 15 percent or more. In the House version, cards for seniors with the lowest incomes will reflect credits for $800, while those near poverty will receive cards bearing credits for $500. Discount cards in the Senate bill will include credits of $600 for low-income seniors. According to both versions, the drug benefit for Medicare patients beginning in 2006 will be voluntary.
Both bills envision two kinds of private insurance to administer the benefit. In the first case, Medicare patients could purchase drug coverage as a separate policy and remain in Medicare's traditional fee-for-service program, which serves about 90 percent of current beneficiaries. The legislation anticipates that drugs-only insurance policies for seniors would be offered by private pharmaceutical benefit managers, or PBMs, which currently administer drug-benefit programs for employer-provided health-insurance programs.
The alternative private-sector approach would come from preferred-provider organizations (PPOs). In order to encourage seniors to join their networks and leave Medicare's traditional fee-for-service program, PPOs would offer drug-insurance coverage, which, like that offered by PBMs, would be subsidized by the federal government. In either private-insurance option — PBMs or PPOs — the drug coverage would be the same.
In the Senate bill, in those regions where no private coverage is offered, the federal government would provide drug insurance; the House bill does not include this option. In an important reform component, beginning in 2010, the House bill would encourage greater competition between Medicare's traditional government-run fee-for-service program and private plans.
Both bills include provisions to hasten less expensive generic drugs to the market and to facilitate the importation of U.S.-made drugs from Canada, where government price controls lower the cost of drugs relative to the U.S. market.
In terms of out-of-pocket expenses, both plans would require a monthly premium of about $35 per beneficiary. That would total $420 per year. Both bills would eliminate or heavily subsidize the premium for low-income seniors.
An insignificant difference relates to deductibles: $275 per year (Senate) and $250 (House). The Senate plan would then pay for 50 percent of drug costs between $276 and $4,500; the beneficiary would have to pay for all of the next $1,300, after which the catastrophic portion of the policy would cover 90 percent of all additional drug costs.
After its $250 deductible, the House insurance plan would pay for 80 percent of drug costs between $251 and $2,000. The Medicare patient would then pay for all drug costs between $2,000 and $4,900, after which catastrophic insurance would cover 100 percent of additional drug expenses. The House bill includes a modest means-tested provision: It would require, for example, those earning $200,000 per year to pay $12,000 in drug costs before their catastrophic benefit begins.
Obviously, each plan would mandate different levels of out-of-pocket costs, depending on the value of prescriptions consumed. The examples below reflect the total costs to the beneficiary, including the $420 annual premium and the deductibles:
•Purchasing $500 worth of prescriptions would cost the Medicare patient $807 (Senate plan) and $720 (House plan). Buying $1,000 in prescriptions would require $1,057 in out-of-pocket outlays (Senate) and $820 (House). For $1,500 in prescriptions, the costs to the beneficiary would be $1,307 (Senate) and $920 (House).
•Medicare recipients who use the 2002 average of $2,300 worth of Medicare prescriptions would pay $1,707 (Senate) and $1,320 (House).
c The maximum out-of-pocket expenses in the House plan, including the annual $420 premium, would be $3,920, which would be reached with the consumption of $4,900 worth of prescriptions. Thus, someone who annually consumes prescriptions worth $5,000, $7,500, $10,000, $12,000, $15,000 or higher would still pay a maximum of $3,920 under the House plan. Comparable out-of-pocket expenses in the Senate plan would be $3,307 (for $5,000 worth of prescriptions); $4,277 (for $7,500 worth); $4,527 ($10,000 worth); $4,727 (for $12,000 worth); and $5,027 (for $15,000 worth).
The figures above make clear that both plans are designed to assure that the annual insurance premium provides extensive coverage against catastrophic expenses. |
