ElderWeb

The Centers for Medicare and Medicaid (CMS) announced the expected premiums for the 2006 Medicare Prescription Drug coverage plans. The average costs (by region) are as follows:

PDP Region	States	Number of Stand - Alone Prescription Drug Plans Based on Monthly Beneficiary Premiums				Number of Organizations Offering Stand-Alone Drug Plans	Weighted Average Monthly Beneficiary Premium for Prescription Drug Plans
		< $20.00	$20.00 - $24.99	$25.00 - $29.99	$30.00 - $34.99
1	NH, ME	1	3	6	12	18	35.69
2	CT, MA, RI, VT	4	6	5	11	18	30.53
3	NY	6	7	6	16	21	32.45
4	NJ	4	4	6	14	19	32.09
5	DE, DC, MD	3	5	4	15	21	33.63
6	PA, WV	2	5	6	16	23	32.78
7	VA	2	3	2	14	18	34.19
8	NC	2	2	1	11	16	36.86
9	SC	1	4	6	16	20	34.89
10	GA	1	7	2	16	18	33.17
11	FL	4	3	3	14	20	33.01
12	AL, TN	1	3	6	14	18	33.29
13	MI	1	3	6	16	18	33.22
14	OH	3	5	6	14	20	32.89
15	IN, KY	1	6	3	12	18	35.85
16	WI	4	5	6	15	18	31.49
17	IL	1	6	8	14	17	31.85
18	MO	2	4	6	11	17	33.30
19	AR	2	1	4	14	16	35.45
20	MS	2	1	4	11	16	36.39
21	LA	1	1	6	13	17	36.85
22	TX	2	4	6	17	21	32.63
23	OK	2	2	2	12	17	35.75
24	KS	2	3	6	13	16	33.12
25	IA, MN, MT, ND, NE, SD, WY	4	5	6	13	17	32.86
26	NM	6	3	9	15	18	29.02
27	CO	3	3	9	14	18	28.52
28	AZ	4	4	10	14	19	28.08
29	NV	3	6	6	14	19	30.32
30	OR, WA	5	5	7	13	21	30.05
31	ID, UT	3	2	5	15	19	33.65
32	CA	6	6	10	18	19	25.41
33	HI	3	2	7	13	12	27.44
34	AK	0	4	4	6	11	34.66

I've developed a tool to help you see how you would be affected by the new Medicare prescription drug benefits that start in 2006. This tool was developed using Medicare Rx Plan Partner Outreach materials prepared by the Centers for Medicare and Medicaid (CMS). It was designed to mirror the call center process by asking questions and presenting selected information based on the response to those questions. After each question you will either see some information related to the answer you chose, or more questions designed to futher refine the information that is relevant. At the end of the process you will see a link to a printable page that summarizes everything related to the options you chose. View the tool at http://www.elderweb.com/medicare/?PageID=3130

Answer a few questions below to create a personalized information page about the new Medicare Drug Insurance Plan which will become available starting in January of 2006.

The Centers for Medicare and Medicaid Services (CMS) have issued guidance that low-income seniors who apply for the new Medicare Prescription Drug program may get help with drug costs, but could have food stamp and other federal benefits reduced. It appears that recipients will not lose as much in benefits as they gain in reduced medical expenses, but they will not see the net out-of-pocket gain they may have been expecting, and may have a rude shock ahead when they find out their food stamps or other benefits are reduced.

A fact sheet on the interplay of the drug benefit with other federal means-tested programs states that every $1 increase in income from reduced drug costs could reduce food stamp benefits by about $.30, and also reduce HUD housing assistance by another $.30. The increased income could also impact eligibility for Medicaid and Supplemental Security Income (SSI).

The exact impact will vary depending on a variety of factors, so I have reproduced part of a CMS fact sheet on the effect of the drug benefit on food stamps that further explains the effect on food stamps:

Question: Will I lose my food stamp benefits if I apply and qualify for extra help paying for the new Medicare prescription drug coverage?

Answer: With the extra help for Medicare prescription drug coverage, you may see your food stamp benefits go down as you spend less on drugs. Using the extra help means you will have more cash to spend on food and other things that you used to spend on prescription drugs. If you get the $10 minimum food stamp benefit, your benefits may end. However, the extra cash you will have available to spend on food and other things makes up for not getting as much in food stamps.

Question: I'™m receiving food stamps now and have claimed a deduction for my medical costs. Do I have to report a change in my medical expenses if I get extra help?

Answer: No, you don'™t have to report changes in your medical expenses until you file to renew your food stamps. Of course, if your medical expenses go up for any reason, you may report the increased cost at any time.

Question: How might my food stamp benefits be affected if I qualify for extra help?

Answer: Mrs. Smith gets Medicare'™s extra help: her monthly prescription drug bill is $200. Mrs. Smith has Medicare, lives alone, and receives $798 per month in Social Security benefits. She doesn'™t receive Medicaid. She receives both food stamps and HUD housing assistance. She regularly pays $250 monthly for medical expenses, $200 of which is for 3 prescription drugs. Her HUD subsidized rent is $162 a month.

Under the Medicare prescription drug plan, Mrs. Smith will pay no monthly drug plan premium, no deductible, and her co-payments for her 3 prescription drugs total $9. Her monthly medical spending is now $59 ($50 for other medical bills + $9 for drug co-pays) for a monthly savings of $191. Because Mrs. Smith'™s out-of-pocket medical costs have gone down, her food stamps will be $5 less than they were when she paid for all of the cost of her prescriptions out of pocket and her HUD subsidized rent will increase by $57 to $219 a month. Even though her food stamps decreased and her HUD subsidized rent increased, she has $129 more cash in her pocket each month.

Example: Mr. Jones gets extra help, his monthly drug bill is $51. Mr. Jones is just like Mrs. Smith except his monthly drug bill is lower and he does not get HUD housing assistance since he owns his own home. He has Medicare, lives alone, and receives $798 per month in Social Security benefits. He doesn'™t receive Medicaid. He regularly pays $147 monthly for medical expenses, $51 of which is for 3 prescription drugs.

Under the Medicare prescription drug plan, Mr. Jones will pay no monthly drug plan premium, no deductible, and his co-payments for his 3 rescription drugs are $3 each. His monthly medical spending is now $105 $147-$51+$9=$105) for a monthly savings of $42. Because Mr. Jones' out-of-pocket medical costs have gone down, his food stamps will be $17 less than they were when he paid for all of his prescriptions out of pocket. But he still has $25 more cash in his pocket ($42 medical savings less $17 decrease in food stamps).

PRESS RELEASE

Aging Network Launches National Education Effort on the Medicare Rx Transitional Assistance Credits as Deadline to Sign-up Approaches

The outreach campaign will target low-Income seniors who are eligible for $1,200 in prescription drug assistance credits through 2005; deadline to sign-up for first $600 is December 31, 2004

Washington, D.C. '“ Today, the National Association of Area Agencies on Aging (n4a) and the National Association of Sate Units on Aging (NASUA) launched a series of outreach and education events as part of the Aging Network Medicare Rx Outreach Campaign involving State and Area Agencies on Aging across the nation. During November and December, these agencies will be hosting events where Medicare beneficiaries can learn more about the Medicare-approved discount drug cards available and receive on-site enrollment assistance.

Any Medicare beneficiary who is not enrolled in Medicaid is eligible to sign-up for one of the discount drug cards. In addition, low-income seniors are eligible for $1,200 in transitional credits to assist them with their prescription drug costs over the next 14-months. The campaign will target communities with a high population of low-income seniors. Medicare has estimated that approximately 7.4 million beneficiaries are eligible for the credit, however to date less than 2 million have enrolled so far.

State and Area Agencies on Aging will also participate in a coordinated outreach effort through their Aging Information & Referral/Assistance (I&R/A) Programs aimed at reaching low-income Medicare beneficiaries with a single concise message about the Medicare transitional assistance credit available in 2004 and 2005. The I&R/A outreach campaign is an intensive effort from November 15 through December 15, 2004, intended to demonstrate the capacity of the aging I&R/A system to reach out to consumers and facilitate their access to needed programs.

During the Aging Network Medicare Rx Outreach Campaign, ten target site events will take place in:

* Atlanta, GA Atlanta Regional Commission and Georgia Division of Aging Services (12/4);

* Baltimore, MD Baltimore City CARES and Maryland Department of Aging (11/24);

* Buffalo, NY Erie County Department of Senior Services and New York State Office for the Aging (12/2-3);

* Columbus, OH Central Ohio AAA and Ohio Department on Aging (11/10);

* Detroit, MI Detroit AAA and Michigan Office of Services to the Aging (11/29);

* Jackson, MS Central MS Planning and Development District/AAA and Mississippi Council on Aging, Division of Aging and Adult Services (11/17-18);

* Phoenix, AZ AAA, Region One and Arizona Aging & Adult Administration (11/18);

* Raleigh, NC Triangle J AAA and North Carolina Division of Aging Department of Health and Human Services (10/26);

* Rio Grande Valley, TX Lower Rio Grande Valley AAA and Texas Dept. of Aging & Disability Services (11/16-18);

* Seattle, WA Seattle County Aging & Disability Services and Washington Aging & Disability Services, Department of Social and Health Services (11/13).

In addition to these target sites, many other State and Area Agencies on Aging around the country will also be holding education events during November and December in an effort to ensure that every low-income senior is aware of their options and how to go about signing-up before the December 31 deadline.

'œDuring the past five months state and local aging agencies have been working diligently to provide older adults and their caregivers with information and assistance on the Medicare discount drug card program,' said Dan Quirk, Executive Director of NASUA.

'œWith the December 31 deadline for the 2004 credit fast approaching, our goal through this campaign is to make sure every low-income senior is aware of the opportunity for $600 this year and another $600 in 2005 and that they know there is local help available to assist them in taking the steps to sign-up before the end of December,' added n4a CEO Sandy Markwood.

Today, n4a and NASUA released, 'œ5 Things to Know about the New Medicare Rx Discount Card Program' to help seniors and their families. The five tips are:

1. Any senior who has Medicare and is not enrolled in Medicaid is eligible for a Medicare-approved prescription drug discount card.

2. Seniors with an annual income of no more than $12,569 for a single person, and no more than $16,862 for a married couple qualify for a $600 credit in 2004 and another $600 credit in 2005. Those with slightly higher incomes may qualify for other prescription drug assistance programs.

3. The Medicare discount card program gives seniors many different cards to choose from, however, beneficiaries can only enroll in one Medicare-approved discount card at a time. Seniors should choose the card that offers the best discounts on the medicines they take.

4. For more information, call 1-800 MEDICARE (1-800-633-4227), visit the Medicare web site at www.medicare.gov, or contact your State Health Insurance and Assistance Program (SHIP) for additional counseling and one-on-one assistance. A listing of SHIP programs with toll-free numbers is available at www.medicare.gov/contacts/static/allStateContacts.asp.

5. The maximum fee for the discount card is $30 per year.

The Aging Network has a long-standing track record of successfully providing assistance, benefits counseling and easy-to-understand information to millions of older adults, especially those with low-incomes. With the increase in Medicare beneficiary options under the Medicare Prescription Drug Improvement and Modernization Act, the network has stepped up its efforts to meet the tremendous need for beneficiary assistance and education.

Since the Medicare discount card program began in June 2004, state and local aging agencies across the country have worked along with State Health Insurance and Assistance Programs to provide older adults in their communities with quality information and answers on the changes to Medicare.

The Aging Network Medicare Rx Outreach Campaign is part of a larger effort over the next twelve months that will serve to educate beneficiaries about the new Medicare Part D prescription drug benefit beginning in January 2006 and the new preventive health benefits set to take effect in January 2005. The campaign is being spearheaded by the National Association of Area Agencies on Aging (n4a) and the National Association of State Units on Aging (NASUA) with support from the U.S. Administration on Aging and the Centers for Medicare and Medicaid Services. For more information on the n4a-NASUA Medicare Rx outreach project, visit www.medicarerxoutreach.org.

###

FACT SHEET

Seniors Can Get Immediate Financial Help with Prescription Drug Costs!

* Low-income seniors can really benefit from the Medicare Rx drug discount card when they qualify for the $600 transitional assistance credit.

* To get the $600 credit, seniors can have an annual income of no more than $12,569 for a single person and no more than $16,862 for a married couple. Those with slightly higher incomes may qualify for other prescription drug assistance programs.

* The Clock is ticking to get it: Seniors must sign up by December 31. If they do, seniors will get $1,200 to pay for Medicine between now and the end of 2005.

* That is why November has been designated Aging Network Medicare Rx Outreach Month.

* Seniors are confused by the various discount card programs that are available. Some don'™t have computers to access discount card information on the Internet'¦ for others getting information over the phone is not an option. Many need help understanding the various cards and programs that are available. Fortunately, there is a local resource available to help sort it all out.

* State and Area Agencies on Aging and Native American aging programs have launched a nationwide campaign to help seniors with their prescription drug costs. The campaign'™s main objective is to provide low-income beneficiaries with the information and assistance they need to take advantage of the $600 transitional assistance credit offered in 2004, before that opportunity expires on December 31, 2004.

* Trained volunteers will help seniors complete applications in cities across the U.S.

For information: Go to www.medicare.gov/maddc/home.asp, or call 1-800 MEDICARE (633-4227).

CONTACT: Lisa Cohen
310-395-2544

After years of debate a new Medicare prescription drug card program will be available starting in 2006. For the period from May of 2004 to December of 2005, an interim program will be available -- Medicare prescription drug discount cards. Medicare participants will need to decide which, if any, they want to select. Several programs at the American Society on Aging / National Council on Aging Joint Annual Convention in San Francisco explained the options, and the difficulties, participants can anticipate.

The cards will charge the participant an annual fee of up to $30 for a card that will entitle him or her to get a discount on prescription drugs. Low-income participants can have the enrollment fee waived and get a credit of $600 toward their out-of-pocket costs under the program. Each person is limited to ONE approved card, and once selected, the choice cannot be changed during the calendar year. This means everyone will need to carefully decide what to do in May (for their 2004 choice) and then again when they are given an opportunity to make a choice for the year 2005. Further confusing things, seniors will be getting offers for unapproved cards and may not realize they have chosen a card that is not approved.

Several resources have been developed to help seniors make choices (see the end of this article for links to those resources.) Because this decision cannot be changed, it will be important to carefully research the options before making a choice.

Some things to be aware of include:

Make sure the chosen card is "Medicare Approved" by looking for the official symbol. There are already stories of fraudulent marketing by companies selling cards that are not approved.

Use the tools below to be sure that the card will cover all the drugs you routinely take. NOT ALL CARDS WILL COVER ALL DRUGS!!

Make sure the network is convenient to you. Some cards may require you to use pharmacies that are not nearby.

Be sure to investigate this opportunity if you are low income or have very high drug costs. It is not clear how beneficial the cards will be to middle income people with moderate drug costs or other drug coverage.

You do not have to rush into a decision. There will be no penalty for waiting to enroll until you are sure what you want to do. This means it may make sense for people who won't get any immediate benefit from the card to avoid signing up at this time. Then, if you later encounter health problems and need the card to cover new prescriptions, you will be able to look for a card that provides coverage for the drugs you need.

Be aware that the card issuers can change the list of drugs that they cover after you have signed up for the card. You cannot change to a different card if that happens. One weakness of the program is that you will have no recourse if the drug you need is dropped or if you later find you need a new drug which is not covered. Panels at the ASA/NCOA convention recommended that you avoid cards with very low fees because they may be more likely to change their drug formularies (the list of drugs they cover) if their costs exceed their expectations.

Panelists also suggested looking hard at the card sponsors to make sure you are dealing with the most reputable ones.

Don't be rushed into making a decision. Take time to review all your options first.

From CareScout

Medicare beneficiaries will not be allowed to use insurance to cover the share of prescription drugs under the new Medicare bill. Millions of current Medicare beneficiaries have bought insurance to fill gaps in cost that Medicare does not cover. Yet under the new provision Medigap policies that help pay the cost of drugs these beneficiaries are prohibited use of this coverage after January 1, 2006.

Congress cited two reasons for prohibiting the sale of Medigap policies. The first reason was that the Congress wanted to ensure that beneficiaries covered some of the cost of their medication and did not overuse medical services. Secondly, the legislatures wanted to prevent the duplication of the new Medicare benefit.

The Medicare drug plan may further limit the use of medications by beneficiaries through the creation of a preferred drug list. In this case only the drugs listed would be covered under Medicare. Patients could not buy private insurance to cover the cost of medication that is excluded form the preferred list.

Furthermore, low-income elderly that qualify for both Medicare and Medicaid would receive their drugs through Medicare. Even though Medicaid covers more medication cost than Medicare, the bill generally prohibits Medicaid programs from supplementing the Medicare drug benefit.

Both Democrats and Republicans have come up with proposals to provide coverage for prescription drugs for Medicare Beneficiaries. Details are sketchy, but I have tried to analyze the impact of each proposal on beneficiaries.

The Republican proposal as currently configured would favor those with annual drug costs of $1,500-$6,000 per year, and the Democratic proposal benefits those with costs over $6,000, or costs from $600-$1,500 per year. Neither proposal would benefit those with drug costs below $600 per year, since they would pay more in premiums than they would gain in coverage. Both plans would provide free coverage for low income people (at least those below 135% of the Federal Poverty Level, so I have ignored them in this calculation. Note, however, that the Republican plan would be an administrative nightmare because it has five (5!!) different benefits levels to consider.

I have used the following assumptions. Few details have been finalized or published, but these seem to be the basic parameters now being considered:

* Out-of-pocket costs include premiums
** Net benefit is total cost of drugs less the out-of-pocket costs of plan

NOTE: I urge the Republicans to PLEASE PLEASE PLEASE simplify their proposal. I am a CPA and still spent several hours trying to figure out what the cost/benefit would be for people with various levels of drug costs. There are five (5!!) different payment levels in the Republican plan, making it very complicated to calculate the relationship between the total drug costs and the actual out-of-pocket expense. Everyone involved will need to know the total year-to-date drug expense and the accumulated out-of-pocket cost at the time of every drug purchase in order to know what the beneficiary must pay as their share of the prescription cost. In addition to being difficult for beneficiaries to understand, this plan would be an administrative nightmare!!

Republican Proposal Benefit Levels

Plan Pays	For Costs From/To	Beneficiary Out-of-Pocket
0%	Up to $250	Up to $250/year
75%	$251-$3,250	Up to $750/year
50%	$3,251-$5,250	Up to $1,000/year
0%	$5,251-$8,250	Up to $3,000/year
100%	Over $8,250	Nothing
	MAXIMUM OUT-OF-POCKET:	$5,000

President Bush quietly sent his prescription drug plan to Congress Monday. It was mentioned during a White House press briefing, where some reporters suggested that the lack of fanfare might be due to a concern that the plan is not likely to do well on Capitol Hill, but White House press secretary Ari Fleischer denied that, and responded, "We have other busy events tomorrow and the following day. It's always just a question of scheduling. But the President is committed to it, and we're going to send it up and see what we can't make happen. But we are aware that there are some sensitivities on this issue. Some concerns have been raised."

The Bush administration is asking for the government to provide and "Immediate Helping Hand" for four years by channeling funding through state Medicare drug assistance programs. His proposal is to pay all drug bills for single recipients with annual incomes under $11,600 and married recipients with annual incomes under $15,700. Medicare would pay up to half the cost of a prescription drug plan for single recipients with incomes between $11,600 and $15,000, and married recipients with incomes between $15,700 and $20,300.

Ways and Means Chairman Bill Thomas (R-CA) said of the proposal, "Our first and highest priority should be to modernize Medicare with a prescription drug benefit for all seniors, but finding consensus has been challenging and will take time. As we work on a comprehensive plan to improve Medicare, Congress should always remain open to ideas to give timely coverage for those seniors struggling to make ends meet." Bush's new secretary of health and human services, Tommy Thompson, told senators that comprehensive reform may take some time to achieve, and suggested that Congress focus for now on passing Bush's prescription drug plan while a White House task force looks at ways to fix the Medicare system as a whole.

Democrats have strongly criticized the proposal, and vow to torpedo it. Michigan Rep. David Bonior and other Democrats said they would introduce their own prescription drug package that would benefit all Medicare recipients rather than a smaller pool of poor seniors that Bush has singled out for coverage. Even some Republicans, like Tennessee Republican Senator Bill Frist, have expressed doubts about the proposal as it stands.

The Health Care Financing Administration today announced an extended and expanded demonstration project that will measure the efficiencies and economies resulting from providing Medicare payments to help support a pharmacy benefit to Medicare beneficiaries. The project will seek to demonstrate how providing, structuring and managing an outpatient prescription drug benefit will result in more economical and better utilized Medicare Part A and Part B services. HCFA is conducting the demonstration with the United Mine Workers of America Health and Retirement Funds, a Medicare partner since 1990.

As part of an expanded and extended demonstration project, HCFA will pay 27% of the annual cost of the Funds? prescription drug program.

"This demonstration will provide a unique opportunity for HCFA to test how providing, structuring and managing outpatient prescription drugs can contribute to providing traditional Medicare benefits more effectively and efficiently," said Robert A. Berenson, MD, HCFA Acting Deputy Administrator. "It also will attempt to prove that disease management models for certain chronically ill beneficiaries are cost effective."

"An added benefit of the demonstration is that we can learn how effective management of a pharmacy benefit will reduce Medicare spending, which is crucial for policy makers looking to provide a prescription drug benefit to all Medicare beneficiaries," said Berenson. "We've worked with UMWA's Funds for a decade and know firsthand of their expertise in managing health care for a chronically ill population as well as maintaining their unique data bases."

In the current issue of the Journal of the American Medical Association, Dr. Robyn Tamblyn and colleagues from McGill University in Montreal report that asking low income people to share in the costs of prescription drugs has some unintended effects. While they found that cost-sharing did reduce the use of unnecessary drugs, it also led to dangerous reductions in the use of drugs necessary for disease management. Among the elderly, researchers found that cost sharing reduced the use of necessary drugs by 9%, and led to a 14% increase in emergency department visits.

The investigators state, "Consumer cost-sharing has been the principal method of fiscal control because it assumes that people will value what they pay for and as a result, they will reduce their use of unnecessary medication when they are required to contribute a portion of the payment, however consumers may not have the information needed to make wise decisions about necessary treatment."

The Office of the Inspector General (OIG) of the Department of Health and Human Services concluded that the Medicare program could save billions of dollars if they acquired prescription drugs at the same prices available to the Veterans Administration. The Medicare program paid for about $3.9 billion in prescription drugs in 1999, and a portion of that cost was born by the beneficiaries who paid a 20% co-payment for those medications. The Medicare program does not directly purchase drugs, like the VA does, but instead reimburses Medicare contractors and intermediaries, who in turn reimburse state Medicaid agencies and providers. The OIG concluded that the program, and its beneficiaries, could see realize nearly #2.3 billion a year in savings if they were able to get the same contract rate allowed to the Veterans Administration, and rebates like those the state Medicaid programs currently receive.

Seniors who use up their prescription drug benefits are far more likely to drop their HMO coverage, according to research by Express Scripts Inc., one of the nation's largest pharmacy benefit managers (PBMs). The study confirms results of a earlier report by researchers at UnitedHealth Group, a Minneapolis, Minnesota-based managed care company, that linked Medicare HMO disenrollment to the exhaustion of drug benefits.

Although researchers concede that other forces may have factored into seniors' decisions to drop out of their HMOs, the study results suggest that drug caps do indeed sway enrollees' thinking in the matter. "What we found is that the relative risk of disenrollment is two to three times greater for those whose annual prescription drug costs exceed the coverage limits of their plan," Dr. Cox noted. "This finding held true, no matter how the plan was administered."

A synopsis of the study by Dr. Cox and colleagues at Express Scripts appears in a letter to the editor in the November 22/29 issue of The Journal of the American Medical Association.

The Commonwealth Fund reports that proposals to help low income seniors by adding Medicare coverage for their drug costs would cover only 27% of those who have some level of "need" for prescription drug coverage. They point out that people have a need for coverage if they lack other insurance, if they have three or more chronic conditions, or if they have unusually high out-of-pocket cost for prescription medications. Many people who have these kinds of needs do not fall into the "low income" levels being considered as guidelines for a prescription drug benefit, so the report concludes that setting income as the only criteria for assistance would be very short-sighted.

As the current Congressional session winds to a close this week, one thing is pretty clear. Little, if anything, will get done this year to provide relief from the cost of prescription drugs for older Americans. The high cost of prescription drugs and the lack of coverage for this cost in the Medicare program has become one of the most important issues on the legislative landscape. In spite of that, partisan politics have interfered with the ability of our Congress to make any significant inroads into a solution. Democrats and Republicans are far apart in their approach to fixing this problem, and each party says that they cannot compromise their position, since they have the "right" solution. Compromise, according to both parties, would involve endangering Americans, violating the public trust, or providing an incomplete solution to the problem. One more thing is certain, candidates on both sides anticipate using this highly volatile issue to drum up interest in their campaigns.

There is no chance whatsoever of any federal legislation which would add prescription drug coverage to the Medicare program. The only legislation still on the table with any chance of passing before the end of the session is an amendment to HR 4461, the appropriations bill for the Food and Drug Administration and other agencies. The amendment, called the Prescription Drug Import Fairness Act of 2000, would make it possible for American pharmacists to import into the U.S. drugs manufactured in other countries in order to re-sell them. Since drug costs in other countries are often substantially lower than in the U.S., the hope is that this will provide a way for Americans to benefit from those lower prices. The obstacle is that it is currently illegal for anyone other than the manufacturer of a drug to import it into the U.S.

The Senate added this amendment to HR 4461 last July, after the House had already approved the bill without this amendment. The amendment picked up support from the White House and other sources, and the amended bill was sent back to the House for a vote. The House disagreed with the amendment, and set up a conference committee, which created a conference report as a substitute for the language in the Senate amendment. A number of Democrats have stated they disagree with language in the conference report, so it is not clear whether it will pass the House or not. The House is scheduled to discuss the conference report today.

George Bush has announced his proposal to provide expanded prescription drug coverage to seniors. His proposal has two parts. The first, and most immediate, action he proposes is to send $12 billion a year for 4 years to the states to fund new and existing state-based prescription drug plans for low income seniors as an interim step until the national Medicare program can be altered. The second part of the proposal would add prescription drug coverage to the federal Medicare program, with a target of enacting legislation no later than September, 2001. This new plan, MediCARxES (Medicare Choice and Access to Prescription Drugs for Every Senior), would set aside $110 billion for Medicare modernization to offer Medicare recipients a choice of plans offering expanded benefits, including prescription drug coverage.

The MediCARxES would:

• Cover the full cost of Medicare premiums for seniors with incomes at or below 135% of the federal poverty level ($11,300 for individuals, and $15,200 for a couple)
• Cover most of the cost of prescription drug coverage for seniors with incomes between 135%-175% of poverty guidelines (up to about $14,600 for an individual, and $19,700 for a couple)
• Pay 25% of premium costs for prescription drug coverage for all seniors above 175% of the poverty level
• Cover all Medicare costs in excess of $6,000 annually for all seniors, not just prescription drug costs
• Guarantee access to a prescription drug benefit even for beneficiaries living in areas where there is no competition among plans
• Establish a Unified Trust Fund as the measure of Medicare solvency

Until this plan can be implemented, $48 billion of interim funding over 4 years would be directed to the states to:

• Cover the full cost of a prescription drug program for seniors with incomes at or below 135% of the federal poverty level
• Cover most of the cost of prescription drugs for seniors with incomes up to 175% of poverty guidelines
• Cover any prescription drug costs in excess of $6,000 annually for all seniors
• Create a White House Task Force on bipartisan Medicare modernization
• Provide expedited consideration of modernization legislation

In other material available on his Web site, Bush said that his proposal compares favorably to the Gore plan because it offers immediate assistance to seniors in 2001, via his proposal to send money to the states in the interim, as compared to the Gore plan which would not be implemented until 2003. Bush points out that his plan protects beneficiaries against catastrophic out-of-pocket costs of all kinds with his $6,000 cap, while Gore's plan caps only prescription drug costs at $4,000.

The House narrowly passed the GOP bill which would add drug coverage to the Medicare program by using private drug-only insurance policies. The insurance industry has opposed the plan, and President Clinton has announced that if this bill comes to his desk, he will veto it. He continues to view the administration plan as a better alternative, and plans to send his program to Congress this week.

HR 4680: Medicare Rx 2000 Act, was passed out of the House Ways and Means Committee last Wednesday, and will go to the full house for approval. The leadership pushed their plan through the House Ways and Means Committee last week and scheduled a vote this week in hopes that Republican lawmakers could head home for the Fourth of July recess with a prescription drug bill in their pocket. Clinton has called the plan "severely flawed," and emphasized that his plan would better serve the interests of the American public. He announced he planned to send a proposal to Congress next week which would add coverage for catastrophic costs, and accelerate the initiation of the program to 2002 rather than the 2003 effective dates of both the original administration proposal and HR 4680.

The House Republicans this week unveiled their proposal to add prescription drug coverage for Medicare beneficiaries. Under this proposal, Medicare beneficiaries who already have drug coverage, either through employer group health plans or Medicare HMOs, will keep their current coverage. Their plan would create an additional, optional, benefit for beneficiaries who do not otherwise have coverage for outpatient prescription drugs. This plan would provide the benefit using private insurance policies, similar to the way that MediGap insurance is now provided. These private policies would provide a drug-only benefit, for an estimated annual premium of $30-$40 a month.

The plan would carry a $250 deductible, and cap benefits at $2,100 in the year 2003, later indexing both premiums and benefits to inflation. In addition, the plan provides for "catastrophic" coverage of all drug bills of $6,000 or more. The bill also stipulates that the new program be administered by a new government agency, the Medicare Benefits Agency, which would be created within the Department of Health and Human Services. They also stipulate that if private insurers do not provide at least two options in each market, the government would step in.

Both the House Ways and Means committee and the House Commerce Committee held hearings this week about proposed plans to introduce new coverage under the Medicare program for outpatient prescription drugs. Many witnesses offered comments and critisms on plans proposed by both parties to address the need for improved Medicare prescription drug coverage.

Democrats and insurance industry representatives opposed the new Republican plan, and protested that insurance companies would be unwilling to take the risk involved in developing private, optional, drug-only insurance policies, because of the risk of "adverse selection." Adverse selection is the risk that only people who anticipate that they will use the benefit extensively will be willing to pay the premiums to get it, which will then drive up premiums and create a further barrier to people who don't expect to use it extensively. They also cited the complications and time involved in getting approval by the Insurance Departments of all states for these new policies, something each individual plan would need to do in each state where they intend to offer that plan for sale. They also said there is a likelihood that there will be markets around the country where no company provides a policy, leaving beneficiaries with no option.

The Congressional Budget Office (CBO) has analyzed the President's proposals for changes to the Medicare program, including changes in the way that Medicare provides coverage for prescription drugs. The new, optional, benefit would have no deductible and would generally pay 50% of an enrollee's prescription drug costs, up to a maximum benefit of $1,000 in 2003. That benefit cap would gradually rise to $2,500 in 2009. Beneficiaries would pay a premium for this coverage which is estimated to be about $24 a month in 2003 and rise to $50 a month by 2009. The plan would use Pharmacy Benefit Managers (PBMs) to stimulate competitive bidding from pharmacies to get better pricing.

The CBO warned that the President's proposal would constrain the ability of PBMs to use their cost-saving techniques, possibly reducing the expected benefit. They also questioned the lack of any coverage for beneficiaries with catastrophic costs, and warned that the plan was likely to increase Medicaid expenditures, as well as Medicare expenditures. Overall, they estimated the cost of the President's proposal to be $160 billion through the year 2010.

CSpan has posted web video clips on Medicare reform proposals and other social policy issues. They include:

- President Clinton's Remarks on Medicare Provider Restorations - Hearing on Prescription Drugs and Medicare, House Commerce Subcommittee on Health & Environment - White House News Media Stakeout on Prescription Drugs - Julie Rovner, Congress Daily, Health Care Policy Correspondent discusses proposals for Medicare to cover prescription drugs.

>> CSpan

The National Committee to Preserve Social Security and Medicare (NCPSSM) released results of a recent survey to assess the public perception of the need for Medicare drug coverage. The survey showed a high level of voter familiarity with the issue, with fully 80% of voters of all ages who recognized that prescription drug costs for senior citizens are on the rise, including 55% who say these costs have risen "a great deal."

Among voters of all ages, 32% ranked establishing Medicare coverage for prescription drug costs as their top priority, out-ranking tax cuts, privacy concerns, and gun control. Among seniors who were surveyed, 47% said Medicare prescription drug coverage was their top priority.

A new paper by the Heritage Foundation examines three bills before Congress which would affect drug coverage and prices. The International Prescription Drug Parity Act (H.R. 1885/S. 1191) would allow wholesalers to import in bulk any prescription drug approved by the Food and Drug Administration. The Prescription Drug Fairness Act (S. 2464) would prohibit U.S. drug manufacturers from selling products to foreign buyers for less than they charge domestic buyers. The Medicare Prescription Drug Plan (S. 2319) would permit seniors to enroll in a new Medicare drug benefit program if they agree to combine their Part A and Part B deductibles. They conclude that all three bills fall short of providing a comprehensive solution to the problems older people face.

The Congressional Budget Office (CBO) reports that President Clinton's proposal to add basic prescription drug coverage to the Medicare benefit package would cost $79 billion over five years, nearly twice what Congress has set aside for a drug benefit and other Medicare reforms during the same period. Over 10 years, the Clinton plan for a basic drug benefit would cost $160 billion.

The President's proposal is for a voluntary, outpatient prescription drug benefit, under a new "Part D" of Medicare. That program would begin in 2003 and be fully phased in by 2009. It would pay half of the cost of prescription drugs, up to a specified cap. The insured half of the benefit would be financed equally by premium payments from enrollees and by general tax revenues, such that enrollees would pay 75% of the cost of covered drugs and the government would pay 25%, up to the cap.

The benefit would be administered by a private-sector pharmacy benefit manager (PBM) in each region of the country, selected through competitive bidding. The PBMs would negotiate drug prices, with the goal of negotiating lower prices than are currently paid by Medicare beneficiaries. Beneficiaries who enrolled in Part D would receive the benefit of those discounted prices on all prescription drug purchases, including drug purchases in excess of the cap.

The President's budget also suggests earmarking $35 billion from 2006 through 2010 for a possible catastrophic benefit, but no policy is specified, so the CBO analysis does not study a catastrophic benefit or the related $35 billion cost. The CBO also noted, "The proposed coverage would provide some assistance to most Medicare enrollees. Because the benefit is capped, however, the proposal would offer little financial protection to beneficiaries with a high level of drug spending. In 2003, for example, about a third of enrollees in the new Part D drug benefit would spend more than the benefit cap for prescription drugs. And the cost of the proposal would be significant. Spending on prescription drugs is the fastest-growing component of health care costs. Even with a capped benefit, the proposal would increase federal outlays substantially."

A study published by the Employee Benefits Research Institute (EBRI) reports that 9 million Medicare beneficiaries lack Medigap coverage, an increase of 33% from 1994 to 1998. The oldest and poorest beneficiaries are most likely to lack coverage, for instance, 40% of beneficiaries age 85 and older had no Medigap coverage.

One important impact of this statistic is the way that the lack of Medigap coverage affects the ability of beneficiaries to pay for prescription drug costs. Traditional Medicare does not include coverage for drug costs, so many beneficiaries purchase a Medigap policy to provide this coverage. Even then, only the more expensive Medigap policies provide this coverage Without a Medigap policy that includes a benefit for pharmaceutical expenses, beneficiaries must pay for these costs out-of-pocket.

The study found that Medicare patients with a supplemental drug insurance policy were about five times more likely to be able to afford a needed drug than patients without a policy, and that 47% of Medicare patients lacked drug insurance for at least one month of the year.

Current Medicare reform efforts are examining the potential costs and benefits of expanding prescription drug coverage for Medicare beneficiaries. Prescription drug costs are not currently covered by Medicare, but they are growing at nearly three times the rate of other healthcare costs, and represent a significant out-of-pocket expense for many older people. Although both Democrats and Republicans agree there is a need to expand Medicare's coverage for prescription drug benefits, they are a long way apart in their approaches to adding such coverage.

President Clinton included expanded Medicare prescription drug coverage in his FY 2001 Budget, which he estimated would cost $98 billion over 10 years, net of savings, by offering a voluntary prescription drug benefit for which beneficiaries would pay an additional premium. This benefit would cover 50% of beneficiary costs, up to a cap. Both the premiums and the cap would rise gradually over time.

The GOP contends the Democratic plan is too expensive, and they are developing their own proposal for Medicare prescription drug benefits. In a response to the President's proposal, they point out that the Congressional Budget Office (CBO) projects that the Democratic plan would cost $168 billion by 2010, and would increase overall drug spending by 25%. They suggest that coverage should be limited to low income beneficiaries.

President Clinton and House Democrats countered with a position statement which emphasized that they will not support alternative proposals that target only the poor through block grants, or the rich through tax incentives. They believe that middle income Americans are most in need of assistance, and will support legislation that targets this group.

Current Medicare reform efforts are examining the potential costs and benefits of expanding prescription drug coverage for Medicare beneficiaries. Prescription drug costs are not currently covered by Medicare, but they are growing at nearly three times the rate of other healthcare costs, and represent a significant out-of-pocket expense for many older people. Although both Democrats and Republicans agree there is a need to expand Medicare's coverage for prescription drug benefits, they are a long way apart in their approaches to adding such coverage.

President Clinton included expanded Medicare prescription drug coverage in his FY 2001 Budget, which he estimated would cost $98 billion over 10 years, net of savings, by offering a voluntary prescription drug benefit for which beneficiaries would pay an additional premium. This benefit would cover 50% of beneficiary costs, up to a cap. Both the premiums and the cap will rise gradually over time.

The GOP contends the Democratic plan is too expensive, and they are developing their own proposal for Medicare prescription drug benefits. In a response to the President's proposal, they point out that the Congressional Budget Office (CBO) projects that the Democratic plan would cost $168 billion by 2010, and would increase overall drug spending by 25%. They suggest that coverage should be limited to low income beneficiaries.

President Clinton and House Democrats issued a position statement which emphasized that they will not support alternative proposals that target only the poor through block grants, or the rich through tax incentives. They believe that middle income Americans are most in need of assistance, and will support legislation that targets this group.

The Current Situation

Currently, Medicare covers very little in the way of prescription drugs for most beneficiaries. This significant expense is paid for by some Medicare HMOs, by a few of the more expensive Medigap policies, or by employer health insurance. For very low income beneficiaries, Medicaid may pay for the cost of prescription drugs, but everyone else must pay out-of-pocket for costs not covered by insurance plans.

Government Studies

The General Accounting Office (GAO) issued a report in February of 2000 called Prescription Drugs: Increasing Medicare Beneficiary Access and Related Implications. In this report, GAO noted that in 1996 almost one third of beneficiaries had employer-sponsored retiree health coverage that included drug benefits; that more than 10% of beneficiaries received coverage through Medicaid or other public programs; and that other Medicare beneficiaries can choose to enroll in a Medicare Choice plan with drug coverage or purchase a Medigap policy.

However, the GAO also noted that the availability, breadth, and price of such coverage is changing as the costs of expanded prescription drug use drives employers, insurers, and managed care plans to adopt new approaches to control the expenditures for this benefit. The GAO pointed out that a number of approaches used by private health plans to control drug expenditures would be inappropriate or ineffective in a public program delivered to all parts of the country, such as incentives given for use of generic drugs and use of drug formularies and private pharmacy benefits managers.

More information was provided by the Congressional Budget Office (CBO) in their Analysis of the FY 2001 Budget. This analysis observes that the President's proposal for "Medicare Part D" benefits would provide some benefit to nearly 85% of Medicare beneficiaries, but because benefits paid to any given enrollee would be capped, those with the largest drug expenditures (about 20% of enrollees) would be unprotected once they spent $5,000. Although the cap on benefits would enable Medicare to better control costs, it would also limit the protection enrollees would have from large out-of-pocket costs. Enrollees could be offered better insurance protection, with greater financial risks for Medicare, if fewer benefits were offered to enrollees whose drug costs were low and greater benefits to those whose costs were high. The deductible would have to be quite large for that option keep federal costs at the level of the President's proposal.

Further analysis from the CBO on the President's proposed plan is included in a later report, which estimates that the cost of the proposal would be $130 billion, net of the increased premiums, for the period from 2003 to 2010, and that another $19 billion would be spent by the Medicaid program in coverage of deductibles and coinsurance related to the expanded Medicare coverage.

Another analysis of the Democratic proposal was prepared by the Commonwealth Fund.

Some other government reports on this subject:

The U.S. Senate Special Committee on Aging held a hearing on how Medicare HMOs handle their prescription drug benefits. The report, called Drugstore Surprise, The Impact of Drug Switching on Older Americans, outlined some problems beneficiaries have experienced in accessing drug coverage through Medicare HMOs, and in identifying what drugs are covered by the plan and which ones they will have to pay for themselves.

Another Special Committee on Aging report, The Right Medicine? Examining the Breaux-Frist Prescription for Saving Medicare, includes testimony from AARP and the drug industry on proposed reform legislation.

The National Bipartisan Committee on Medicare Reform, now disbanded, prepared an extensive report on Medicare Prescription Drug Coverage which described the problems with current coverage, and the committee's proposed solution.