Dramatic Improvement or Death Spiral — Two Members of Congress Assess the Medicare Bill
http://www.100md.com
《新英格兰医药杂志》
The Journal asked Representative Bill Thomas (R-Calif.), chairman of the House Ways and Means Committee, and Senator Edward M. Kennedy (D-Mass.), ranking member of the Senate Health, Education, Labor, and Pensions Committee, to respond to the following question: "If you were to rewrite the recently passed Medicare bill, how would you change it?" Their responses follow.
Senator Kennedy replies:
The Republican Medicare bill is wrong for senior citizens, wrong for Medicare, and wrong for the country. Its inadequate and badly designed drug benefit is a Trojan horse created with one purpose in mind — to privatize Medicare and pander to the pharmaceutical and insurance industries at the expense of the nation's senior citizens. This agenda has been Republican dogma ever since Medicare was enacted in 1965. For the first time since then, the Republicans have control of the White House and both houses of Congress, and they did not hesitate to use that control to force their anti-Medicare ideology through Congress. At the very least, the new law needs to be restructured and corrected in major ways.
President George W. Bush's original strategy was to deny senior citizens any drug benefit unless they joined a health maintenance organization (HMO) or other private insurance plan. That proposal was a nonstarter, and Republicans in Congress developed a more devious way to achieve the same goal.
The new law practically bribes private insurers to enter the health insurance market for seniors. It pays 25 percent more than it would cost Medicare to provide the same health services to seniors. About one third of the bonus comes from the new payment formula contained in the bill. The other two thirds comes from the Bush administration's refusal to reflect the reality that the healthiest seniors are the most likely to join HMOs.1 Understandably, sicker and frailer elderly people do not want to give up the free choice of doctor that has been one of the central features of Medicare from the beginning.
HMOs and other private insurers will reap huge profits under the new law at the expense of Medicare and its beneficiaries. According to a recent estimate, private insurers would gain an additional $189 billion per year in revenues by entering the Medicare market.2 The Bush administration says that all it wants is competition between Medicare and private insurance plans for seniors, but instead of allowing fair competition, it has stacked the deck against Medicare. The new law also provides a $12 billion slush fund for a new kind of private alternative to Medicare — regional preferred-provider organizations, or PPOs — in addition to the 25 percent overpayment.
The bill sets up a massively destructive program called "premium support" in which as many as 6 million senior citizens will be forced to participate. Under the plan, the premiums for Medicare and private plans are linked to one another. As healthy seniors are enticed out of Medicare by private plans, Medicare premiums will have to increase to cover the costs of the seniors who remain in Medicare. Those higher premiums will then force more and more healthy seniors out of Medicare into private plans, further increasing Medicare premiums and resulting in a death spiral, as Medicare becomes more and more unaffordable and finally collapses.
Even the new drug benefit for seniors who remain in the Medicare program will be administered through private insurers who are free to set their own premiums and establish their own formularies. If no insurers offer the benefit in a given geographic area, Medicare itself can step in with a plan. But if even one private insurer offers a drug benefit — even if its premiums are unaffordable or its formulary does not meet a given patient's needs — the only other way to obtain the drug benefit is to join an HMO or a private plan.
These shameful provisions should all be eliminated. Senior citizens should be free to choose a private plan instead of Medicare, but the choice should be genuine — not dictated by unfair competition.
A separate but severe problem with the new law is that the prescription-drug benefit itself is far from adequate. The Bush administration and Republicans in Congress gave a higher priority to tax breaks for the wealthy than to health care for senior citizens. The budget allocated for prescription drugs represents only 25 percent of the cost of the drugs that senior citizens need.3 So many seniors will have to pay such a high proportion of drug costs out of their own pockets that the new program hardly qualifies as insurance. Senior citizens with $500 in drug costs will actually pay more, including premiums, than they would if they did not participate in the program. Elderly persons with $1,000 in drug costs will pay 86 percent of that amount in premiums and cost sharing; those with $5,000 in drug costs will pay 78 percent.
Moreover, the inadequacy of the benefit will grow over time. Drug costs are increasing much faster than the incomes of the elderly, and the law does nothing to ease that burden. Seven years after the new program begins, the premium will have increased from $35 a month to $58, and the deductible will have increased from $250 to $445. The threshold in expenses that allows a beneficiary to qualify for the so-called catastrophic protection will have increased from $5,000 to $9,000.4
Because the benefit is administered by private insurance companies operating in different geographic areas, the premium can vary widely, depending on where seniors live. The drugs that are actually available can also vary, depending on the formularies offered by the plans in the particular area.
The benefit also discriminates against seniors who have private retiree coverage through a former employer — even though these seniors and their employers pay the same taxes to support Medicare that everyone else does. As a result, the Congressional Budget Office and outside experts estimate that almost 3 million retirees will lose the good coverage they now enjoy, because their former employer will eliminate its drug coverage for retirees.4,5
The new law does offer generous coverage for low-income elderly persons — those with incomes below 150 percent of the poverty level. But even this coverage is tainted. The law imposes federal copayments on 6 million elderly persons and disabled Medicaid beneficiaries — the poorest of the poor — and these copayments are higher than what most of these people pay today. In this very poor population, even these low copayments — $1 for a generic drug and $3 for a brand-name drug — often lead to a failure to take needed drugs and, ultimately, serious health consequences. One study found an 88 percent increase in the rate of such consequences, including hospitalization, institutionalization in a nursing home, and even death, and a 78 percent increase in the rate of emergency room visits.6 In addition, to qualify for low-income benefits, beneficiaries have to pass a demeaning assets test that prevents those who have managed to save a small amount for retirement from qualifying, no matter how low their income is.
The new law also contains numerous provisions that benefit the insurance companies that administer the program at the expense of the people it is supposed to help. When senior citizens sign up with a particular insurance company to obtain the drug benefit, they are locked in for a year. But the company can change the formulary of drugs it covers at any time — and does not even have to tell beneficiaries about the change; all it has to do is post an announcement on its Web site. The law even prohibits seniors from using their own money to buy a "wrap-around" policy to fill in the gaps in the benefit.
The worsening prescription-drug nightmare that seniors and many others face in our country today is caused by the exploding cost of drugs. Studies predict that the new law will mean higher drug prices and even higher windfall profits for the pharmaceutical industry.4,7 Shamefully, the law prohibits the government from negotiating lower prices for Medicare, even though negotiations regarding the drugs purchased by the Department of Veterans Affairs and the Department of Defense have resulted in charges 60 percent lower than the prices paid by others. Medicare should be given explicit authority to negotiate with drug companies for better prices, and it should use that authority.
Congress should also pass legislation to provide for the safe reimportation of drugs from Canada and the European Union, in order to exert downward pressure on U.S. prices. The pharmaceutical industry has been the most profitable industry in the country for a decade. According to an analysis of 2001 data, it was five times as profitable as the average Fortune 500 company.8 The industry deserves great credit for supplying miracle drugs, but no responsible industry would engage in the price gouging and advertising abuses that taint its reputation today.
Congress should never have passed the Republican Medicare bill. It was rammed through the House and Senate only after normal rules had been bent or broken. It is a partisan law shaped by right-wing ideology and powerful special interests that contribute heavily to the Republican Party. It is designed to destroy Medicare, and it benefits the pharmaceutical and insurance industries, not senior citizens. It needs profound restructuring if it is to meet the needs of the elderly, protect Medicare, and serve the best interests of the American people.
References
Centers for Medicare & Medicaid Services. Medicare+Choice in 2004. October 9, 2003 (transcript). (Accessed January 27, 2004, at http://www.medpac.gov/public_meetings/transcripts/100903_M%20C_SH_transc.pdf.)
The impact of Republican Medicare proposals on insurance industry revenues and profits. Report. Washington, D.C.: Senate Committee on Health, Education, Labor, and Pensions Minority Staff, January 16, 2004.
Congressional Budget Office. Statement of Douglas Holtz-Eakin, Committee on Ways and Means, U.S. House of Representatives, April 9, 2003. (Accessed January 27, 2004, at http://waysandmeans.house.gov/hearings.asp)
Congressional Budget Office. Letter to the Honorable Don Nickles providing additional information about CBO's cost estimate for the conference agreement on H.R.1. November 20, 2003. (Accessed January 27, 2004, at http://www.cbo.gov/MoreRecentlyReleased.cfm.)
Thorpe KE. Implications of a Medicare prescription drug benefit for retiree health care coverage. November 2003. (Accessed January 26, 2004, at http://www.house.gov/schakowsky/Thorpe_paper_2.pdf.)
Tamblyn R, Laprise R, Hanley JA, et al. Adverse events associated wtih prescription drug cost-sharing among poor and elderly persons. JAMA 2001;285:421-429.
Sager A, Socolar D. 61 Percent of Medicare's new prescription drug subsidy is windfall profit to drug makers. October 2003. (Accessed January 26, 2004, at http://www.yuricareport.com/Medicare/MedicareRXwindfall-1pg-Sager-Socolar.pdf.)
Families USA. Profiting from pain: where prescription drug dollars go. July 2002. (Accessed January 26, 2004, at http://www.familiesusa.org/site/DocServer/PPreport.pdf?docID=249.)
Representative Thomas replies:
Medicine has seen remarkable changes in the past four decades that have resulted in our living longer, healthier lives. But for senior citizens in the United States to receive the benefits of modern medicine, it literally took an act of Congress. The Medicare Prescription Drug Improvement and Modernization Act of 2003, signed by President George W. Bush on December 8, 2003, delivers on the promise to provide the best health care to our greatest generation.
This landmark legislation would not have become law without compromise. No single lawmaker saw his or her ideal bill become law. However, we successfully enacted a law that will dramatically improve health care for seniors. In his State of the Union address on January 20, 2004, President Bush vowed to veto any bill that would limit seniors' choices or take away their drug coverage.
Congress transformed Medicare, at its core, from a bill-paying program for sick patients to one designed to keep seniors healthy. For the first time, Medicare will cover a physical examination when seniors enroll in the program in order to establish a solid foundation for ongoing treatment. Seniors will also receive regular cardiovascular and diabetes screenings to preemptively diagnose health problems before they become chronic or severe. These screenings are critical, since more than 60 percent of seniors have chronic conditions, and nearly two thirds of all Medicare funds are spent on seniors with five or more chronic conditions. Medicare will establish new disease-management programs to identify patients at risk, coordinate care, and encourage self-monitoring by patients in order to improve health outcomes.
The new law addresses Medicare's most fundamental flaw: the absence of a prescription-drug benefit. Too many low-income seniors have gone without their prescriptions, and many middle-income seniors with high drug costs have been threatened with economic ruin. In addition, seniors without prescription coverage often pay the highest prices even though they consume the most drugs.
Private insurance plans have voluntarily covered prescription drugs in order to prevent, treat, or manage diseases more cost effectively and less invasively than can be done with such alternative treatments as surgery. Medicare, however, has not kept pace with modern medicine. With the enactment of this modernization bill, Congress has made a fundamental breakthrough in health care for seniors.
Fourteen million low-income seniors (defined as those with an annual income of $15,400 for an individual or approximately $20,000 for a couple) will now have comprehensive drug coverage. When these seniors go to the pharmacy, they will pay $1 or $2 for generic drugs and $3 to $5 for brand-name drugs; they will have no monthly premium and no gap in coverage. Low-income persons will receive this additional help through Medicare rather than through a patchwork of varying state Medicaid programs, including some that have been limiting prescriptions to three per month or restricting access to popular drugs. Congress believes that all seniors in the United States — no matter where they live — should have a drug benefit of the same quality.
All seniors, regardless of income, are entitled to a voluntary prescription-drug benefit, which will provide protection against catastrophic costs and good coverage for those with moderate costs. The new law covers three quarters of the first $2,250 in drug costs after a $250 deductible and 95 percent of drug costs after a beneficiary spends $3,600 out of his or her own pocket. The nearly two thirds of beneficiaries who have annual drug costs of less than $2,250 will have no gap in coverage. The catastrophic protection is critical, since future cures for conditions such as Alzheimer's disease and arthritis are likely to be expensive. To provide immediate help to seniors, a drug-discount card will be available by this summer. The card will provide all seniors with real savings and low-income seniors with $600 in additional assistance with drug costs. Already, more than 70 companies have expressed interest in sponsoring the cards.
The new law provides a 75 percent subsidy for the drug benefit — similar to that offered to government workers and legislators by the Federal Employees Health Benefits Program. Congress deliberately did not establish in law the dollar amount of the premium, because more efficient drug plans that aggressively negotiate with pharmaceutical manufacturers for lower prices should be allowed to charge a lower premium. The new law also provides tax-free subsidies to employer-sponsored and union-sponsored retiree plans so that seniors can keep the coverage they have today.
The new law does more to cut drug prices than any other action ever taken by Congress. The Generic Pharmaceutical Association endorsed the law because it will expedite the entry of cheaper generic drugs into the market. According to the nonpartisan Congressional Budget Office, the law saves seniors between 20 and 25 percent, because plans will have both the tools and the incentives to negotiate lower prices. Indeed, the office estimated that one particular provision, which exempts Medicare prices from the Medicaid "Best Price," will save $18 billion by encouraging steep discounting by pharmaceutical manufacturers. Finally, the law reforms the corrupt "average wholesale price" payment system for drugs that are currently covered by Medicare. Before this reform, seniors' 20 percent copayment often exceeded the entire retail cost of the drug. Furthermore, physicians were encouraged to prescribe drugs on the basis of the biggest difference between the average wholesale price and the actual acquisition price, rather than focusing on what was clinically best for the patient.
Just as important, the law promotes higher quality. All drug plans must use pharmacy therapy-management programs to avert adverse drug interactions. Incentives to prescribe medications electronically will help ensure that patients receive the right prescription and will reduce the volume of unnecessary paperwork and calls between pharmacists and physicians. If a plan uses a formulary, it must be established by practicing physicians and pharmacists relying on peer-reviewed medical literature. Seniors will be informed about the way in which these formularies operate and what specific drugs are covered or preferred. All seniors are entitled to both an internal appeal and an independent external appeal for the coverage of drugs that are not on the "preferred" list.
Even as Congress adds a new benefit to Medicare, the fiscal challenges facing the program are substantial. Before the enactment of this law, Medicare spending was expected to double over the next decade, as 77 million baby boomers begin to retire. That is why another feature of the Medicare law is the expansion of opportunities for seniors to participate in integrated health care plans under Medicare. Congress believes that private plans and competition will help to drive down the explosive growth of Medicare spending.
Currently, about 12 percent of seniors are enrolled in private plans. Many seniors prefer these plans because they often offer better coverage and coordinated care than traditional fee-for-service Medicare. However, some private plans have withdrawn from Medicare because reimbursements have been erratic and the government generally has not been a reliable business partner. In addition, people in most rural areas have not had access to these plans.
The new law ties the increased payments received by these plans to the costs of the traditional Medicare program. In 2006, the law will encourage the participation of regional, multistate preferred-provider organizations. When plans submit bids to provide integrated care below a set benchmark price, there will be shared savings, with 75 percent going to the beneficiary in the form of lower premiums or better benefits and 25 percent going to taxpayers. Thus, taxpayers will share in the savings as seniors make rational choices.
However, because the payment benchmarks will increase with the growth of fee-for-service programs, the payment formula does not permit bids by private plans to slow the growth rate of Medicare. The bill passed by the House included a more dynamic competitive system, which would pay plans according to a weighted-average formula. The promise of this reform is that as beneficiaries enroll in more efficient plans, those plans will have greater influence in establishing the weighted average in the subsequent year, thereby allowing competitive forces to change the growth rate. Unfortunately, the conference ultimately agreed only to a pilot program testing this type of direct competition in six metropolitan areas.
Another critical reform that will help to extend the life of Medicare is "income relating" on the Part B premium. This marked change for Medicare recognizes that not all beneficiaries have the same needs or resources. When Medicare was first enacted, 50 percent of Part B was financed through beneficiary premiums and 50 percent was paid for by taxpayers. Today, the cost sharing has shifted to a 75–25 split, with taxpayers picking up the extra 25 percent. Clearly, the wealthiest 3 percent of seniors do not need the same assistance as low-income and middle-income seniors. Therefore, under the new law, persons with an income of more than $80,000 or couples with an income of more than $160,000 will receive a smaller subsidy starting in 2007.
The new law also reforms the payments to and regulation of the providers that serve Medicare. One key reform is to pay more to those hospitals that provide Medicare with data on quality outcomes. This policy will enable seniors to comparison shop among hospitals on the basis of widely recognized measures of quality. In addition, the law blocks a scheduled 4.5 percent cut in payments to physicians. Third, physicians, hospitals, and home health care agencies operating in rural and underserved areas will receive long-overdue and needed payment increases. Fourth, payments for durable medical equipment (such as wheelchairs, bedpans, and hospital beds) will move from a government-set fee schedule to competitive bidding — a reform that will save beneficiaries and taxpayers billions of dollars. Finally, the bill streamlines Medicare's confusing and voluminous regulations so that physicians and other providers can spend more time on patient care and less time on paperwork.
A new health care law of this magnitude requires that seniors receive complete information about the changes. That is why Congress provided $1.5 billion to the Department of Health and Human Services to implement the new law and provide comprehensive information to Medicare stakeholders. The new law will markedly improve the health care of 40 million seniors and begin making Medicare more efficient and responsive to the beneficiaries, providers, and taxpayers it serves.(Edward M. Kennedy, and Bi)
Senator Kennedy replies:
The Republican Medicare bill is wrong for senior citizens, wrong for Medicare, and wrong for the country. Its inadequate and badly designed drug benefit is a Trojan horse created with one purpose in mind — to privatize Medicare and pander to the pharmaceutical and insurance industries at the expense of the nation's senior citizens. This agenda has been Republican dogma ever since Medicare was enacted in 1965. For the first time since then, the Republicans have control of the White House and both houses of Congress, and they did not hesitate to use that control to force their anti-Medicare ideology through Congress. At the very least, the new law needs to be restructured and corrected in major ways.
President George W. Bush's original strategy was to deny senior citizens any drug benefit unless they joined a health maintenance organization (HMO) or other private insurance plan. That proposal was a nonstarter, and Republicans in Congress developed a more devious way to achieve the same goal.
The new law practically bribes private insurers to enter the health insurance market for seniors. It pays 25 percent more than it would cost Medicare to provide the same health services to seniors. About one third of the bonus comes from the new payment formula contained in the bill. The other two thirds comes from the Bush administration's refusal to reflect the reality that the healthiest seniors are the most likely to join HMOs.1 Understandably, sicker and frailer elderly people do not want to give up the free choice of doctor that has been one of the central features of Medicare from the beginning.
HMOs and other private insurers will reap huge profits under the new law at the expense of Medicare and its beneficiaries. According to a recent estimate, private insurers would gain an additional $189 billion per year in revenues by entering the Medicare market.2 The Bush administration says that all it wants is competition between Medicare and private insurance plans for seniors, but instead of allowing fair competition, it has stacked the deck against Medicare. The new law also provides a $12 billion slush fund for a new kind of private alternative to Medicare — regional preferred-provider organizations, or PPOs — in addition to the 25 percent overpayment.
The bill sets up a massively destructive program called "premium support" in which as many as 6 million senior citizens will be forced to participate. Under the plan, the premiums for Medicare and private plans are linked to one another. As healthy seniors are enticed out of Medicare by private plans, Medicare premiums will have to increase to cover the costs of the seniors who remain in Medicare. Those higher premiums will then force more and more healthy seniors out of Medicare into private plans, further increasing Medicare premiums and resulting in a death spiral, as Medicare becomes more and more unaffordable and finally collapses.
Even the new drug benefit for seniors who remain in the Medicare program will be administered through private insurers who are free to set their own premiums and establish their own formularies. If no insurers offer the benefit in a given geographic area, Medicare itself can step in with a plan. But if even one private insurer offers a drug benefit — even if its premiums are unaffordable or its formulary does not meet a given patient's needs — the only other way to obtain the drug benefit is to join an HMO or a private plan.
These shameful provisions should all be eliminated. Senior citizens should be free to choose a private plan instead of Medicare, but the choice should be genuine — not dictated by unfair competition.
A separate but severe problem with the new law is that the prescription-drug benefit itself is far from adequate. The Bush administration and Republicans in Congress gave a higher priority to tax breaks for the wealthy than to health care for senior citizens. The budget allocated for prescription drugs represents only 25 percent of the cost of the drugs that senior citizens need.3 So many seniors will have to pay such a high proportion of drug costs out of their own pockets that the new program hardly qualifies as insurance. Senior citizens with $500 in drug costs will actually pay more, including premiums, than they would if they did not participate in the program. Elderly persons with $1,000 in drug costs will pay 86 percent of that amount in premiums and cost sharing; those with $5,000 in drug costs will pay 78 percent.
Moreover, the inadequacy of the benefit will grow over time. Drug costs are increasing much faster than the incomes of the elderly, and the law does nothing to ease that burden. Seven years after the new program begins, the premium will have increased from $35 a month to $58, and the deductible will have increased from $250 to $445. The threshold in expenses that allows a beneficiary to qualify for the so-called catastrophic protection will have increased from $5,000 to $9,000.4
Because the benefit is administered by private insurance companies operating in different geographic areas, the premium can vary widely, depending on where seniors live. The drugs that are actually available can also vary, depending on the formularies offered by the plans in the particular area.
The benefit also discriminates against seniors who have private retiree coverage through a former employer — even though these seniors and their employers pay the same taxes to support Medicare that everyone else does. As a result, the Congressional Budget Office and outside experts estimate that almost 3 million retirees will lose the good coverage they now enjoy, because their former employer will eliminate its drug coverage for retirees.4,5
The new law does offer generous coverage for low-income elderly persons — those with incomes below 150 percent of the poverty level. But even this coverage is tainted. The law imposes federal copayments on 6 million elderly persons and disabled Medicaid beneficiaries — the poorest of the poor — and these copayments are higher than what most of these people pay today. In this very poor population, even these low copayments — $1 for a generic drug and $3 for a brand-name drug — often lead to a failure to take needed drugs and, ultimately, serious health consequences. One study found an 88 percent increase in the rate of such consequences, including hospitalization, institutionalization in a nursing home, and even death, and a 78 percent increase in the rate of emergency room visits.6 In addition, to qualify for low-income benefits, beneficiaries have to pass a demeaning assets test that prevents those who have managed to save a small amount for retirement from qualifying, no matter how low their income is.
The new law also contains numerous provisions that benefit the insurance companies that administer the program at the expense of the people it is supposed to help. When senior citizens sign up with a particular insurance company to obtain the drug benefit, they are locked in for a year. But the company can change the formulary of drugs it covers at any time — and does not even have to tell beneficiaries about the change; all it has to do is post an announcement on its Web site. The law even prohibits seniors from using their own money to buy a "wrap-around" policy to fill in the gaps in the benefit.
The worsening prescription-drug nightmare that seniors and many others face in our country today is caused by the exploding cost of drugs. Studies predict that the new law will mean higher drug prices and even higher windfall profits for the pharmaceutical industry.4,7 Shamefully, the law prohibits the government from negotiating lower prices for Medicare, even though negotiations regarding the drugs purchased by the Department of Veterans Affairs and the Department of Defense have resulted in charges 60 percent lower than the prices paid by others. Medicare should be given explicit authority to negotiate with drug companies for better prices, and it should use that authority.
Congress should also pass legislation to provide for the safe reimportation of drugs from Canada and the European Union, in order to exert downward pressure on U.S. prices. The pharmaceutical industry has been the most profitable industry in the country for a decade. According to an analysis of 2001 data, it was five times as profitable as the average Fortune 500 company.8 The industry deserves great credit for supplying miracle drugs, but no responsible industry would engage in the price gouging and advertising abuses that taint its reputation today.
Congress should never have passed the Republican Medicare bill. It was rammed through the House and Senate only after normal rules had been bent or broken. It is a partisan law shaped by right-wing ideology and powerful special interests that contribute heavily to the Republican Party. It is designed to destroy Medicare, and it benefits the pharmaceutical and insurance industries, not senior citizens. It needs profound restructuring if it is to meet the needs of the elderly, protect Medicare, and serve the best interests of the American people.
References
Centers for Medicare & Medicaid Services. Medicare+Choice in 2004. October 9, 2003 (transcript). (Accessed January 27, 2004, at http://www.medpac.gov/public_meetings/transcripts/100903_M%20C_SH_transc.pdf.)
The impact of Republican Medicare proposals on insurance industry revenues and profits. Report. Washington, D.C.: Senate Committee on Health, Education, Labor, and Pensions Minority Staff, January 16, 2004.
Congressional Budget Office. Statement of Douglas Holtz-Eakin, Committee on Ways and Means, U.S. House of Representatives, April 9, 2003. (Accessed January 27, 2004, at http://waysandmeans.house.gov/hearings.asp)
Congressional Budget Office. Letter to the Honorable Don Nickles providing additional information about CBO's cost estimate for the conference agreement on H.R.1. November 20, 2003. (Accessed January 27, 2004, at http://www.cbo.gov/MoreRecentlyReleased.cfm.)
Thorpe KE. Implications of a Medicare prescription drug benefit for retiree health care coverage. November 2003. (Accessed January 26, 2004, at http://www.house.gov/schakowsky/Thorpe_paper_2.pdf.)
Tamblyn R, Laprise R, Hanley JA, et al. Adverse events associated wtih prescription drug cost-sharing among poor and elderly persons. JAMA 2001;285:421-429.
Sager A, Socolar D. 61 Percent of Medicare's new prescription drug subsidy is windfall profit to drug makers. October 2003. (Accessed January 26, 2004, at http://www.yuricareport.com/Medicare/MedicareRXwindfall-1pg-Sager-Socolar.pdf.)
Families USA. Profiting from pain: where prescription drug dollars go. July 2002. (Accessed January 26, 2004, at http://www.familiesusa.org/site/DocServer/PPreport.pdf?docID=249.)
Representative Thomas replies:
Medicine has seen remarkable changes in the past four decades that have resulted in our living longer, healthier lives. But for senior citizens in the United States to receive the benefits of modern medicine, it literally took an act of Congress. The Medicare Prescription Drug Improvement and Modernization Act of 2003, signed by President George W. Bush on December 8, 2003, delivers on the promise to provide the best health care to our greatest generation.
This landmark legislation would not have become law without compromise. No single lawmaker saw his or her ideal bill become law. However, we successfully enacted a law that will dramatically improve health care for seniors. In his State of the Union address on January 20, 2004, President Bush vowed to veto any bill that would limit seniors' choices or take away their drug coverage.
Congress transformed Medicare, at its core, from a bill-paying program for sick patients to one designed to keep seniors healthy. For the first time, Medicare will cover a physical examination when seniors enroll in the program in order to establish a solid foundation for ongoing treatment. Seniors will also receive regular cardiovascular and diabetes screenings to preemptively diagnose health problems before they become chronic or severe. These screenings are critical, since more than 60 percent of seniors have chronic conditions, and nearly two thirds of all Medicare funds are spent on seniors with five or more chronic conditions. Medicare will establish new disease-management programs to identify patients at risk, coordinate care, and encourage self-monitoring by patients in order to improve health outcomes.
The new law addresses Medicare's most fundamental flaw: the absence of a prescription-drug benefit. Too many low-income seniors have gone without their prescriptions, and many middle-income seniors with high drug costs have been threatened with economic ruin. In addition, seniors without prescription coverage often pay the highest prices even though they consume the most drugs.
Private insurance plans have voluntarily covered prescription drugs in order to prevent, treat, or manage diseases more cost effectively and less invasively than can be done with such alternative treatments as surgery. Medicare, however, has not kept pace with modern medicine. With the enactment of this modernization bill, Congress has made a fundamental breakthrough in health care for seniors.
Fourteen million low-income seniors (defined as those with an annual income of $15,400 for an individual or approximately $20,000 for a couple) will now have comprehensive drug coverage. When these seniors go to the pharmacy, they will pay $1 or $2 for generic drugs and $3 to $5 for brand-name drugs; they will have no monthly premium and no gap in coverage. Low-income persons will receive this additional help through Medicare rather than through a patchwork of varying state Medicaid programs, including some that have been limiting prescriptions to three per month or restricting access to popular drugs. Congress believes that all seniors in the United States — no matter where they live — should have a drug benefit of the same quality.
All seniors, regardless of income, are entitled to a voluntary prescription-drug benefit, which will provide protection against catastrophic costs and good coverage for those with moderate costs. The new law covers three quarters of the first $2,250 in drug costs after a $250 deductible and 95 percent of drug costs after a beneficiary spends $3,600 out of his or her own pocket. The nearly two thirds of beneficiaries who have annual drug costs of less than $2,250 will have no gap in coverage. The catastrophic protection is critical, since future cures for conditions such as Alzheimer's disease and arthritis are likely to be expensive. To provide immediate help to seniors, a drug-discount card will be available by this summer. The card will provide all seniors with real savings and low-income seniors with $600 in additional assistance with drug costs. Already, more than 70 companies have expressed interest in sponsoring the cards.
The new law provides a 75 percent subsidy for the drug benefit — similar to that offered to government workers and legislators by the Federal Employees Health Benefits Program. Congress deliberately did not establish in law the dollar amount of the premium, because more efficient drug plans that aggressively negotiate with pharmaceutical manufacturers for lower prices should be allowed to charge a lower premium. The new law also provides tax-free subsidies to employer-sponsored and union-sponsored retiree plans so that seniors can keep the coverage they have today.
The new law does more to cut drug prices than any other action ever taken by Congress. The Generic Pharmaceutical Association endorsed the law because it will expedite the entry of cheaper generic drugs into the market. According to the nonpartisan Congressional Budget Office, the law saves seniors between 20 and 25 percent, because plans will have both the tools and the incentives to negotiate lower prices. Indeed, the office estimated that one particular provision, which exempts Medicare prices from the Medicaid "Best Price," will save $18 billion by encouraging steep discounting by pharmaceutical manufacturers. Finally, the law reforms the corrupt "average wholesale price" payment system for drugs that are currently covered by Medicare. Before this reform, seniors' 20 percent copayment often exceeded the entire retail cost of the drug. Furthermore, physicians were encouraged to prescribe drugs on the basis of the biggest difference between the average wholesale price and the actual acquisition price, rather than focusing on what was clinically best for the patient.
Just as important, the law promotes higher quality. All drug plans must use pharmacy therapy-management programs to avert adverse drug interactions. Incentives to prescribe medications electronically will help ensure that patients receive the right prescription and will reduce the volume of unnecessary paperwork and calls between pharmacists and physicians. If a plan uses a formulary, it must be established by practicing physicians and pharmacists relying on peer-reviewed medical literature. Seniors will be informed about the way in which these formularies operate and what specific drugs are covered or preferred. All seniors are entitled to both an internal appeal and an independent external appeal for the coverage of drugs that are not on the "preferred" list.
Even as Congress adds a new benefit to Medicare, the fiscal challenges facing the program are substantial. Before the enactment of this law, Medicare spending was expected to double over the next decade, as 77 million baby boomers begin to retire. That is why another feature of the Medicare law is the expansion of opportunities for seniors to participate in integrated health care plans under Medicare. Congress believes that private plans and competition will help to drive down the explosive growth of Medicare spending.
Currently, about 12 percent of seniors are enrolled in private plans. Many seniors prefer these plans because they often offer better coverage and coordinated care than traditional fee-for-service Medicare. However, some private plans have withdrawn from Medicare because reimbursements have been erratic and the government generally has not been a reliable business partner. In addition, people in most rural areas have not had access to these plans.
The new law ties the increased payments received by these plans to the costs of the traditional Medicare program. In 2006, the law will encourage the participation of regional, multistate preferred-provider organizations. When plans submit bids to provide integrated care below a set benchmark price, there will be shared savings, with 75 percent going to the beneficiary in the form of lower premiums or better benefits and 25 percent going to taxpayers. Thus, taxpayers will share in the savings as seniors make rational choices.
However, because the payment benchmarks will increase with the growth of fee-for-service programs, the payment formula does not permit bids by private plans to slow the growth rate of Medicare. The bill passed by the House included a more dynamic competitive system, which would pay plans according to a weighted-average formula. The promise of this reform is that as beneficiaries enroll in more efficient plans, those plans will have greater influence in establishing the weighted average in the subsequent year, thereby allowing competitive forces to change the growth rate. Unfortunately, the conference ultimately agreed only to a pilot program testing this type of direct competition in six metropolitan areas.
Another critical reform that will help to extend the life of Medicare is "income relating" on the Part B premium. This marked change for Medicare recognizes that not all beneficiaries have the same needs or resources. When Medicare was first enacted, 50 percent of Part B was financed through beneficiary premiums and 50 percent was paid for by taxpayers. Today, the cost sharing has shifted to a 75–25 split, with taxpayers picking up the extra 25 percent. Clearly, the wealthiest 3 percent of seniors do not need the same assistance as low-income and middle-income seniors. Therefore, under the new law, persons with an income of more than $80,000 or couples with an income of more than $160,000 will receive a smaller subsidy starting in 2007.
The new law also reforms the payments to and regulation of the providers that serve Medicare. One key reform is to pay more to those hospitals that provide Medicare with data on quality outcomes. This policy will enable seniors to comparison shop among hospitals on the basis of widely recognized measures of quality. In addition, the law blocks a scheduled 4.5 percent cut in payments to physicians. Third, physicians, hospitals, and home health care agencies operating in rural and underserved areas will receive long-overdue and needed payment increases. Fourth, payments for durable medical equipment (such as wheelchairs, bedpans, and hospital beds) will move from a government-set fee schedule to competitive bidding — a reform that will save beneficiaries and taxpayers billions of dollars. Finally, the bill streamlines Medicare's confusing and voluminous regulations so that physicians and other providers can spend more time on patient care and less time on paperwork.
A new health care law of this magnitude requires that seniors receive complete information about the changes. That is why Congress provided $1.5 billion to the Department of Health and Human Services to implement the new law and provide comprehensive information to Medicare stakeholders. The new law will markedly improve the health care of 40 million seniors and begin making Medicare more efficient and responsive to the beneficiaries, providers, and taxpayers it serves.(Edward M. Kennedy, and Bi)