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CU statement expressing disappointment with the Medicare prescription drug bills

June 27, 2003

Statement by Gail Shearer,
Director of Health Policy Analysis of Consumers Union Washington Office

expressing disappointment with the Medicare prescription drug bills
that passed in the House and Senate

“Congress has squandered an historic opportunity to provide seniors and the disabled with meaningful relief from the growing burden of prescription drug costs. Medicare beneficiaries will be disappointed when the reality of the meager benefit and unrestrained prices for their medicines continues to mean severe hardship. The bills passed early this morning are not the right prescription for providing the relief from high prescription drug bills. Seniors and the disabled are set up for disappointment.”
10 of the reasons the House-passed bill is bad for consumers:
  1. By allowing HMOs and PPOs to offer enriched benefits in 2006, the highly subsidized private Medicare providers will lure relatively healthy people into private coverage: taxpayer costs will go up, private insurance companies will get over-paid compared to their true costs, and millions of beneficiaries will lose choice of doctor.
  2. In 2010 traditional fee-for-service Medicare will be forced into an unfair competition with private HMOs and PPOs, with an unlevel playing field: the traditional free-choice-of-doctor fee-for-service program will have higher costs and premiums (25 percent higher by government estimates) because it covers sicker people. Ultimately, traditional Medicare will be undermined and may even be forced out of existence.
  3. The bill does not guarantee that seniors and people with disabilities will have access to an affordable prescription drug benefit, with a fixed premium and a generous benefit comparable to the drug benefit that Members of Congress get.
  4. The bill relies on participation of a reluctant private insurance industry to provide drug coverage for those remaining in traditional Medicare: there is no assurance that they will want to participate, and no fallback for beneficiaries if they do not.
  5. There will be total confusion: If private insurance companies do participate, they will be allowed to vary the benefits. This will make apples-to-apples comparisons by beneficiaries impossible and undermines the very notion of price-based competition.
  6. The bill fails to take aggressive steps to rein in prescription drug expenditures, through aggressive discounts negotiated by the federal government and through greater use of comparative effectiveness data: prescription drug expenditures will continue to spiral upward.
  7. Many beneficiaries who lack prescription drug coverage today will face higher out-of-pocket costs in 2007, even though they have coverage, because of the premiums, the uncovered costs and cost-sharing, and the anticipated increase in prescription drug expenditures.
  8. There will be additional confusion caused by the introduction of means-testing into the program – the catastrophic benefit is limited for those beneficiaries with high income. This provision not only undermines Medicare as a universal program, but introduces tremendous administrative complexity: will private insurers vary the premium based on enrollees’ income?
  9. The skimpy coverage shuts down benefits altogether when drug expenditures reach $2,000 and the gap lasts until expenditures reach $4,900.
  10. The bill assures that special interest insurance companies will come to the government requesting larger subsidies (some would say bribes) to participate. This means higher costs for taxpayers and less money used to provide benefits.

10 of the worst things about the Senate Medicare prescription drug bill

  1. The bill does not guarantee that prescription drug coverage will be affordable and comprehensive; the premium for private coverage is uncertain and could be considerably higher than the $35/month estimate.
  2. The bill lacks a Medicare option for all beneficiaries: they are at the mercy of a reluctant private insurance industry.
  3. Taxpayers will end up paying more (and getting less) because of deep subsidies to lure participation of private carriers.
  4. Benefits will vary: there is no standard benefit package, ruling out healthy competition in the marketplace.
  5. Beneficiaries are prohibited from buying additional medigap coverage to lower their 50% coinsurance or provide benefits after the benefit shutdown.
  6. There will be total confusion: benefits will vary, private coverage will be unstable, and beneficiaries will be forced to make complicated decisions without the ability to make apples-to-apples comparisons.
  7. Employers are likely to CUT retiree benefits: millions will have LESS coverage than they have today. The Congressional Budget Office estimates that 37 percent of beneficiaries with employer prescription drug coverage will lose it under the bill.
  8. The bill lacks adequate cost containment: the federal government can not negotiate deep discounts.
  9. Due to unchecked expenditures and skimpy benefits, many will face higher out-of-pocket costs when this is implemented than they do today.
  10. The bill denies those who are eligible for both Medicaid and Medicare the ability to receive their prescription drug benefits through Medicare, undermining the universal nature of the Medicare program.

Contact: Gail Shearer or Liz Rose, 202.462.6262