Welcome to Consumer Reports Advocacy

For 85 years CR has worked for laws and policies that put consumers first. Learn more about CR’s work with policymakers, companies, and consumers to help build a fair and just marketplace at TrustCR.org

House drug bill a “major disappointment” that is “doomed to fail”

Friday, June 28, 2002

House drug bill a “major disappointment” that is “doomed to fail”

WASHINGTON, DC — The House today narrowly approved a bill promoted as a way to help seniors pay for prescription drugs through Medicare, but Consumers Union called the bill a “major disappointment.”
“This bill falsely raises the hopes of seniors who need relief from the growing burden of paying for prescription drugs,” said Gail Shearer, the director of health policy analysis for Consumers Union’s Washington DC office.
“A person who spends $1000 on drugs would end up facing about $800 for cost-sharing and new premiums under this bill,” she said.
The House voted 221-208 to approve the bill early this morning after a testy debate. Republican sponsors of the bill had to postpone the vote by a day in order to corral support among skeptical members of their party. The final vote was largely along party lines.
Shearer said, if the bill became law, it would be doomed to fail because its basic design is flawed.
After studying the bill, Shearer found that Medicare recipients who currently spend up to $745 a year on prescription drugs would wind up paying larger out-of-pocket costs under the coverage provided by the bill. In other words, those who spend up to $745 a year on prescription drugs would have to spend even more once their premiums and out-of-pocket expenses are counted. As a result, few of these people would be likely to enroll.
“Congress has ignored an important lesson from the medigap market: the insurance industry can not deliver an affordable prescription drug benefit in a voluntary marketplace where those with little need for medicine can simply pass up coverage.
In medigap, Shearer explained, those wishing to buy prescription drug coverage face an extra premium that is often higher than the maximum benefits they can receive.
“People with Medicare need a drug benefit that is reliable and affordable, and this bill delivers one that is neither,” Shearer said.
“Insurance companies would be free to vary the benefit, jack up the premium, and even exit the marketplace, just as Medicare HMO’s have disappointed millions of seniors when they decide to close shop. Taxpayers would be disappointed as well, considering that the insurance industry would likely follow behind Medicare HMO special interests and come pleading for more money to subsidize the flawed system,” she concluded.
For more information contact: David Butler, (202) 462-6262