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President’s framework for Medicare: Bad medicine for seniors and the disabled

Tuesday, March 4, 2003

President’s framework for Medicare: Bad medicine for seniors and the disabled

(Statement of Gail Shearer, Director of Health Policy Analysis, Washington Office)

The President’s “Framework to Modernize and Improve Medicare” outlines three coverage options (ranging from traditional Medicare coverage to a variety of private insurance options) that would help pay for at most 22 percent of projected prescription drug expenditures of Medicare beneficiaries. The framework is short on crucial details and short on guarantees for Medicare beneficiaries. Consumers Union’s key concerns are:

  • The framework lacks a guarantee of adequate prescription drug benefits, regardless of which option a beneficiary chooses. The only guarantee in the President’s plan is the certainty that if you stick with traditional Medicare, you will not have access to affordable prescriptions. Those in traditional Medicare would only have access to an ineffective discount drug card and a yet-unspecified catastrophic prescription benefit (with a deductible, perhaps in the range of $6,000). Even if discount drug cards yield 10 percent savings, this discount is unlikely to keep up with prescription drug inflation, leaving a growing burden of out-of-pocket prescription drug costs. Even the so-called “Enhanced Medicare” and “Medicare Advantage” proposals fail to specify the details of the prescription drug coverage.
  • The proposed budget of $400 billion is inadequate for the size of the problem. The Congressional Budget Office projects that Medicare beneficiaries will spend $1.8 trillion on prescription drugs over the next 10 years. The President’s proposed budget of $400 billion over this time period will cover, at best, only 22% of their expenditures. Considering that billions will be siphoned off to pay the extra costs associated with a privatized market (higher administrative costs, marketing, and insurance company profits), it is clear that this proposed program will not provide adequate financial relief to the population in need of prescription drug coverage.
  • The framework is silent about necessary measures that will rein in prescription drug expenditures, e.g., accelerating the introduction of generic drugs, or adopting measures to improve the cost-effectiveness of the nation’s prescription drug dollars. Consumers Union believes that an essential element of Medicare reform is assuring that consumers and taxpayers get better bang for their prescription drug buck. In order to do this, Congress needs to speed the introduction of generics and take steps to provide consumers and doctors accurate information about the comparative effectiveness and cost-effectiveness of different prescription drugs. The Administration proposal does not indicate any commitment to stand up to the pharmaceutical industry and assure that we spend our prescription drug dollars more effectively.
  • The framework puts unwarranted reliance on the private marketplace, which has proved unreliable for Medicare beneficiaries in the past. The framework ignores the recent experience with Medicare HMOs that have abandoned the Medicare market and forced beneficiaries to find new coverage. It ignores that fact that HMOs have lured in beneficiaries with comprehensive prescription drug coverage and then cut back on this coverage, leaving seniors and the disabled without the protection they need.
  • Medicare beneficiaries are guaranteed a complicated decision process. The framework suggests that there will be a minimum federal standard for benefits, but would allow private companies to vary the benefits. Beneficiaries will not be able to make apples-to-apples comparisons of policies. Confusion in the marketplace will undermine the goal of a healthy private competitive marketplace, will help insurance companies attract relatively healthy enrollees (and boost their profits), and will place an inordinate burden on Medicare beneficiaries who may have vision restrictions or other cognitive impairments that make this choice of plan burdensome.
  • The framework guarantees that private companies will come hat in hand to Congress to pressure it for larger payments in order to assure their continued participation. Medicare beneficiaries are desperate for adequate prescription drug coverage. Insurance companies and HMOs know this, and they know that if they threaten to pull out of the market, they will be able to force Congress to boost the subsidies they receive. The Administration’s framework, by design, assures a powerful special interest lobby will have a lot of clout and may get whatever it takes to continue participation.

In sum, the President’s relies on a flawed structure for the new Medicare program, fails to provide needed guarantees of benefits and affordability, fails to adequately rein in prescription drug expenditures, and puts taxpayers (and beneficiaries) at the mercy of private insurance companies who will exert pressure on Congress. Medicare beneficiaries and taxpayers need a Medicare reform framework that guarantees all will have access to affordable prescriptions and that assures that taxpayer dollars are spent wisely.
For more information contact: Gail Shearer: (202) 462-6262