CHN: Senate Unveils Medicare Drug Plan

Bipartisan Agreement Garners Criticism from Both Sides, But Likely To Pass Senate 
On Thursday, June 5, Senators released plans for a prescription drug plan to provide coverage to the elderly through a combination of the government-run Medicare health program and private health plans. The details of the plan were enthusiastically announced by Senators Charles E. Grassley (R-IA), chairman of the Senate Finance committee, and Senator Max Baucus (D-MT), the committee’s ranking Democrat.

The Senate Finance Committee held a hearing on Friday, June 6 to begin work on the legislation and has tentatively scheduled a full committee markup for Thursday, June 12. It is possible that the full Senate will vote on the bill before the week long July 4th recess. Despite the optimistic atmosphere among some senators, there are still many obstacles to passing the legislation. Some conservative senators are dismayed that the proposal does not provide more incentives for moving to private health care plans, and fear the new plan will be too costly and bureaucratic. At the same time, some liberal senators are worried that this plan is a first step towards undermining the traditional Medicare fee-for-service structure and a step towards privatization of Medicare.

The new plan breaks with the Bush Administration’s proposal of enticing seniors to leave the traditional Medicare fee-for-service programs by offering more substantial benefits through private health care providers. This idea was dropped from the Senate proposal, which provides equal benefits to participants, regardless of the drug benefit plan they choose. The proposal would begin to offer drug coverage in 2006, but includes earlier plans to offer discount drug cards that would save seniors 10 to 25 percent. The cards would include an extra $600 for those who qualify as low-income seniors. The cards (including a one-time fee) would be phased out in 2006 when the program begins.

The specific levels for premiums and other out-of-pocket expenses are not yet confirmed, but reports indicate that the proposal will be closely tied to one outlined early last week. Those details indicate seniors would pay a $275 yearly deductible and monthly premiums of around $35. The plan would then cover 50 percent of drug costs up to $3,450. Participants would be required to pay all drug costs from that level up to $3,700 when a “catastrophic” benefit would kick in and cover 90 percent of all additional drug costs. The proposal also contains a $25 billion rural provider package that was excluded from the recent tax cut legislation at the last minute. Both Chairman Grassley, and Senator Baucus share concerns that rural areas will be overlooked by the changes in the Medicare drug program.

The plan has received support from both Republicans and Democrats, but has also faced harsh criticism. House Democrats, along with some Democratic Senators, criticized the plan immediately, claiming that it falls short of the goals of Democrats to provide full prescription drug coverage to seniors. Senators John Rockefeller (D-WV), a member of the Finance committee, Tom Harkin (D-IA), and Debbie Stabenow (D-MI) were three of the more vocal Democrats to offer criticism.

The proposal got a tacit endorsement from Senator Ted Kennedy (D-MA), perhaps the most important Democrat to have on board. Minority Leader Tom Daschle (D-SD) tried to persuade the senior senator from Massachusetts to withhold his support of the plan, but Kennedy believes the plan is a “major breakthrough” that will allow seniors to have “reliable drug coverage for the exorbitant cost of prescription drugs.”

There has been criticism from Republicans as well, most notably from Senator Rick Santorum (R-PA), Craig Thomas (R-WY) and Senator Don Nickles (R-OK), who are concerned that the low-income subsidies are too generous and there are too few incentives to use private health providers. Yet the White House has stated that President Bush is “encouraged” by the agreement and is hopeful a bill can be passed this year.

There is sure to be much debate and many amendments by both parties in committee and on the floor, as Democrats will attempt to provide more generous drug benefits and solidify the future of the Medicare program and Republicans will seek to promote incentives for private health providers and limit the bureaucratic components of the program. It is also possible the specifics will change once the Congressional Budget Office releases its cost analysis of the proposal.

This proposal, despite its criticism, is seen as an important first step towards passing a drug benefit – something the Senate has never done. The House passed a drug benefit package in 2000, and again in 2002, but those proposals died in the Senate. Senate Finance committee member John B. Breaux (D-LA) said, “we’re closer now to actually [passing a prescription drug benefit] than I’ve ever seen.”