|
Over the strong objections of Democratic leaders, a Republican-backed prescription drug plan recently squeaked
through the House of Representatives. The plan’s structure for delivering benefits is deeply because it subsidizes HMOs to provide drug coverage, and the benefits seniors would are
uncertain. And the Republican plan does absolutely nothing to control drug costs—a health care crisis that affects not only
seniors but all working families.
The plan does not add prescription drug coverage to the regular Medicare benefits. Instead, “encourages” HMOs and private insurers to market a private drug plan. Therefore, there’s no guarantee—and considerable uncertainty —that all or
even many retirees would ever get coverage for their drug costs.
In key respects, the Republican plan is one more example of business as usual: The only sure winners under the plan are private insurers—HMOs—and big pharmaceutical companies.
Prescription drug coverage is the most important and most needed change in Medicare decades. Congress
should not gamble on program’s effectiveness or with the well-being of the nation’s seniors by entrusting HMO- insurance companies with delivery of the benefit.
A Deeply Flawed Approach:
Instead of embedding a strong and guaranteed prescription drug benefit within Medicare, the Republican plan
turns over critical benefit decisions to HMOs and private insurers. HMOs would decide whether to offer drug
coverage at all in a given area, what drugs to cover, the cost of coverage and how much retirees would have
to pay out of pocket. Because of the wide variation in the numbers of HMOs in different areas, geography
alone would decide how many options seniors have: In some cities, seniors would have many choices, while in others they would have few or none.
Previous congressional experiments in entrusting seniors’ health care coverage to HMO-style private
insurance companies have proved disappointing for millions of seniors—and disastrous for some:
- Since 1998, HMOs have pulled out of Medicare+Choice (the Medicare managed care program) in
droves, abandoning more than 2 million seniors in the process. In 1998, 346 HMO plans participated in the Medicare+Choice program. By 2001, that number had fallen to 178.
- Between 1999 and 2001, out-of-pocket expenses for Medicare recipients enrolled in HMOs rose by 43
percent for those in good hehealth, 53 percent for those in fair health and 62 percent for those whose
health is poor. From 2000 to 2001, the share of Medicare HMO enrollees with prescription
drug coverage fell from 78 percent to 67 percent. Over the same period, the share of enrollees charged
physician co-payments of at least $15 more than tripled, and the percentage charged co-payments for hospital admissions rose from 13 percent to 31 percent.
- Access to HMOs varies widely among seniors. Between 1999 and 2001, the share Medicare
beneficiaries with access to HMOs fell from 72 percent to 64 percent. overwhelming majority of rural beneficiaries—85 percent in 2001— have no access to Medicare HMOs.
Uncertain Benefits:
Even if the approach the Republican plan were workable, the Medicare participants would receive are far less
generous and far less certain promoters contend. An analysis by Kenneth Thorpe, a distinguished
professor Emory University’s School of Public Health, reports discouraging conclusions even based on “best case” assumptions about the plan. B
enefits for many seniors in and around the nation would run out every year before all the bills came in. Seniors still
would have to spend thousands annually for their medications. On average, seniors still would pay the overwhelming share of their drug-related expenses.
Dr. Thorpe found:
- seniors spending $333 to $400 each month on their medications ($4,000 to 4,800 per year), Medicare benefits would out in May or June. Think this won’t happen to many seniors? Think again. In Kansas, an estimated 23,940 seniors could end up in this bind.
- About 128,600 Kansas seniors—roughly two of every five likely to purchase coverageunder the
plan—still would have hefty drug bills. That’s because the Republican package is a “doughnut” plan
with a gaping hole in coverage. Under the plan, Medicare benefits would run out for participants when
their total drug expenses, the combination of Medicare’s share and the individual’s share, reached $2
,000 and would not start up again until total expenses reached a catastrophic cap of $4,800 (which translates into $3,700 in individual out-ofpocket payments).
- A projected 93,700 Kansas seniors, nearly 27 percent of those likely to buycoverage under the Republican plan, will have drug expenses that fall in the doughnut’s hole,
requiring them to spend
an average of more than $3,000 of their own money for medications, including $2,825 in out-of-pocket
expenses and $408 for premiums. An additional 34,900 who hit the catastrophic cap will spend more than $4,000 per year on average, including $3,700 out of pocket and $408 for premiums.
- Drug costs under the Republican plan will take an enormous bite from the incomes of
seniors of relatively limited means. An estimated 5,700 single beneficiaries and 12,300 couples with
annual drug expenditures between $2,000 and $4,800 and incomes that are only twice the poverty level
(a total of $16,988 for singles and $21,410 for couples in 2001) would spend 18.2 percent and 13.5 percent, respectively, of their pre-tax income on drugs.
- Another 2,100 singles and 4,600 couples in this income bracket would have drug expenditures that
exceed the catastrophic cap, requiring them to spend 23.2 percent and 17.2 percent, respectively, of their income on drugs.
- On average, Kansas Medicare beneficiaries will still pay 65 percent of their total drug costs
under the Republican plan. Medicare will chip in only about one-third—better than nothing but not
good enough.
As disappointing and disturbing as these conclusions are, they are extremely optimistic compared with what
retirees might actually get. Because of the proposed structure, retirees would be at the mercy of the private
health market in their area and what HMOs and private insurers were willing to offer. As
with Medicare+Choice, seniors in many areas may have no coverage at all, lose coverage after a start-up period or pay exorbitantly to get coverage.
|
|
Dr. Thorpe’s Methodology: Expenditure estimates are derived from March 2002 Congressional Budget Office data, which show the distribution of people and spending by various
spending thresholds based on current policy. The House bill will generally result in lower expenditures for those with insurance and similar expenditures for the uninsured (the uninsured will
spend more, but this is largely offset by the 30 percent reduction in baseline spending estimated as the cost management factor by the CBO). The analysis builds in estimates of changes in
spending for the uninsured once they receive drug coverage. For the insured, the cost management factor estimated for H.R. 4954 (approximately 30 percent) was applied to the spending
distributions. Counts of Medicare beneficiaries by state are from the Centers for Medicare and Medicaid Services (CMS). These estimates were inflated from 2000 to 2005, using a national growth
factor developed by the CBO. Distributions of income by state for Medicare beneficiaries were developed by merging three years of data from the March supplements to the Current Population Survey (CPS), 1999-2001. Estimates of the number of persons with Medicare only (no drug coverage) were developed through the CPS and the Medicare Current Beneficiary Survey. These estimates were developed for each
state, and the share of insured and uninsured were applied to develop a state-specific distribution of drug spending. Drug spending within each state was allocated on a proportional basis using
CBO estimates of total spending covered under the legislation. Additional Sources: The Henry J. Kaiser Family Foundation, The Medicare Program:
Medicare+ Choice, September 2001; The Commonwealth Fund,
Trends in Premiums, Cost-Sharing, and Benefits in Medicare+Choice Health Plans, 1999-2001, April 2001; Medicare Managed Care: Medicare+Choice at Five Years, April 2002.
|
