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Contact Us Fall 2000; Volume 1, Number 1
Health Highlights

The Politics of Medicare Prescription Drug Coverage
Noëlle Sherber
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During the recent debate over the possibility of a Medicare pharmaceutical benefit, partisan party politics have unfolded. On the Republican side, the House leadership put forth a private insurance market approach in H.R. 4680, The Medicare Rx 2000 Act, narrowly passing it in the House by a largely party-line 217 to 214 vote. Across the aisle, the Democratic Congressional leadership and the Clinton administration have rallied behind a federally-sponsored program with a set benefit package - S. 2342, The Medicare Modernization Act. Despite the divisive nature of the debate, the political pressure to legislate may open the door for compromise. Presidential candidates George W. Bush and Al Gore have also proposed Medicare pharmaceutical benefit plans; these proposals evidence the same strong party ideologies as their Congressional counterparts.

The key differences between H.R. 4680 and S. 2342 are as follows:1

H.R. 4680 - Republican Plan
(passed June 28, 2000)
S. 2342 - Democratic Plan
(as revised June 24, 2000)
General Approach
Universal entitlement to choose among at least two subsidized drug plans with standardized actuarial value under a new Part D of Medicare, administered by a new Medicare Benefits Administration. Effective January 1, 2002. Universal entitlement to subsidized outpatient prescription drug coverage integrated into the Medicare program, under a new Part D, for all beneficiaries. Effective January 1, 2002.
Beneficiary premiums / Government subsidies of beneficiary premiums
Plans would be required to offer a standard drug benefit, or one that is at least actuarially equivalent. Premiums are estimated at $35-$40 per month in 2003 and would depend on the plan selected by the beneficiary. Premiums would be collected directly from the beneficiaries. The federal government would provide a premium subsidy, equivalent to 35% of benefit payments, for qualified drug coverage through re-insurance payments to plans.
The benefit would cover 50% of the beneficiary's annual drug costs up to $2,100 in 2003.
Beneficiaries would pay a uniform, national premium (estimated at $25 per month in 2002) set to cover 50% of the costs of the benefit, that would be deducted from Social Security checks. The benefit would be phased-in to cover 50% of the beneficiary's annual drug costs up to $5,000 (indexed after 2009).
Stop-loss
Federal government pays 100% of drug expenditures above $7,050 ($6,000 out-of-pocket) in 2003. </td> Federal government pays 100% of drug expenditures above $5,000 ($4,000 out-of-pocket) in 2002.
Government low-income subsidies
For beneficiaries below 135% of the federal poverty level, the government fully subsidizes the premium and 95% of other cost-sharing. Between 135%-150%, low-income premium subsidy declines to 0% on a linear sliding scale. States determine eligibility. For beneficiaries below 135% of the federal poverty level, Medicaid pays full premiums and co-insurance for drug coverage. Between 135%-150%, low-income subsidy declines to 0% on a linear sliding scale. States determine eligibility.
Annual drug deductible
$250 in 2003 No deductible
Coinsurance / Copayment
50%. 50% up to annual cap. Administering entities would be permitted to allow lower cost-sharing for some drugs, provided the Secretary determines total costs would not be increased.
Covered drugs
FDA-approved outpatient prescription drugs and biologicals. FDA-approved outpatient prescription drugs and biologicals, insulin and related syringes, needles, pumps, and smoking cessation programs.
Relationship to Medicare+Choice
Medicare+Choice plans providing actuarially equivalent or better drug coverange would be eligible for re-insurance subsidies. Medicare+Choice plans providing equal or better drug coverage would be eligible for full subsidies.
Relationship to employer-sponsored plans
Employer-sponsored plans providing actuarially equivalent or better drug coverage would be eligible for re-insurance subsidies. Employer-sponsored plans offering equal or better drug coverage would be eligible for subsidies.
Congressional Budget Office Estimated Federal Costs
$146 billion in new federal costs 2001-2010. (June 28, 2000 estimate.) $338 billion in new federal costs 2001-2010. (July 18, 2000 estimate.)

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