Prescription drugs under Medicare

For seniors, Medicare reform means getting a comprehensive drug benefit under traditional Medicare that is affordable and stable in price. They like preventive benefits and favor reforms that maintain Medicare as a program in which everyone contributes and everyone gets the same guaranteed benefits.

The National Committee to Preserve Social Security and Medicare supports a prescription drug benefit that is universal, comprehensive, affordable, guaranteed to all regardless of income or health status and offered as a standard benefit under Medicare. And, most importantly, we are committed to preserving the social insurance nature of Medicare.

Seniors who are spending an average of $200 a month on prescriptions need the assurance of meaningful prescription drug coverage. Yet the administration’s Medicare proposal would not give seniors this assurance. Instead, it uses the promise of prescription drug coverage for some to restructure Medicare and eventually undermine its social insurance principle – the same principle that now assures all seniors a defined set of benefits and should guarantee all seniors a defined prescription drug benefit.

We recognize that the country faces a deficit and fiscal constraints, just as we all recognize that the administration’s suggestion of spending $400 billion over 10 years for Medicare, including drug coverage, covers only a fraction of the $1.8 trillion that seniors will be spending on drugs over the next decade.

Can private insurance models provide these seniors the affordable, predictable and reliable health coverage they need? Let’s examine the scenario. Beneficiaries in different plans would have different benefits and costs. Those costs and benefits could dramatically change every year, as they have in managed care plans during the past five years. If premiums and costs increased, poorer and sicker beneficiaries might not be able to afford the same coverage as others. So far, evidence does not indicate that private insurance can promise seniors that premiums would not fluctuate substantially from year to year.

There is an underlying assumption operating in a number of Medicare proposals that private plans give better care. Certainly this assumption is present in the administration’s plan, which creates a new category of private Medicare insurance plans and uses private plans to deliver prescription drug coverage.

The shortcomings of private plans are well documented, from the earliest unsuccessful Medicare-risk HMO demonstration projects to today’s uncertain Medicare+Choice. Since the enactment of the Balanced Budget Act of 1997 that created Medicare+Choice, managed care plans have dropped more than 2.4 million seniors, many of whom enrolled for the drug coverage the plans provided. When plans drop seniors, there often is not another Medicare managed care plan in the area, especially in a rural setting.

Medicare+Choice premiums have increased by 37 percent, compared to an 8 percent increase in Medicare Part B premiums. For example, one of our members, Lucille Bryson, joined a Medicare+Choice program five years ago, paying $19.98 a month. Over the next three years, her premiums increased to $80 a month and she says that her benefits are now being cut. Sadly, Mrs. Bryson is not unique.

HMOs have spent, on average, between 10 and 15 percent of their revenue on administrative costs compared to Medicare’s 2 percent. The dramatic increase in premiums and administrative costs are further evidence that the private sector does not have the track record to support the assertion that it can provide seniors adequate prescription drug coverage for a reasonable cost.

Managed care plans continue to ask Congress for more money to run the Medicare+Choice programs and threaten to refuse to cover seniors. When Congress did increase payments by $1 billion to plans in 2000, more than 544,000 beneficiaries still lost coverage

This information gains significance when considering whether to divert prescription drug coverage to private plans and funnel beneficiaries to private Medicare plans. Such plans, if modeled after Medicare+Choice, would perform in a manner similar to that of managed care, resulting in a policy of offering Medicare beneficiaries low-cost, low-coverage plans that attract younger, healthier seniors, leaving the sickest and oldest unable to afford the more generous plans.

Excerpted from the Congressional testimony of Barbara B. Kennely, president of the National Committee to Preserve Social Security and Medicare (