The landmark Medicare bill approved by the Senate on Tuesday will transform the way senior citizens pay for their prescription drugs, initially lowering their costs and eventually changing how they get their health care for decades to come.
Beginning in April or May, seniors can expect to see lower drug prices with a prescription drug card giving them discounts of approximately 10 percent to 25 percent. According to executives at Walgreens, the average monthly retail price of a 30-day supply of the cholesterol drug Lipitor is $77 for a 10-milligram dose, for example, and the discount card would knock that price down to anywhere from $58 to $69.
The legislation, which President Bush plans to sign after Thanksgiving, will provide prescription drug coverage to 40 million seniors and people with disabilities, with the greatest benefit going to those with low incomes.
The Senate voted 54-44 in favor of the measure, the first major expansion of the Medicare program since it was created 38 years ago. It was passed by the House in a bitterly close vote early Saturday.
Sen. Dick Durbin (D-Ill.) voted against the bill; Sen. Peter Fitzgerald (R-Ill.) voted for it.
“Today is an extraordinary day,” proclaimed Senate Majority Leader Bill Frist (R-Tenn.), saying the plan unleashes the combined forces of the public and private sectors to deliver drugs and health care. “Today is a fateful day. Today is a red-letter day for seniors.”
But Democrats, who said a greater role for private insurers and pharmaceutical companies could undermine the Medicare program, insisted that seniors would render the ultimate verdict.
“The real judges are the folks sitting at their kitchen tables, pulling out a pad and pencil and deciding if it is a good deal for them,” said Sen. Debbie Stabenow (D-Mich.), a harsh critic of the legislation.
Senate Minority Leader Tom Daschle (D-S.D.) almost immediately introduced legislation to repeal several of the more controversial aspects of the bill, as well as to allow seniors to import drugs from Canada and Western Europe.
“This debate is not over,” he said. “It’s just beginning.”
The new prescription drug cards will only stay in effect until 2006, when the long-term program kicks in.
Under the long-term plan, senior citizens will be able to enroll in a prescription drug program under Medicare or take out private insurance that offers drug coverage. The Medicare premium would be roughly $35 per month, and there will be a $250 deductible. After that, insurance would cover 75 percent of drug costs up to $2,250.
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For most seniors, the prescription benefit would provide no coverage after the first $2,250 in drug costs, and coverage would not resume until a senior citizen had spent $3,600 out of pocket. After that, the insurance would cover 95 percent of drug costs.
For low-income seniors, all premiums and deductibles would be waived if their earnings do not exceed $12,123 a year, and there would be no coverage gap. Medicaid recipients with incomes at the poverty level would obtain their prescription drugs through the new Medicare program, paying $1 for generic drugs and $3 for brand-name medicines.
Cost control difficult
While the discount drug card is expected to save seniors money on their prescriptions, companies providing comprehensive drug coverage have had little success over the years reining in costs for consumers. By many estimates, employers and private health plans’ drug costs are rising 15 percent annually.
The legislation would allow drug plan administrators to restructure the benefit as they like, although the deductible could not be changed. For example, companies could decide to charge higher premiums but minimize the gap in coverage. They could also cover some drugs but not others, much like private health plans already in operation.
To provide extra benefits, health plans are expected to encourage seniors to use generic drugs, to promote mail order delivery and to create preferred lists of drugs so that doctors would prescribe less expensive medicines. Those strategies, health plan administrators say, will allow the private sector to “stretch” the standard benefit.
Yet dealing with an insurance company or a health plan will also yield the frustrations and headaches that consumers in traditional health plans encounter when the private companies and employers try to save money on drug costs, analysts said.
“For older seniors who aren’t really part of a current employer or company-sponsored health plan, this is going to be a new learning experience for them,” said Todd Swim, a health benefits analyst with the Chicago office of Mercer Human Resource Consulting. “People need to realize that this will cost money to provide comprehensive coverage.”
Besides providing a drug benefit, the legislation overhauls the traditional Medicare program and institutes a pilot program to let private insurers compete against Medicare in six cities beginning in 2010–one of the more controversial items in the bill.
Those six cities would be chosen by Health and Human Services Secretary Tommy Thompson. Already, several senators have asked Thompson not to select cities in their state. For example, Sen. Lincoln Chafee (R-R.I.) agreed to support Republican leaders on a procedural vote if they would ensure that Providence be excluded.
Pilot programs in 42 cities
Forty-two cities in the nation are participating in a smaller scale demonstration project with preferred provider organizations, called PPOs, providing health coverage to Medicare recipients, said Tom Scully, administrator of the Centers for Medicare & Medicaid Services, the agency that runs those programs.
Senate Democrats say they fear that the introduction of private insurance plans into the Medicare program will lead to the eventual dismantling of traditional fee-for-service Medicare, which allows seniors to choose their own doctors.
The three Democratic senators running for president all opposed the plan. Neither Sens. John Kerry (D-Mass.) nor Joseph Lieberman (D-Conn.) showed up for the final vote; John Edwards (D-N.C.) voted against the bill.
Also for the first time, the legislation will require seniors with annual incomes of more than $80,000 to pay higher premiums under Medicare Part B, which covers non-hospital services. The size of those premiums would increase to up to 80 percent for people with incomes above $200,000.
The legislation also will establish new tax-preferred health accounts, open to individuals with high-deductible insurance policies, giving them a tax break on money they save for health costs. Called Health Savings Accounts, they are a favorite of conservative Republicans.
Canadian drugs out
Over the protests of some lawmakers, the legislation will essentially prevent Americans from buying drugs in Canada by requiring the Health and Human Services Department to first certify that it is safe to do so. Thompson has said he would not do that.
The bill also prohibits the Medicare program from negotiating the cost of drugs with pharmaceutical companies, which some say would significantly reduce the costs of those drugs. Because of that, analysts say it will be just as difficult for Medicare to control its spending on drugs as it has been in the private sector.
Democrats have characterized the plan as a giveaway to large drug companies, and some analysts concurred that the drug industry will see a huge jump in profits.
“This is going to have to mean huge increases in their gross income because there is going to be an increase in demand for drugs,” said Timothy McBride, professor of health management and policy at St. Louis University School of Public Health. “The people that are not covered by Medicare right now will now get some coverage so there is some pent-up demand for drugs. That has got to be a big boon for the drug companies.”
Many health plans say they have been powerless to control physicians’ prescribing habits, and that seniors will be vulnerable to an onslaught of television ads encouraging consumers to try the latest and often most expensive brand-name drugs.
“The effect of this bill will be to vastly increase the demand for prescription drugs,” McBride said. “From an economist’s perspective, what that does is increase prices, not lower them.”