In November 2003, President Bush signed the Medicare prescription-drug bill, which will usher in the largest change in the Medicare program in terms of money and number of people affected since the program’s creation in 1965. The final version of the bill was controversial, passing by a small margin in both the House and Senate.
Conservatives criticized the bill for not giving a large enough role to the private sector as an alternative to the traditional Medicare program, for spending too much money, and for risking even larger budget deficits than already predicted.
Liberals criticized it for providing an inadequate drug benefit, for allowing the prescription program to be run by private industry, and for creating an experimental private-sector program that will compete with traditional Medicare.
In the end, passage was ensured with support from the American Association of Retired Persons (AARP), drug companies, private health insurers, and national medical groups—and with the usual political maneuvering.
Public support among seniors and other groups remains unclear. For example, the American Academy of Family Physicians supported the bill, but negative reaction by members led President Michael Fleming to write a letter explaining the reasons for the decision (www.aafp.org/medicareletter.xml). In addition, Republican concerns about the overall cost of the legislation seem borne out by the administration’s recent announcement projecting costs of $530 billion over 10 years, about one third more than the price tag used to convince Congress to pass the legislation about 2 months before.
This article reviews the bill and some of its health policy implications.
Not all details clear; more than drug benefits affected
Several generalizations about Federal legislation hold true with this bill.
First, while the bill establishes the intent of Congress, a number of details will not be made clear until it is implemented by the executive branch—the administration and the responsible cabinet departments such as the Center for Medicare and Medicaid Services. The importance of these implementation details is most relevant to the prescription drug benefit section of the bill.
Second, the bill changes or adds programs in a number of health areas besides prescription drugs (see Supplementary changes with the Medicare prescription drug bill). These additions partly reflected the need of proponents to satisfy diverse special interests (private insurers, hospitals and physicians, rural areas) and thereby gain their support for other parts of the bill that were more controversial, principally the drug benefit and private competition for Medicare. Thus, there is funding to increase Medicare payments to physicians and rural hospitals and to hospitals serving large numbers of low-income patients.
Supplementary changes with the Medicare prescription drug bill
- Medicare payments to rural hospitals and doctors increase by $25 billion over 10 years.
- Payments to hospitals serving large numbers of low-income patients would increase.
- Hospitals can avoid some future cuts in Medicare payments by submitting quality of care data to the government.
- Doctors would receive increases of 1.5% per year in Medicare payments for 2004 and 2005 rather than the cuts currently planned.
- Medicare would cover an initial physical for new beneficiaries and screening for diabetes and cardiovascular disease.
- Support for development of health savings accounts that allow people with high-deductible health insurance to shelter income from taxes and obtain tax deductions if the money is used for health expenses.
- Home health agencies would see cuts in payments, but patient co-pays would not be required.
- Medicare Part B premiums (for physician and outpatient services) would be greater for those with incomes over $80,000.
Third, the changes also reflect genuine goals of improving health by expanding Medicare coverage of preventive services and requiring participating hospitals to submit quality-of-care data.
Prescription drug coverage under the new bill
Although many seniors have drug coverage through retirement health plans or Medigap policies purchased privately, about one quarter of beneficiaries (some 10 million people) do not have such coverage. Even those with drug coverage may have difficulty affording recommended medications since the median income for a senior is little more than $23,000. Many physicians have seen the ill effects of seniors not filling their prescriptions or skipping doses of prescribed medications.
Until the benefit takes effect. The actual prescription drug benefit will not begin until 2006. Until then, Medicare recipients will be given the option of purchasing a drug-discount card for $30 per year starting this spring. It is estimated these cards may save 10% to 15% of prescription costs. In addition, low-income seniors will receive $600 per year toward drug purchases.
After it takes effect. The drug benefit starting in 2006 will be funded through a complex arrangement of patient and government payments (Figure).