NASW Seeks Changes in Medicare Prescription Drug Legislation

The Issue at Hand:

On June 26, the House and Senate passed Medicare prescription drug bills (S.1/H.R.1) that would make significant changes in Medicare’s program structure and benefits. The House and Senate versions each have positive elements; they would help millions of older and disabled Americans — especially those with low incomes and with very high drug expenses — with the cost of outpatient prescription drugs. However, both bills are inadequate, containing major gaps in coverage. Additionally, they could lead to potentially unaffordable increases in cost sharing requirements and loss of coverage for those who already have health insurance from a former employer.

The two bills are now moving to a difficult conference committee phase, and NASW has begun work to make the final bill the best prescription drug benefit possible. The conference committee is expected to begin negotiation on the final agreement this week, a process expected to take a number of weeks, potentially extending past Labor Day. NASW will be supporting a number of specific policies, which will address the shortcomings of the two versions, during these negotiations.

Background:

The Senate and House proposals have key similarities: a budget limit of $400 billion over 10 years; expanded out of pocket protections for lower income beneficiaries; a high catastrophic cap; and a gap in coverage, called “the doughnut.” The Senate bill, to be implemented in 2006, includes a $35 average monthly premium and a $275 annual deductible (indexed to the increase in prescription drug costs). The House bill would also have about a $35 monthly premium; significant beneficiary cost sharing; a gap in coverage; a stop loss limit; and additional assistance for people with low incomes. The House bill also has very controversial provisions that would make it more expensive for those who wish to stay in the traditional Medicare program, as well as a means-testing provision for higher income beneficiaries.

NASW’s Major Issues of Concern:

The National Association of Social Workers (NASW) is pleased that Congress is considering ways to provide prescription drugs to Medicare beneficiaries, but we are very concerned that the House bill would privatize the Medicare delivery system in order to administer this new benefit. In particular, privatization in the House bill has significant potential to negatively affect access to quality health care for persons in need of services. Following are our top priority concerns for the conferees to address:

Privatization must not undermine the basic fee for service program

The House bill requires that the traditional fee for service Medicare program compete against private plans, based on price, beginning in 2010. The proposed premium structure is heavily weighted against the fee-for-service program, thus transforming Medicare from a defined benefit program to a defined contribution system. Ultimately, this could result in the dismantling of Medicare as a universal entitlement. Because private Medicare plans tend to aggressively recruit younger, healthier seniors, open competition will mean rising out-of-pocket costs for the vast majority who prefer to remain with the stable benefits and premiums of traditional Medicare. The result of the competition from the House bill will be the transformation of Medicare’s universal, national risk pool into a multitude of regional pools that are segmented by age, income, residence, and health status.

Increases in premiums and deductibles must be affordable

Both bills add burdensome new deductibles and co-payments to traditional Medicare and the new prescription drug benefit. High premiums and deductibles undermine the social insurance nature of Medicare, because near-poor beneficiaries would pay for all drug costs in the benefit gap and incur large copayments for covered drugs. Many would pay a very significant amount of their annual income, even with the new coverage. The final bill must move to close this benefit gap.

Benefits must not be means tested

Medicare reform must not include means testing. Relying on income levels to determine access to Medicare benefits would severely undermine Medicare's universal nature and fairness. Under the House bill, Medicare would be required to collect beneficiary income data and vary the level of the catastrophic cap based on income. This provision raises relatively little revenue, but undermines support for the program from those who pay more into it, since the Medicare payroll tax is not capped. This provision also raises concerns regarding personal privacy and program efficiency. All Medicare beneficiaries should have access to the same level of protection.

The benefit must apply equally to Medicaid dual eligible persons

The Senate bill does not offer the Medicare drug benefit to seniors who are eligible for the Medicaid program. The House bill would slowly phase in the benefit for Medicaid and Medicare dual eligible persons. The final bill must ensure that all beneficiaries receive their drug benefit through Medicare, so that the program remains one of social insurance, not welfare.

Prescription drug coverage must be adequate

The gap in drug coverage in both the House and Senate bills must be reduced. Many beneficiaries cannot afford to pay 100 percent of their drug costs between the basic benefit cap ($2,001 in the House and $4,501 in the Senate) and the catastrophic drug stop loss ($4,900 in the House and $5,813 in the Senate). This gap in coverage, plus the $250/$275 deductible, large co-payments, and "average" monthly premiums of $35 makes the plan either too expensive or not cost effective for many beneficiaries.

A reliable Federal fallback program is essential

Both bills create access to drug benefits through private plans. In rural areas, where few health plans may wish to market the new private prescription plans, the Senate bill creates a Federal fallback plan to ensure benefits are available to all beneficiaries who need them. Under the House plan, availability depends upon whether (and at what price) private plans will be willing to offer coverage. The House bill’s lack of a Federal fallback feature denies a stable drug benefit to commercially unprofitable areas of the country. This is especially important, because Medicare’s recent experience with the private insurance market raises major doubts about the availability and stability of private plans attempting to serve this population. The bill must ensure that beneficiaries everywhere have access to at least one defined and standard drug plan.

Timing:

There is uncertainty in Congress over how long the conference committee will take to negotiate the final bill. Many expect consideration to continue after the August congressional recess, although this is speculative. The Senate has appointed its conferees and the House is expected to do the same shortly. NASW will be advocating these policy outcomes during conference, targeting Members of Congress— particularly the conferees— for grassroots advocacy action. After we see the conference agreement, NASW will develop a position on whether or not to support final passage.