March 04, 2003 -- Newest twist on Medicare restructuring


Bush says he's now offering a pharmacy benefit to seniors who stay on
fee-for-service Medicare, but it's only for truly catastrophic cases.




New York Times, March 4, 2003

White House Unveils Medicare Plan

By ROBERT PEAR

WASHINGTON, March 3 - The White House unveiled its plan tonight to
overhaul Medicare, saying it would offer comprehensive coverage of
prescription drugs and preventive services to people who join private
insurance plans.

The Bush administration backed away from its idea to offer no drug
benefits to elderly people in the traditional fee-for-service Medicare
program. But drug benefits available through private plans would be
far more extensive, so Medicare recipients would have strong
incentives to join private plans.

More than 85 percent of the 40 million Medicare beneficiaries are in
the original fee-for-service program, which gives people a free choice
of doctors but offers little coverage of prescription drugs outside
hospitals.

President Bush plans to set forth his "framework to modernize and
improve Medicare" in a speech to the American Medical Association on
Tuesday. A senior administration official disclosed details tonight,
after Congressional Democrats attacked the proposal as inadequate.

Administration officials said the proposed new drug benefits could be
available on Jan. 1, 2006, if Congress passed legislation this year.

"To give seniors more immediate help," the White House said, "the
president is proposing to make a prescription drug discount card
available to all seniors and to provide an additional $600 subsidy to
low-income participants for their prescription drug costs."

The administration said the discount card could reduce retail drug
prices by 10 percent to 25 percent.

Senator Tom Daschle, Democrat of South Dakota, the minority leader,
denounced the proposal. "The president's new plan still privatizes
Medicare," Mr. Daschle said. "It still requires seniors to leave the
traditional Medicare program if they want insurance coverage that
helps them with the routine costs for medications."

John C. Rother, policy director of AARP, an advocacy group for older
Americans, said: "At least, the Bush administration is moving in the
direction of providing a drug benefit to people in the traditional
Medicare program. But most beneficiaries will probably not consider
the new proposal adequate."

Under the latest version of the administration's proposal, people in
the traditional Medicare program would receive two kinds of
assistance - the discount card and protection against very high drug
expenses - without paying any additional premiums.

Administration officials said the catastrophic coverage would take
effect after a beneficiary's drug expenses exceeded a certain amount.
Last week they said that amount was $4,500 to $7,000. But tonight
they declined to specify the threshold.

The Congressional Budget Office says that 8 percent of Medicare
beneficiaries have drug costs exceeding $6,000 a year. But this group
accounts for a large share of medicines used by the elderly: one-third
of all spending on outpatient drugs for Medicare recipients.

The official said Mr. Bush wanted to work out details like the amount
of catastrophic coverage with Congress. The decisions could have
immense political implications. Mr. Bush has promised drug benefits
to the elderly, and Democrats plan to attack him if he does not
deliver.

Lawmakers from both parties insist that generous drug benefits must be
available to people in the original fee-for-service program, as well
as through private plans. The private plans include health
maintenance organizations and loose networks of doctors and hospitals
known as preferred provider organizations.

Democrats say that few elderly people would get tangible benefits from
the president's proposal. The discount card is "of very, very
marginal value," Mr. Daschle said.

In a summary of its proposal issued tonight, the White House said:
"Those seniors who are happy with their current coverage in
traditional Medicare will be able to keep that coverage and receive
help with the high costs of prescription drugs. Traditional Medicare
will continue to be there for those who want it, with help for
prescription drugs."

Under the president's proposal, people who join a private plan would
receive extra preventive benefits, including coverage of cancer
screenings with no co-payments or deductibles. In addition, they
would receive new protection against the costs of serious illnesses,
as proposed by Senator Charles E. Grassley, Republican of Iowa.

Dr. John W. Rowe, the chairman of Aetna, applauded President Bush's
new plan. "Aetna would certainly be very interested in
participating," Dr. Rowe said in an interview.

But Senator Edward M. Kennedy, Democrat of Massachusetts, said: "The
president's proposal is deeply flawed. He still says that senior
citizens will be required to leave the traditional Medicare program if
they want a decent drug benefit."

In his budget request last month, Mr. Bush said he wanted to spend
$400 billion in the next 10 years to "strengthen and improve
Medicare." New estimates from the Congressional Budget Office say drug
spending for Medicare beneficiaries will total $1.8 trillion in the
next decade.

Administration officials said they wanted to encourage Medicare
beneficiaries to enroll in private plans because they believed that
such plans would offer more options to the elderly and could adapt
more quickly to changes in medicine, including new technology.

In the enhanced version of Medicare envisioned by Mr. Bush, private
plans could offer different drug benefits, with different premiums,
co-payments and deductibles, "provided the benefit meets a basic
federal standard." The White House gave no details of the standard
coverage.

Democrats and many Republicans say Mr. Bush is relying too heavily on
private health plans. Many H.M.O.'s have pulled out of Medicare in
the past five years, saying federal payments were inadequate.

H.M.O.'s now decide county by county whether to accept Medicare
patients. In 12 states, beneficiaries do not have access to H.M.O.'s,
and many counties have just one private plan for the elderly. By
contrast, under Mr. Bush's proposal, the nation would be carved into
10 regions, and the government would sign contracts with several
private plans in each region.

Dr. Rowe, the Aetna executive, said, "The regions give you a large
enough population so it would be feasible for private health plans to
offer comprehensive benefits to seniors."

Senator Grassley said the drug benefits available in traditional
Medicare and in private plans must be "of equal value," though not
"exactly the same."

Democrats agree, and some go further. Drug benefits in the
traditional Medicare program should be the same as those available in
private plans, Mr. Daschle said.

Senator Debbie Stabenow, Democrat of Michigan, said: "The president
talks about Medicare reform, but those are code words. What he really
wants to do is to privatize Medicare."

White House officials insisted that Mr. Bush's proposal would fulfill
a promise he made in his State of the Union address in January. "All
seniors," he said then, "should have the choice of a health care plan
that provides prescription drugs."

On Tuesday, House Democrats plan to introduce Medicare drug
legislation that would cost $700 billion to $900 billion over 10
years. Democratic senators support a plan that would cost at least
$600 billion.