President Bush believes the Nation has a moral obligation to fulfill
Medicare's promise of health care security for America's seniors and
people with disabilities. Medicare has provided this
security to millions of Americans since 1965.
However, as
Medicare's lack of prescription drug coverage demonstrates, Medicare is
not keeping up with the rapid advances in medical
care. Medical care this century holds the promise of
improving and extending life through countless
innovations.
To ensure that Medicare continues to provide a
secure entitlement for access to modern health care, on July 12, 2001,
President Bush proposed a framework to strengthen Medicare and address
its financial security.
As the President continues to work with Congress to address the
threats to our Nation's security, he will also work with Congress to
enact legislation this year to address the problems facing
Medicare.
In his budget and State of the Union address, the
President will renew his commitment to provide prescription drug
coverage in Medicare, based on the framework for bipartisan legislation
that he proposed in July 2001. The President's budget
includes $190 billion in net additional spending for improving
Medicare.
Many improvements in Medicare, such as full implementation of a
prescription drug benefit, will take several years to set
up. But some needed improvements in Medicare benefits can
begin to take effect sooner, by building on existing programs.
The
President's budget will include proposals which can be implemented
quickly as part of legislation to improve Medicare
benefits. The proposals are based on ideas that have been
proposed previously by Democrats and Republicans. They
include:
- Building on the proposed Medicare Rx Drug
Card to give seniors access to drug discounts of 10 to 25 percent, by
quickly putting in place the structure for a Medicare drug benefit that
uses the best features of private drug benefits to get lower prices
from drug manufacturers.
Implementing a new
'model waiver' program in Medicaid, Pharmacy Plus, which will help
states use their Medicaid programs to provide prescription drug
coverage for seniors who need help the most - including 365,000
low-income seniors in Illinois who will get new drug coverage through a
Medicaid waiver approved today.
- Helping
states implement comprehensive drug coverage for low-income
beneficiaries as quickly as possible, as part of the Medicare drug
benefit. The Federal government will pay 90 percent of the costs of
comprehensive drug coverage for beneficiaries with incomes between 100
and 150 percent of poverty.
This will provide comprehensive
drug coverage for up to 3 million additional low-income Medicare
beneficiaries without drug coverage now, and even more when the
Medicare drug benefit is fully implemented, while easing the fiscal
pressures on states that already provide prescription drug assistance.
-Providing better private health plan options
for Medicare beneficiaries who prefer them by directing almost $4
billion to help correct chronic underpayments to Medicare's private
plans and to create new incentives for popular coverage options like
'point of service' plans that are essentially unavailable to Medicare
beneficiaries today.
-Giving seniors access to
two additional Medigap (supplemental coverage) plans, with updated
benefits that provide better protection against high medical expenses
and assistance with prescription drugs at a more affordable cost than
the current standard Medigap plans.
I. PRESIDENT'S FRAMEWORK FOR STRENGTHENING MEDICARE
Medicare needs better benefits, including a prescription drug
benefit, like modern health insurance plans. Medicare's
outdated benefit package does not cover prescription drugs and does not
provide timely, consistent coverage for many modern technologies and
preventive treatments.
It does not protect beneficiaries against the
high costs of treating serious illnesses, and it imposes unnecessary
regulatory burdens on providers and patients.
As a result,
seniors often do not receive appropriate, up-to-date treatment for
their health problems. Most other insurance programs, including the
program available to all Federal employees, provide reliable options
for getting modern health insurance benefits. However,
Medicare's options are actually becoming more limited.
The President believes that we must give seniors better
options. He also believes that any improvements in Medicare
should not force changes on today's seniors who are satisfied with
their current coverage.
Medicare is not financially secure for the retirement of the Baby
Boom. The 77 million Americans who will be in Medicare by 2030 are
counting on Medicare's promised benefits.
Yet Medicare's fund for
hospital insurance will face cash flow deficits beginning in 2016, and
Medicare's fund for its other benefits will likely require a doubling
of beneficiary premiums and of Medicare's claims on general revenues to
remain solvent over the next 10 years. Medicare's bifurcated
accounting disguises the true fiscal health of Medicare and makes it
difficult to plan ahead.
President Bush has worked with members of Congress from both
parties to develop a framework for a modernized Medicare program and
for keeping Medicare's benefits secure. Modernized Medicare
includes an improved traditional fee-for-service plan, and improved
health insurance plan options. The President's framework for
bipartisan legislation includes the following principles:
- All seniors should have the option of a
subsidized prescription drug benefit as part of modernized Medicare.
- Modernized Medicare should provide better
coverage for preventive care and serious illnesses.
- Today's beneficiaries and those approaching
retirement should have the option of keeping the traditional plan with
no changes.
- Medicare should provide better
health insurance options, like those available to all Federal
employees.
- Medicare legislation should
strengthen the program's long-term financial security.
- The management of the government Medicare plan
should be strengthened so that it can provide better care for seniors.
- Medicare's regulations and administrative
procedures should be updated and streamlined, while the instances of
fraud and abuse should be reduced.
- Medicare should encourage high-quality health care for all seniors.
For more information:
www.whitehouse.gov/news/releases/2001/07/medicare.pdf
II. IMMEDIATE ASSISTANCE FOR SENIORS
AS PART OF LEGISLATION TO STRENGTHEN MEDICARE
Medicare Rx Drug Card Program
Approximately 10 million seniors and persons with disabilities have
no prescription drug coverage. As a result, even though they
are among the heaviest users of prescription drugs, seniors often must
pay full retail price for their prescriptions.
Most privately-insured
Americans pay significantly lower prices, because their private
insurance plans allow them to use the purchasing power of large groups
to get discounts from manufacturers.
The President believes that
Medicare should help seniors get access to these tools right away, even
before a prescription drug benefit is fully implemented. Using
competitive tools to get lower prices for drugs and better pharmacy
services is a common feature of major Democratic and Republican
proposals to provide a prescription drug benefit.
In conjunction with his framework for Medicare legislation, the
President announced an initiative to create a Medicare-endorsed Drug
Card Program, to help seniors get lower drug prices right
away.
The Drug Card will not only provide some short-term
relief for seniors; it will also give the Medicare program needed
experience in administering a Medicare prescription drug benefit.
Seniors' groups such as the AARP support the Drug Card Program, calling
it 'a positive first step toward a prescription drug
benefit.'
The implementation of the drug card has been
blocked temporarily by an injunction from United States District Court
for the District of Columbia. However, the Court has stayed the
injunction while the Department of Health and Human Services submits a
revised drug card proposal for public comment.
The improved proposal
reflects comments and creative new ideas that followed the initial
announcement of the card. For example, several drug
manufacturers have announced new programs that provide drug discounts
for low-income seniors, illustrating the kind of assistance that the
drug card will help make more widely available.
The formal
'notice and comment' process on the proposed drug card will permit
further improvements in the program before it is implemented.
Seniors today have some access to voluntary discount cards that
provide pharmacy discounts of about 10 percent on average.
Privately-insured Americans regularly achieve additional savings of
between 2 percent to 35 percent on brand name drugs through
manufacturer discounts.
We expect that the Medicare Drug
Card will help seniors get access to some of the manufacturer discounts
achieved by insured drug card programs, and the discounts will increase
as prescription drug coverage is phased in, for the following reasons:
- The initiative proposes that card sponsors
secure manufacturer rebates, and pass them through to pharmacies and
beneficiaries, resulting in lower prices.
- The initiative would provide education
programs targeted to Medicare beneficiaries about generic substitution,
drug utilization, pharmacist services and other ways to lower
prescription drug spending and get higher-quality pharmacy services.
- The initiative would allow Medicare
beneficiaries to pool together to use their buying power to get better
prices from drug manufacturers. Drug Coverage for Low-Income Seniors
through Pharmacy Plus Model Waiver Program
A number of states have asked for Federal approval to use the
Medicaid program to extend drug-only coverage to senior citizens and
people with disabilities who are not otherwise eligible for
Medicaid.
States are also concerned about rising drug costs
in Medicaid and have been exploring common private-sector cost-control
mechanisms, like preferred drug lists, as a way of moderating drug
spending. Medicaid law and federal regulations, however,
have discouraged the use of these management tools.
The Administration has developed a model Pharmacy Plus drug waiver
that states can use to provide drug-only coverage to low-income
Medicare beneficiaries through Medicaid.
These waivers will
permit states to provide drug coverage and implement private-sector
benefit management techniques in their Medicaid drug programs. Although
it will incur costs for a new population of individuals, the model
waiver program is budget neutral because it will provide more
cost-effective drug coverage for persons with Medicare and other
coverage who might otherwise have periods of eligibility for
Medicaid.
Details depend on the characteristics of state
Medicaid programs, with states usually able to extend drug coverage up
to around 200% of poverty.
A newly-approved waiver for
Illinois will now provide drug coverage to 365,000 Medicare
beneficiaries in the state, indicating the potential for this program
to provide assistance now to seniors who most need it.
Medicare Low-Income Drug Assistance
The President's Medicare Low-Income Drug Assistance proposal would
make it possible to quickly phase in comprehensive drug coverage for
Medicare beneficiaries up to 150 percent of poverty as part of Medicare
drug benefit legislation, even before the Medicare benefit is fully
phased in.
States have the option to expand comprehensive
drug coverage to Medicare beneficiaries up to 100 percent of poverty at
current Medicaid matching rates. As an incentive to states
to further expand coverage to 150 percent of poverty (approximately
$17,000 for a family of two), the Federal government would pay 90
percent of the cost of expanding drug benefits from 100 to 150 percent
of poverty.
States would be responsible for the remaining 10
percent of the cost. This proposal is expected to lead to
coverage for up to 3 million Medicare beneficiaries who would otherwise
not receive coverage until the Medicare drug benefit is fully
implemented, which will require several years.
In addition,
states that already provide comprehensive drug coverage to low-income
beneficiaries would be eligible for the Federal funding, easing the
fiscal pressures on states that provide these benefits.
Federal support for comprehensive drug coverage for low-income
beneficiaries is a part of all major Democratic and Republican drug
benefit proposals, and is part of the President's framework for
strengthening Medicare.
Because states already have
mechanisms in place to provide assistance to low-income Medicare
beneficiaries, this proposal permits relatively quick implementation of
drug coverage for the beneficiaries who need help the
most.
States would also have the flexibility to provide the
comprehensive drug benefit using the infrastructure of the
Medicare-endorsed prescription drug card program and any other Medicare
infrastructure for drug assistance as soon as it is available.
The budgetary cost of this program is approximately $1.2 billion in
FY 2003 and $8 billion in fiscal years 2003-2005. Federal support for
comprehensive drug coverage for low-income beneficiaries would continue
even after the Medicare drug benefit is fully implemented, and would be
integrated with it.
Essential Additional Funding to Sustain Private Health Insurance
Plans
The President's framework for strengthening Medicare calls for a
fair payment system for private plan options for Medicare
beneficiaries, like the system that provides reliable health insurance
options to all Federal employees in the Federal Employees Health
Benefits program.
Private plans have long been the preferred
choice of 6 million Medicare beneficiaries. This is not surprising,
because the private plans allow beneficiaries to receive more
up-to-date benefits than are available under traditional
Medicare.
The enhanced benefits can include prescription
drugs, disease management programs, and better preventive care services
- benefits widely available to the nonelderly and to members of
Congress. Frequently, private plans have provided much lower
cost sharing for required Medicare benefits as well.
Action is needed now to ensure that these benefits remain available
to Medicare beneficiaries, because the current 'Medicare+Choice' system
for paying private plans is not giving beneficiaries the options they
deserve.
Since the new payment system was implemented in 1998,
hundreds of Medicare+Choice organizations have left the program or
reduced their service areas, adversely affecting coverage for hundreds
of thousands of beneficiaries - reversing what had been an upward trend
in private plan availability and enrollment.
In addition,
the remaining plans are offering less generous drug benefits and other
coverage. Moreover, 'open network' plans like Preferred Provider
Organizations (PPOs) and 'point of service' plans have become popular
among privately covered individuals, yet only two PPOs participate in a
few counties in the entire Medicare program.
Annual increases in Medicare+Choice funding have failed to reflect
rising health care costs, leading to unreliable options and reduced
benefits for seniors.
Specifically, between 1998-2002,
Medicare+Choice rates increased at 2 or 3 percent per year, or only
11.5 percent overall, in counties where the majority of Medicare+Choice
enrollees live.
This compares with increases in Medicare
fee-for-service (government) plan spending by over 21 percent and
medical cost inflation of 9 to 10 percent per year and the same time
period.
Because payments to private plans do not reflect
conditions in Medicare and the health care marketplace, private health
plans cannot meet beneficiaries? needs.
The President's budget proposes to take urgently needed steps
toward the equitable payment system for private plans proposed in the
President's framework for strengthening Medicare. The
proposal will modify the Medicare+Choice (M+C) payment formula to
better reflect actual healthcare cost increase and allocate additional
resources in 2003 to counties that have received only minimum updates
over the last few years.
This would make it possible for more private
plans to remain in Medicare until the new payment system is phased
in. Proposals to help sustain private plans in Medicare are
supported by both Democrats and Republicans.
Under the President's proposal, all plans will receive payment
increases equivalent to national fee-for-service cost growth minus 0.5
percent.
For 2003, plans in counties that have been
receiving the minimum updates (2 to 3 percent) in the last 4 years will
receive a 6.5 percent increase in payments. The budget also
proposes incentive payments for new types of plans that enter
Medicare+Choice to encourage a variety of new managed care plans
(e.g., PPOs) to participate in
Medicare+Choice.
The augmented payments to improve
beneficiaries' options would cost $3.7 billion between 2003-05 and
would permit about 7 percent more Medicare beneficiaries to join
Medicare+Choice plans.
Additional Medigap Options for Affordable Protection Against High
Out-of-Pocket Costs
Medicare's statutory benefits have enormous gaps - copayments as
high as 50% on many services, poor coverage for preventive care, and no
limits on out-of-pocket spending.
For this reason, nearly
all seniors in the fee-for-service (government) plan have supplemental
insurance, mainly through Medigap. But the cost of
supplemental coverage is rising much more rapidly than the cost of
Medicare, and the 'standard' Medigap plans have barely been updated in
more than a decade. As a result, seniors face important
problems in getting the coverage they need:
- Limited drug coverage: The
three existing Medigap plans that cover prescription drugs offer an
unattractive drug benefit coupled with a rich package of medical
benefits. The richness of the non-drug package and the cost
of drugs make the plans prohibitively expensive to most beneficiaries.
Fewer than 500,000 beneficiaries receive a Medigap drug benefit today.
- First dollar coverage: All of
the existing Medigap plans pay the up front costs of care for
beneficiaries, including the first dollar spent on care. Research has
demonstrated that first dollar coverage, defined as the absence of any
upfront copays, coinsurances, or deductibles paid by the beneficiary,
results in increased utilization and higher costs.
- Antiquated benefit
packages: The plans have been the same since 1990 and have
not kept up with the evolution in the Medicare program over the last
decade. The concentration of enrollment in only three to
four plans suggests that the other available plans are not providing
the range of options that beneficiaries need.
The President's framework for strengthening Medicare includes
updated, more affordable Medigap options for beneficiaries who choose
the improved Medicare benefit package. Beneficiaries who wish to keep
their current benefits with no changes would be able to do
so.
To provide more affordable Medigap options before the
improved benefit package becomes available, the President's Budget
proposes the addition of two new Medigap plans to the existing ten
standardized plans.
The new plans will include prescription drug
assistance, protection against high out-of-pocket costs, and buydown of
most of the cost of Medicare deductibles and copays. The idea of making
updated Medigap plans available has long had bipartisan
support.
For example, President Clinton proposed to update
Medigap with supplemental coverage that included reasonable limits on
cost sharing. The new plans will provide new opportunities
for savings for beneficiaries, with a one-time opt in for current
beneficiaries.
The new plans would also provide modest
budgetary savings, due to the elimination of first-dollar coverage.