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SUSAN DENTZER: Medicare covers the lion’s share of hospital bills and doctor’s care for nearly 40 million of the elderly and disabled. But it offers almost no coverage for prescription drugs for patients not in the hospital. That’s a huge drawback, when prescription drugs are becoming an ever more important way of preventing and treating disease. So last year, and again, this year, President Clinton has proposed allowing all Medicare beneficiaries to enroll voluntarily in a new part of the program that would help pay for drug coverage.
PRESIDENT CLINTON: More than three in five of our seniors now lack dependable drug coverage, which can lengthen and enrich their lives. In good conscience, we cannot let another year pass without extending to all our seniors this lifeline of affordable prescription drugs.
SUSAN DENTZER: Under the President’s plan, beneficiaries would pay $26 a month in premiums, beginning in 2003. In return, Medicate would pay half of the beneficiaries’ annual drug costs. The government would start out by paying as much as $1,000 a year and eventually pay as much as $2500 a year of annual drug costs for seniors. When the President first unveiled this proposal last year, it ran into a wall of opposition. Much of it came from pharmaceutical drug companies that backed alternative approaches.
SPOKESPERSON: Seniors are joining hands to support new plans in Congress based on the work of the national bipartisan Medicare Commission — plans that help seniors who have private drug coverage to keep it, and seniors who need it, to get it. Knowing we are all covered — that’s peace of mind.
SUSAN DENTZER: Many lawmakers also feared that Medicare’s long-term financial woes might only be worsened by adding drug benefits without making other changes in the program. That concern has grown with the projected costs of the President’s proposal, now estimated at $160 billion over ten years.
Meanwhile, members of both parties have developed a number of alternatives to the President’s plan. And still more are likely to come forward later this year. Today, House Republicans put forth some details of legislation they hope to produce in coming weeks. Under the plan, no new drug benefit would be added directly to Medicare. Instead, private insurers would develop different drug benefit packages that beneficiaries could select. The government would chip in to help pay the costs for low-income seniors. Both Senate and House Republicans have earmarked $40 billion over five years for those subsidies. That suggests the proposal would fall far short of the comprehensive coverage that the President and many Democrats favor.
JIM LEHRER: And for more on this debate, Chris Jennings, deputy assistant to the President for health care policy, and Republican Congressman Jim McCrery of Louisiana. Congressman, let’s go through some of the details of your plan. Who actually would be helped by this? Who would be eligible for these kinds of subsidies?
REP. JIM McCRERY, (R) Louisiana: Well, all seniors, actually, would be eligible for one subsidy or another. First of all, just like the President’s plan, we would cover low-income seniors. That is, we would purchase for them a private insurance plan that would help them pay, and in fact pay for their prescription drug needs.
JIM LEHRER: And what is low income? How is it defined?
REP. JIM McCRERY: Well, the President’s plan goes up to about 135% of poverty. We think we can at least match that. We’re still having our numbers scrubbed by CBO to see how high we can take that.
JIM LEHRER: That’s the Congressional Budget Office.
REP. JIM McCRERY: Congressional Budget Office. But we think we can match the President’s plan on that score.
JIM LEHRER: Roughly what, $12,500 a year would be the… anybody who made less than that, a single person would be eligible for…
REP. JIM McCRERY: Would get 100% subsidy for the insurance plan, that’s correct.
JIM LEHRER: Okay.
REP. JIM McCRERY: But all seniors with benefits from another subsidy that we would provide to the insurance market to basically buy down the high-risk seniors, kind of a high-risk pool in the insurance market. And all seniors would benefit from that in the form of lower premiums.
JIM LEHRER: I see. In other words, you wouldn’t be targeted for individuals, though?
REP. JIM McCRERY: Right.
JIM LEHRER: It would be targeted just to bring down the whole price?
REP. JIM McCRERY: That’s correct.
JIM LEHRER: And why did you decide not to go through Medicare with this?
REP. JIM McCRERY: Well, we… Look, we think the President has a good plan. We think ours is better; his could be improved. One which it could be improved is by offering more competition for seniors’ drug costs. The President’s plan really allows HICVA to regulate and control….
JIM LEHRER: That’s the agency in the federal government that regulates…
REP. JIM McCRERY: That controls Medicare. And they keep their prescription drug benefit inside HICVA, inside Medicare, so it’s kind of a one size fits all. We would like to get more competition in the marketplace, to give seniors more choices for their prescription drug needs.
JIM LEHRER: And these subsidies would go directly to the individual, or would they go to the drug company or to the health insurance plan?
REP. JIM McCRERY: Well, all the details need to be worked out, but basically the low-income seniors would have their premiums paid by the government.
JIM LEHRER: I see. What do you think of this?
CHRIS JENNINGS, White House Health Care Policy Adviser: Well, it sounds good. I think the rhetoric is quite good, and we’re very pleased that the Republicans now are… have offered a proposal. As you know, the President’s been talking about prescription drugs since 1998. He talked about it in the State of the Union and he released a detailed policy last year. Our concern is unfortunately, the policy doesn’t meet the rhetoric or the principles. And if we can orient ourselves towards the goals and the principles, that’s one thing. But the policies we’re afraid don’t meet that.
JIM LEHRER: What’s the serious flaw in this? The most serious flaw?
CHRIS JENNINGS: I’d say that there’s three: One, we’re concerned that it’s under funded. Yesterday, the Budget Committee chairman of the House and the Senate indicated that they weren’t going to dedicate the full $40 billion to that drug benefit, as had been indicated previously, and actually would pay 20. They say up to $40 billion, but it might not be adequately financed in the first place. Secondly, it may not be even available to all beneficiaries. Primarily they’re relying on the insurance industry to provide voluntarily this option for Medicare beneficiaries. But if they don’t offer it, then Medicare beneficiaries don’t have that option. And even if they offer it, it may not be affordable.
JIM LEHRER: Well, let’s stop right there. We’ll come back to the cost thing in a minute, but Congressman, what about that? What assurance do you have that this would even be available to a low-income person?
REP. JIM McCRERY: Well, that’s a legitimate question, and we certainly have to craft a proposal that will encourage the private market to respond. And we think we will do that. Certainly we’re now vetting with the insurance industry, with the pharmaceutical companies, the plan so that we’ll have some idea that they will in fact put into the marketplace an array of choices for seniors. And if we can’t construct a plan like that then we’ll get together with Chris and maybe make some changes along his way. But we think our plan will work. We think it’ll offer better, more choices to seniors.
JIM LEHRER: But do those choices… Your point is Mr. Jennings, those choices do not exist now? Even if this money was available, there’d be no place for people to go buy this, is that right?
CHRIS JENNINGS: Today of course insurers can offer a drug benefit through the Medigap plan, but it’s very expensive and frequently inaccessible altogether. So it’s just not… We’re not interested in a false promise. If we’re going to tell Medicare beneficiaries of all incomes, that they have access to a benefit, then there should be a benefit. I think the last point I’d like to make about that though, that even if it is accessible, even though the insurance industry has stated previously that they won’t offer this because they’re afraid of offering this policy, they’ve indicated quite publicly that they don’t think structurally it works.
JIM LEHRER: Why? Excuse me. Why do they say that?
CHRIS JENNINGS: They have stated that in the past primarily because they’re concerned about risk selection, which is sick populations choosing that policy and the premiums going up and up and up and healthier populations not choosing the policy. And they’re afraid of offering it. And so our concern is that, if they don’t participate, there won’t be a drug option, and then it is an empty promise. But one last point: Even if it is made available, there’s no guarantee that it will be affordable because, you know, they’re talking about, in this proposal, about giving the insurance industry some subsidies. And I guess I would leave it up to the public to… you know, if they believe that, if we give money to the insurance industry, it will come back to them in lower premiums, we’d rather give the dollars directly to Medicare beneficiaries to make sure it’s affordable in the first place.
JIM LEHRER: Why did you decide, Congressman, to go that route, the subsidization rather than the individual route?
REP. JIM McCRERY: Well, first of all, let me say that if we were dealing with the plan that Chris is talking about and that he’s relating comments made by the insurance industry, I would agree with him. But our plan is not the same plan that the Medicare Commission put forward, it’s not the same plan that insurance companies commented on in the past. It’s a completely different plan, it’s a better plan. The new wrinkle is the subsidy at the top for those high-risk seniors that will allow insurance companies to get into the market, offer a product at a reasonable price. When we buy that down, it reduces the very high risk that Chris is concerned about.
JIM LEHRER: Have you drafted this plan, and have you come up with your critique of it in a vacuum, or have each much you talked to the insurance industry? For instance, have you all gone to them and say, “look, here’s what we want to do? Will you all do this, will you participate?”
REP. JIM McCRERY: We have to some extent. We’re in the process of vetting it some more. We’ve talked to actuaries. We’re going to talk with some more actuaries. We’re talking with CBO now, crunching numbers. But we think right now, after having talked with a number of folks in that industry, that we can make it work.
JIM LEHRER: And why do you think… Where do you draw your impression that these folks do not think it’ll work and will not probably participate?
CHRIS JENNINGS: Well, one, because they straight out have stated that they won’t participate on numerous occasions because of the risk selection concern. And I’ve got to tell you, we’re looking forward to more details of this policy because, frankly, I couldn’t tell you right now what the premium would be for the Republican proposal, what the benefit would be, and I’ll tell you, if I’m a Medicare beneficiary, I want to know all those questions before I’m able to make a decision as to whether it’s worthwhile for me. And once again, if it’s not even available, then it won’t be even affordable. And if it’s available, it won’t be affordable. And we have to get to the point where all of us can get together, work collaboratively, get a real meaningful drug benefit that’s available and affordable to all beneficiaries.
JIM LEHRER: But you said a moment ago that, at least from your perspective, from the President’s perspective, this is a major step that the Republicans have come this far on prescription drugs, is that right?
CHRIS JENNINGS: Well, we think from not mentioning the word last year to moving to rejecting a block grant approach to saying that they want to move towards a Medicare-type drug benefit, that that does mark an evolutionary change, and we welcome that. We want to make sure that change continues to have a meaningful benefit. And one last point: The President does have a specific policy that addresses all these issues. I could tell you what the premium is, I could tell you what the benefit is, I could tell you how much it costs, and I’m hoping that we can work together collaboratively in the context of reform to get a bill done this year.
JIM LEHRER: Congressman, is he reading your position correctly on this?
REP. JIM McCRERY: He’s reading it correctly insofar as our not having concretized the numbers, what the premium will be. We don’t know, that obviously, until we put the numbers out there and let the insurance market react. But I think the concept is sound. If we put enough money into it– and I’ll be frank, we don’t know that yet. We’re working CBO. We’re crunching the numbers. We think we have a plan that’s workable within the $40 billion range that we have to work with under the budget, and I understand what Chris said about the Senate, but this is the House. We’re working on our plan, and we’re planning to spend the $40 billion on the prescription drug benefit, plus some minor restructuring of the Medicare system.
JIM LEHRER: In a word to each of you, before we go — I’m sorry to interrupt, Congressman.
REP. JIM McCRERY: It’s quite all right.
JIM LEHRER: But if somebody’s watching this tonight, listening to the two of you, should they get up from the chair and say, “hey, there is going to be some kind of prescription drug program for seniors soon?”
REP. JIM McCRERY: I think there will be. I’d like to say it’s going to be this year. I’m confident we’re going to put on the floor of the House this year a plan that will pass.
CHRIS JENNINGS: Well, when we prepared our policy, we developed it to address the needs of the elderly. We’re concerned that this has been more oriented towards the needs of the pharmaceutical industry. What we’d like to really do is get to the point where we both mutually develop a policy that meets the needs of all older Americans and people with disabilities, and we think this year, if the Republicans can move off their current legislation and move towards the President, we can do that in the context of reform.
JIM LEHRER: But it is fair to say you’re not there yet?
REP. JIM McCRERY: Certainly not.
CHRIS JENNINGS: I think that’s fair.
REP. JIM McCRERY: We want to work with him.
JIM LEHRER: Thank you both very much.