JEFFREY BROWN: The push is on this week for changes to Medicare that are being called the broadest expansion of the program since it was created in 1965. There are two key components: The scope of what would be the first prescription drug benefit in the program, and new moves towards using market forces to compete with traditional Medicare to help control costs. Much of this remains controversial, but a congressional vote on Medicare overhaul could come by the end of the week.
Joining me now is Tricia Neuman, director of the Medicare Policy Project at the Henry J. Kaiser Family Foundation. The foundation funds the NewsHour's health unit.
TRICIA NEUMAN: Thank you.
JEFFREY BROWN: Let's start with some background. What is pushing the drive towards change among seniors?
TRICIA NEUMAN: This is an issue that seniors really care about. This pressure is heartfelt. They're worried that many have multiple chronic conditions. They use a lot of prescriptions and they're paying a lot for them, and they have tremendous difficulty without drug coverage. So this is an issue that comes from seniors in town meetings, and members of Congress have heard a lot about it for many years and have said they want to do something about it.
JEFFREY BROWN: So the prescription drug benefit is getting the most attention or has over the last few years. We have a graphic here that can show some of the highlights. Let's take a look at that. So seniors, beginning in 2006, would sign up for stand-alone drug plan or join a private health plan. The premiums would be about $420 a year -- the deductible about $275. How would that work? How would these plans work?
TRICIA NEUMAN: So a senior in 2006 would face a choice. They could stay in traditional Medicare and get drug coverage through a private plan or they could choose to sign up for a managed care plan like an HMO or a PPO, where they could get their Medicare benefits and a drug benefit.
They would still pay their Medicare Part B premium but they would also pay a new drug premium which is estimated to be about $35 a month, but that could vary from plan to plan and from community to community, so it's just an estimate. So the decision is for seniors to choose among these plans in their areas to figure out which gives them the best deal.
JEFFREY BROWN: But the senior gets the choice.
TRICIA NEUMAN: But the senior gets the choice.
JEFFREY BROWN: Okay. Now let's look at the actual proposed coverage. We have another graphic here. Now, the government would pay 75 percent of the drug costs up to $2,200 annually. Then there would be no coverage up to about $5,000 in costs. Government pays 95 percent of costs after that. There's a gap there. It's been called the donut.
TRICIA NEUMAN: That's right.
JEFFREY BROWN: Why the gap?
TRICIA NEUMAN: Well, the gap is there because there's a limit in the amount of money that has been allocated for this drug benefit. Congress has said they will spend $400 billion, and that sounds like a lot of money but it only goes so far, so members of Congress have had to work to define a benefit that will fit within their $400 billion limit, and that has meant this sort of unfortunate gap in benefits and what that means is really $2,800 of expenses that a senior will have to pay before they get catastrophic coverage on top of their deductible and other cost sharing.
JEFFREY BROWN: Now you do a lot of surveys of seniors' expectations. What is it that they are asking for and how does that jibe with what we're seeing here?
TRICIA NEUMAN: Well, our surveys would suggest that seniors are expecting a benefit that looks a lot like what most workers get today. When you talk to seniors, they are looking for what they think of is a standard benefit. And typically these benefits don't have separate drug deductibles.
They don't have these gaps in their benefit package -- the donut hole, as you called it. And so our surveys and focus groups would suggest there could be some expectations gap where seniors are expecting more than they may get.
JEFFREY BROWN: The other key issue here is this move towards privatization in some form. Let's look at another graphic we have. It's known formally as "premium support." There's a demonstration project that would start up in six areas in 2010. Private plans would compete with traditional Medicare for seniors. Now, what does that mean?
TRICIA NEUMAN: Well, this is sort of the... one of the major issues in the debate. I think it comes down to a fundamental disagreement between people about what Medicare should look like in the future. There's this notion that some people believe that Medicare should be more privatized, that more people should move into private plans.
Others want to retain the stability and security of traditional Medicare. This demonstration project tests the idea of more private plan involvement, more competition, but it does so in just six areas of the country. How it all plays out is sort of an unknown because this is an idea that hasn't been tested.
JEFFREY BROWN: What is the hope of the proponents? What do they want it to accomplish?
TRICIA NEUMAN: Proponents hope that competition will lower the growth in spending for Medicare, will give seniors more choices in terms of the variety of plans from which they could choose. They like the idea of the flexibility that comes with a variety of private plans.
Opponents or skeptics wonder whether competition can save money for Medicare when they look at the history of competition in Medicare and elsewhere, they note that there's not a lot of evidence that would suggest that this will happen so there's real disagreement. There's real concern about what will happen to people who prefer traditional Medicare and whether they will end up footing the bill and paying higher costs over time.
JEFFREY BROWN: So another key area seniors will have to decide for themselves where to jump in.
TRICIA NEUMAN: Absolutely.
JEFFREY BROWN: Now there's a lot of other issues in this bill. One that jumped out at me is for the first time there would be a form of means testing. How would that work?
TRICIA NEUMAN: This is an idea that has been tossed around in Congress for many years and that the proposal would be to income relate the Part B premium. What that means is everybody still gets the same benefits but some people would pay more and the proposal would have people with incomes of over $80,000 a year pay a higher Part B premium than others on the program.
JEFFREY BROWN: Yesterday the AARP signed on to all this. How significant is that, as this plays out?
TRICIA NEUMAN: It's certainly a significant factor when AARP signs on. AARP obviously looked at the opportunity and decided or made the decision for themselves that this would be the right proposal to move forward with. They did acknowledge problems in the program and I think ultimately seniors will be evaluating how well this program will work for them, but it is important that AARP has endorsed it.
JEFFREY BROWN: Sum it up: A significant moment in the history of Medicare?
TRICIA NEUMAN: Oh, I think it's absolutely significant. If a Medicare benefit, drug benefit is passed, it's certainly significant. Whether you like this proposal or not, it's a significant change for the future of Medicare.
JEFFREY BROWN: Okay. We'll watch over the coming days. Tricia Neuman, thanks a lot.