TOPICS > Politics

Rx for Medicare

November 24, 2003 at 12:00 AM EDT

GWEN IFILL: The Medicare debate that began in the House over the weekend and continued in the Senate today featured unusually stark disagreement about what the measure would or would not do. Depending on which side you listened to, it represents either the end of Medicare as a government guarantee, or the beginning of a new, more expansive benefit. Here to sort some of this out for us is NewsHour health correspondent, Susan Dentzer.

Susan, we dearly hope you can sort some of this out of us.


GWEN IFILL: There are so many things this bill does. Let’s try to break it down one at a time. There is a debate over how good this bill is for low-income seniors.

SUSAN DENTZER: Again, nothing in this bill is simple, so it all depends. For low-income Medicare beneficiaries who are also qualified for Medicaid for various reasons, and there are about six million of those, they will move into getting their drug benefits no longer out of Medicaid but under Medicare.

Rather than having their benefits be different from state to state, they’ll get the standard Medicare benefit. They’ll have to make some modest payments to get those, $3, for example, for a prescription. But some people are afraid, some advocates are afraid that they’ll end up in effect paying more than they did when they were under Medicaid. So that’s one area of debate.

An additional set of issues applies to other low-income beneficiaries, that is to say, people with incomes up to roughly speaking $13,000 a year for an individual. They will get some subsidies for the Medicare benefit. They’ll get subsidies toward the deductible, toward that coverage gap that our piece mentioned, as well as at the high end for those catastrophic costs.

However, many of those people will be subject to limitations on the subsidies if they have more than $6,000 of assets. That’s not including their homes but it does include personal effects. So many, in fact there’s a concern that almost three million low-income beneficiaries will be knocked out of any subsidies by that provision alone.

GWEN IFILL: How about the parts of the bill that deal with the roles that HMOs and PPOs, Preferred Service Providers and hospitals, would play now in Medicare – are they winners or losers in this?

SUSAN DENTZER: Well, to take hospitals separately, hospitals do get some additional funding through Medicare and also through Medicaid out of this bill. It’s not huge in the great scheme of things, but they — but hospitals get $24 billion more in payments over the next ten years, and about $16 billion of that goes to rural hospitals, in particular, to compensate them for costs and other factors.

To turn to private health plans, HMOs and PPOs, et cetera, many will be providing the new drug benefits. All of the drug benefits will be provided by some new private entity, either stand-alone private plans that come forward to provide only drug benefits or other private health insurance plans, HMOs, PPOs, and so on that will incorporate these new Medicare drug benefits into all the other health care they provide people.

So the government will be paying those entities to provide the drug coverage. In addition, they’ll get an extra amount of subsidies to make them more competitive and more capable of providing health care. Those subsidies have been variously estimated at anywhere from $14 billion to $40 billion over ten years.

GWEN IFILL: And government will also be subsidizing some big companies to help them with their retiree benefits. That’s why some huge companies, like General Electric, are very happy about something like this.

SUSAN DENTZER: Exactly. A very major concern is that for those who are lucky enough to have employers who are contributing to their health coverage and paying a lot of drug costs, there would be encouragement to dump those on to the government because we will be providing a new Medicare drug benefit. Companies now are being incentivized by being given payments to keep that coverage intact.

GWEN IFILL: Kwame just described to us the debate on the floor, the expansion of Medicare to include private competition. What is true and what is false in that debate?

SUSAN DENTZER: Well, in addition to the huge role that private health insurance plans and other private entities will be playing in offering the drug benefit, there is this additional test in 2010 of expanded role for private plans in competing head to head with Medicare. That’s really what the 2010 experiment is going to be all about. It is essentially pitting private health insurance plans against the traditional Medicare program to see whether they can compete on a price basis.

And the concern has been, even in a limited test, and as Senator Snowe described in our piece, it is vastly watered down compared to what it once was. The concern is the healthiest Medicare beneficiaries will tend to go to the private plans, leaving the sicker and older beneficiaries in traditional Medicare. The cost of the program will explode and essentially system will collapse. That’s been the concern. Now that there is a test only of this premise, it is much less of a concern.

GWEN IFILL: A big chunk of this is about prescription drugs. After all is said and done and the bill is drafted as it will be perhaps tonight or tomorrow morning in the senate, does it actually lower the cost for prescription drugs for most people?

SUSAN DENTZER: In fact, under this legislation, the government is expressly forbidden from negotiating drug prices with pharmaceutical companies. So many of the people who have been concerned about this bill and actually posed it say what are we doing here? We are not doing anything inherently to lower drug prices, except creating these pooling mechanisms where private plans can negotiate lower drug prices directly with the companies.

GWEN IFILL: They’re enhancing their affordability with the recipients but not letting the dollars go any further.

SUSAN DENTZER: Drug prices will be lower. For now, for example, seniors can walk into pharmacies and buy them at retail prices only if they don’t have coverage. Now the prices will inherently be lower. The prices will fall a bit, but they won’t be negotiated directly by the government, unlike many of the other industrialized countries that do negotiate those prices.

GWEN IFILL: Like Canada, where so many people have gone to get cheaper drugs.

SUSAN DENTZER: Absolutely, and that’s another important piece of this legislation. It was stripped of these provisions that would have allowed reimportation of the drugs from the U.S., exported to Canada and brought back. Now the legislation is back to earlier legislation that has already been passed, which is to say drugs can only, can be imported from Canada but only if the Secretary of Health and Human Services decides it is going to be safe and the secretaries repeatedly have said it is not going to be safe.

GWEN IFILL: This is not about Medicare, a separate thing but is also in the bill. The long sought-after benefit, health care savings accounts which many in the House and the Senate have longed for. This is included in this, isn’t it?

SUSAN DENTZER: Absolutely. This would affect not just Medicare enrollees but, broadly, the entire U.S. population would be eligible. Essentially it means this. You could go out and buy a high deductible health insurance plan with a deductible of $1,000 for an individual, $2,000 for a family.

Then your employer or you could set up to $5,000 a year for a single person, $10,000 a year for a couple in a tax-favored health savings account. It would be tax deductible on the front end and the funds could accumulate tax free. You could use those to pay for your medical expenses, those that would you have to pay out of pocket subject to the high deductible in your health insurance plan. You could also use them on cosmetic surgery and other things that are typically not covered by health insurance.

Again, conservatives worry this is going to…or conservatives want this because they think that health care is going to become more competitive out of this. Liberals are very worried about the overall impact on the health insurance market.

GWEN IFILL: Thank you for following all this for us, Susan.

SUSAN DENTZER: My pleasure, Gwen.