SUSAN DENTZER: The Senate Finance Committee began work today on a broad proposal to reshape Medicare.
SEN. TOM DASCHLE: Medicare is a lot like our Capitol Building. We have something that has worked well for 40 years, now we need to renovate it. We need to add to it. We need to reconstruct it, adapt it to current circumstances, but I hope, as with the Capitol, we'll recognize the value of Medicare.
SUSAN DENTZER: The plan is the latest attempt in a multi-year struggle to add an outpatient prescription drug benefit to the program.
SEN. CHARLES GRASSLEY: We would not have achieved the success today; in this closely divided Senate partisanship is a dead end.
SUSAN DENTZER: This year, senators said there is real hope for enacting Medicare changes. That's because the Senate bill has the backing of a key group of Republicans and centrist Democrats. It has also picked up the qualified support of President Bush. In a speech at a Connecticut hospital today, he called on lawmakers in both Houses of Congress to enact changes.
PRESIDENT GEORGE W. BUSH: And so I've come here today to remind Congress that Congress has an obligation and a responsibility to meet the needs of our seniors, and to make sure that Medicare is modern. The House needs to get it done, and the Senate needs to get it done, prior to the fourth of July break.
SUSAN DENTZER: The Senate proposal would be the largest expansion of Medicare coverage since the program's inception in 1966. Patricia Neuman is a Medicare expert with the Henry J. Kaiser Family Foundation. The foundation is the health-research organization that also funds the NewsHour's health unit. Neuman says the Senate plan would create two new ways for Medicare beneficiaries to obtain outpatient drug coverage, starting in 2006.
PATRICIA NEUMAN: They could either sign up for Medicare Advantage Plan, as it's called in the Senate plan, which is a health maintenance organization, or so-called PPO, a preferred provider organization. That's a private plan with a network of providers where you can go outside the network if you want to pay more, or pay less if you stay in the network. In any event, they could choose that plan to get their Medicare covered benefits and their drug benefit if they want, and if it's available. Or if they want to stay in traditional fee-for-service Medicare, they can do that and get their drug benefits through other private plans that just provide prescription drug coverage.
SUSAN DENTZER: To contain the costs of the overall package, senators created a convoluted structure of drug benefits. Under the plan, enrollees who wanted to sign up for a drug benefit would pay a premium estimated at about $420 a year. Once beneficiaries incurred any drug expenses, they would pay a $275 deductible. Then, from $276 to $4,500, they'd split drug costs 50- 50 with the government. For drug expenses above $4,500, up to about $5,800, beneficiaries would pay the entire cost of drugs themselves. Finally, for all drug costs above roughly $5,800, beneficiaries would pay 10 percent of the costs, with the government paying the other 90 percent. The gap in coverage from $4,500 to $5,800 is referred to as "the hole in the donut."
PATRICIA NEUMAN: This benefit structure is not typical of what you'd find in most employer plans, but the authors of the legislation were really stuck. They had to make the benefit fit into a $400 billion budget amount, and while $400 billion sounds like a lot of money, it actually doesn't go very far for seniors. And so they were stuck with trying to jiggle with the benefit in order to make the dollars fit into the $400 billion total.
SUSAN DENTZER: The so-called "donut hole" is one of many features of the bill that has prompted concern among some senators. Today Senator Jay Rockefeller, a West Virginia Democrat, pressed to find out how many beneficiaries would be affected.
SEN. JAY ROCKEFELLER: What is the number and percent of Medicare beneficiaries who will fall into the coverage gap and reach the out-of-pocket limit?
DOUGLAS HOLTZ-EAKIN, Director, CBO: That's a number we don't have available. Doing part of the cost estimate much like the national average you don't need that to get the total cost. It's an interesting part of the policy but we don't have that.
SEN. JAY ROCKEFELLER: These are kind of fundamental questions, it would seem to me.
THOMAS SCULLY, Centers for Medicare and Medicaid Services: The people that would actually fall in the gap where they would spend enough to not hit the catastrophic threshold but get over the first threshold is about 4.7 million people, 12 percent of the population.
SUSAN DENTZER: The Senate plan also includes complicated provisions for low-income Medicare beneficiaries. For example, the six million disabled Medicare beneficiaries who also qualify for coverage under Medicaid would not be eligible for the new Medicare drug coverage. Instead, they'd stay with their current, and almost certainly less generous, drug coverage under Medicaid. On the other hand, still other low-income seniors would get substantial assistance from the government, including help with paying premiums and deductibles. Because the full plan would not take effect until 2006, Neuman says senators added in short- term steps to help seniors with their drug costs until then.
PATRICIA NEUMAN: There is a discount drug card that would be available to virtually all seniors, and in addition to that, there would be a $600 drug subsidy card that would be available to those with low incomes.
SUSAN DENTZER: The Senate panel continued its work into this evening. Senators said they hope to complete the bill and take to it the Senate floor next week.