Medicare Changes

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• RAY SUAREZ:

  Some reaction now from two consumer groups who saw this new bill and its drug benefit differently. David Certner is the director of federal affairs for AARP, representing more than 35 million people who are age 50 and older. And Ron Pollack is the executive director of Families USA, a health care advocacy group that represents seniors, among others.

  David Certner, are people, your members, starting to go get a handle on what's in this bill? And what kind of feedback are they giving to the AARP?

• DAVID CERTNER:

  I think the biggest feedback we're getting so far is people don't have a handle on the details of this bill. This is a complex bill, almost 700 pages long, a lot of information here. And more importantly, there's been a lot of misinformation and rhetoric out there.

  So it's very hard for people to understand exactly what's in the bill and we're going to be spending a lot of time over the next weeks, months and probably a couple of years trying to talk about the details of this bill. What we do know is that, when people do find out more about the bill, they are more comfortable with what's in the bill.

• RAY SUAREZ:

  Ron Pollack, what are you hearing?

• RON POLLACK:

  Well, I've been speaking to senior gatherings all across the country throughout this legislative process. And there are two reactions I get: The first time when you describe this very bizarre and sparse benefit that people get, people look at you very bewildered. They just don't understand it.

  And the more you explain it to people, then they start getting angry because they feel the benefit really is very poor, and what bothers them enormously is that the prices of prescription drugs are going to continue to skyrocket.

  When they learn that not only was there no reasonable effort made to contain costs, but rather, there was actually a prohibition in the legislation that prohibits the Medicare program from bargaining on behalf of seniors to get prices down, that bothers seniors. When they learn that they can't go to Canada where prices of drugs are a fraction of the price of what they are here in the United States, that bothers seniors. When seniors learn there is this huge gap that you portrayed in the opening, that after $2,250 in annual drug expenses, up to $5,100 in drug expenses, they have to lay out all of this money out of pocket — they've never heard of something like this.

  Now, the president said during his speech, "We should be providing to seniors what members of Congress get and what the federal employees get." This is a far cry from this. So seniors actually are very disappointed. The groups we've talked to have really expressed some anger.

• RAY SUAREZ:

  Well, David Certner, somebody's on the phone who just says something like what Ron Pollack just said. How do you answer?

• DAVID CERTNER:

  I think what you have to understand is that this bill is only half a loaf in essence. This bill only goes so far. There are some strange subsidy gaps in this bill, big coverage gaps, because there is not enough funding allocated for the bill. This bill will help millions of people. This bill will also not help many millions of other people because there's just not enough funding in the bill.

  And Ron is right when he talks about issues of price controls and holding down drug costs. This bill goes very light in that direction, but this is not an issue that's going away in this country. This bill was about covering people. We're going to be right back at it, talking about trying to hold down the high cost of drugs.

• RAY SUAREZ:

  Well, break it down a little bit. Who are some of the people who really get something out of it, the way it's written now? And who are some others who might not be happy with what's in there?

• DAVID CERTNER:

  Well, as shown by some of your earlier information, the biggest winners I think under this bill are the basically one-third of individuals who are at 150 percent of the poverty level or below. Those lower-income folks who are below about $18,000 for a couple, $14,000 for a single; for them, they're going to have pretty good coverage. There is no gap in coverage, as Ron described, which is for many other people, not for the low-income. And they will have limited amount of co-pays and in many cases have their premiums and deductibles waived. So they're the big winners under this bill.

  The other big winners are those who have very high drug costs. There's a $3,600 out-of-pocket cost, catastrophic cap at which point the government picks up 95 percent of your cost. So if you have very high drug costs, you're going to be a winner under this bill.

  The third group is those who have no coverage today because this bill, for the first time, will provide in Medicare good prescription drug coverage for you that you can't get anywhere else.

• RAY SUAREZ:

  And Ron Pollack, on the other side of that win-loss equation?

• RON POLLACK:

  Well, let's take some of the groups David mentioned because there are some real problems for some of these groups. First, let's start with the low-income. As David knows, this is a group that we care a great deal about and work very hard on behalf of. David's right in saying that those people who qualify for this low-income benefit, they get something pretty good. They'll pay essentially $2 per genetic prescription, $5 for brand name prescription. But there are two things you need to know about this:

  First, there is a very large number of senior citizens who get disqualified from getting this benefit even though they are very poor. They have assets, as you indicated in the opener, of more than $6,000. They may have a life insurance policy, they may have a little money set aside for burial expenses or household items. They're going to be disqualified from this. They won't get this benefit.

  There's another group, and this is the poorest of the poor. These are people who are below poverty. They have income below $9,000 a year, and they're currently in the Medicaid program. Today, they get prescription drug coverage. Under this bill, they're going to be worse off for two reasons: One, is they're going to have to pay more money to get their drugs, and they're not going to have the same drugs available to them under this program because there's going to be a limited so-called formulary. So the poorest of the poor are actually — a good number of them — are going to be hurt.

  Now, there's another group David mentioned that also deserves serious consideration. These are the people who have very high drug expenses. Now, David is correct in saying that, if you have over $5,100 in drug expenses, you'll get this so-called catastrophic benefit where you only have to pay 5 percent of the costs. But before you do that, you have to pay $3,600 out of your own pocket in co-payments and in deductibles over and above a $420 premium. You have to pay more than $4,000. Many of these people will never get to this catastrophic benefit because they can't afford it.

• RAY SUAREZ:

  Do we know how many of the current recipients we're talking about when we talk about that category?

• DAVID CERTNER:

  Well, there's the category — the asset test — that Ron mentioned, and we think the asset test was a bad idea. It should not have been part of this bill. And that will probably disqualify somewhere between 10 and 15 percent of the low-income people who otherwise would have been eligible for the really good coverage for low-income folks. That's a problem. On the top end, I think we're talking close to 10 percent of people who actually have costs above the out-of-pocket cap.

• RON POLLACK:

  It's important … David's numbers I think are roughly the same as our numbers would show. But the people who fall in this gap — they call it here euphemistically a donut hole — it's really a coverage chasm — there's a lot of people, there are about one-third of America's seniors have drug expenses that take them into this gap, where they get no coverage at all.

  But there's a very important thing to keep in mind as well and that is all of these out-of-pocket costs that seniors are required to pay under this, those costs are going to grow over time. And because there isn't any serious cost containment as David and I were explaining before, those costs are going to grow very substantially. And so instead of paying $4,020, $420 in a premium, $3,600 in other out-of-pocket costs to get this catastrophic benefit, 10 years from now you're going to have to pay $7,100 in order to get this catastrophic benefit because the drug costs are just going to skyrocket.

• RAY SUAREZ:

  And David Certner, will more people end up in that valley as well who maybe didn't expect to be there in the coming years because drug costs are going to be….

• DAVID CERTNER:

  Well, you're going to have people paying higher prices if we don't get a handle on drug cost. This bill does a little bit on drug costs, particularly trying to encourage genetics to the marketplace, which are generally cheaper than the brand name drugs.

  But for the most part, this bill dodges most of the real issues on cost containment. We're going to have to go back and deal with those issues like reimportation from Canada. We hear that all the time. Why are prices lower in Canada than what I can get here? And we're going to have to address those issues. And the coverage gap is a problem. We explored amendments earlier in the year to try to close that coverage gap; it's a big problem for people who are not low-income, who are looking to see if they can get a good deal out of this benefit and they're going to find that if they fall in that gap, their deal is not going to be nearly as good as it should be.

• RAY SUAREZ:

  Well, earlier Ron discussed the formulary, that is the list of approved drugs. Are there a lot of people that are taking drugs that they might right now assumed are going to be approved for them who will end up paying out of pocket and it won't even count toward their deductible?

• DAVID CERTNER:

  Well, I don't think we know the answer to that because we don't even have these plans coming forward yet and we don't even know what's going to be on their formulary lists, so we're not sure. I think it's probably a good guess that many people will not be able to get drugs that they currently get now under a Medicare formulary that they might be able to get under a more expansive regime now. We really don't know the answer to that yet.

  Many of these issues we're to not going to find out ever been until the next two years as we roll out what these plans are actually going to look like.

• RAY SUAREZ:

  Ron Pollack, you've discussed the gaps between rich and poor seniors, those with high and low drug costs. Are there other split perceptions here — between younger seniors and older ones, between those who are still on the verge of retirement and those who are already in the Medicare plan, as far as the way they perceive this thing?

• RON POLLACK:

  Oh, I think so. You've got a whole group of people who have prescription drug coverage today, they get it through their employer in most instances, if you have drug coverage as a senior, it's a previous employer, it's a retiree benefit.

  And although there were some provisions made to try to encourage employers to continue providing coverage, about one-quarter of the people who have coverage today from their employers are likely to lose it. That's what the Congressional Budget Office tells us. So there are a significant number of people who are very happy with the coverage they have. They're likely to lose it.

  Then there's a big difference in terms of healthy and younger seniors versus the older and sicker seniors. The private plans — the HMO's and other managed care plans — they like to cherry-pick. They like to get the youngest healthiest people. And the traditional Medicare program takes all-commerce, the oldest old and the sickest sick. We're going to see them increasingly divided up with the private plans trying to pick off the youngest healthiest people. In the process, I think over time, it will put the traditional Medicare program in jeopardy.

• RAY SUAREZ:

  Let me get a quick response from David Certner.

• DAVID CERTNER:

  I want to mention because I think Ron touched on one of the things we probably hear most about from our members is, those who currently have good coverage, particularly coverage through a former employer, very nervous about losing that coverage.

  Of course what we've seen over the last decade is the fact that employers have been dropping their retiree health benefit coverage. We've seen almost a 50 percent reduction in the number of employers who are actually offering this coverage over time. So this is something that's been happening.

  One of our number one objectives in this bill was to make sure that there were substantial subsidies from the federal government to private employers to encourage them to continue to offer retiree health benefits. And that's in this bill. We have almost $88 billion worth of subsidies in the bill to employers to maintain their current coverage, and that was a huge priority for us. We want to make sure we can slow down the number of companies who are dropping this coverage.

• RAY SUAREZ:

  David Certner, Ron Pollack, thank you both.