Millions of seniors
stand to lose their private employer-based drug coverage or find
that their existing drug coverage is significantly scaled back from
what it is today. That is the likely result if provisions in major
Medicare legislation recently approved by both houses of Congress
(S. 1 and H.R. 1) to provide all Medicare beneficiaries with a new
Medicare prescription drug benefit are approved in their current
form.
A House-Senate conference committee is now
attempting to reconcile the differences between the two massive
bills. Rather than reconciling two profoundly flawed bills,
however, the conferees should go back to the drawing board. They
should use as a blueprint the 1999 majority recommendations of the
National Bipartisan Commission on the Future of Medicare, which
proposed that Medicare beneficiaries be given a choice between
traditional Medicare as it exists today and new, private plans
offering comprehensive, integrated benefits including full
outpatient prescription drug coverage.
Replay of a Bad
Policy
This is not the first
time that Congress has tried to add a prescription drug benefit to
Medicare as a universal entitlement. In 1988, Congress passed the
Medicare Catastrophic Coverage Act, which included a Medicare
prescription drug benefit. But strong opposition from senior
citizens, the law's intended beneficiaries, forced Congress to
repeal the legislation a year later. Among the chief opponents of
the 1988 Catastrophic Act were retirees with prescription drug
coverage provided as a retirement benefit by their former
employers. They calculated that under the new Medicare prescription
drug program, they would pay more in premiums and receive less
generous coverage in return, relative to their existing
employer-sponsored coverage.
Now, with the passage of S. 1 and H.R. 1,
Congress and the Administration are perilously close to repeating
that history. According to The New York Times, "The Congressional
Budget Office estimates that 32 percent of retired workers with
employer-sponsored drug coverage would lose it under the House
bill. The comparable figure for the Senate bill is 37 percent."
This implies that the CBO believes about 3.8 million to 4.4 million
retirees could lose their employer-provided drug coverage
outright.
What has not been closely examined is the
effect the legislation would be likely to have on the rest of the
approximately 12 million retirees with employer-sponsored drug
coverage as well as the approximately 4.8 million additional
retirees who have purchased Medicare supplemental insurance
(Medigap) plans with prescription drug coverage. A close reading of
both bills indicates that those retirees would also experience
reductions in their current prescription drug coverage under the
pending legislation.
The most likely scenario is that under
either bill's provisions, almost all employers currently offering
retiree drug coverage sooner or later would drop their coverage
outright, scale back their plans' benefits to the new Medicare
standard plan design, or replace it with wrap-around coverage that
pays the initial deductible and cost-sharing for their retirees.
The effects of such wrap-around coverage would be to:
-
Limit employers'
liabilities and shift much of the risk and cost for
prescription drugs onto the taxpayer.
-
Give retirees with employer wrap-around
plans up-front coverage. In other words, they would
get free drug coverage on the first $4,500 worth of drugs under the
Senate bill or the first $2,000 worth of drugs under the House
bill.
-
Force retirees with higher drug costs to
pay a large share of the bill. These retirees would
be forced to pay entirely out-of-pocket for the next $3,700 worth
of drugs under the Senate bill or the next $3,500 worth of drugs
under the House bill.
Not surprisingly, retirees are beginning
to be concerned about how the pending legislation would affect
their existing employer-sponsored or individually purchased
coverage. Absent a significant rewrite of the final bill in the
conference committee, there is a growing likelihood that those
concerns could translate into a full-scale retiree revolt following
final passage of the legislation--as was the case with the Medicare
Catastrophic Coverage Act in 1989.
Needed: Better Medicare Choices
To head off such a revolt, Congress should scrap
the drug provisions in both the House and Senate bills and go back
to the 1999 majority recommendations of the National Bipartisan
Commission on the Future of Medicare to give Medicare beneficiaries
a choice between traditional Medicare as it exists today and new,
private plans offering comprehensive, integrated benefits including
full outpatient prescription drug coverage.
Such an approach would forestall a brewing
political backlash and--even more important--ensure that both
today's retirees and tomorrow's retirees get the kind of quality,
integrated, chronic care that they need and deserve. It would move
Medicare away from its current model of fragmented care that is
costly and results in sub-optimal health outcomes for senior
citizens. The result would be a system that not only paid for
prescription drugs, but also integrated them with other health care
benefits to get the most value for seniors out of the ability of
drugs to reduce other health care costs and improve the quality of
their health outcomes and lives.
Edmund F.
Haislmaier is a Visiting Research Fellow in the
Center for Health Policy Studies at the Heritage
Foundation.