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NEWS
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Legislation: Medicare
The U.S. Senate passed a Republican-backed bill to overhaul Medicare on November 25, 2003, just days after the House narrowly approved the measure. The single biggest expansion in Medicare's 38-year history, which goes into effect in 2006, will give 40 million Americans currently on Medicare prescription drug benefits. Additionally, Americans that earn over $80,000 a year will have to pay a higher premium under Medicare Part B non-hospital coverage, which requires payment of a premium and covers physician services and certain other medical costs not covered by the Medicare Part A universal hospital benefit. Individuals with high-deductible insurance policies will be eligible for new tax-preferred health accounts under the $400 billion plan. The bill also provides for the option for private health coverage as an alternative to Medicare. In 2004 and 2005, before the new plan goes into effect, seniors can purchase a drug card that will decrease costs by at least 15 percent.
The bill, which President Bush is expected to sign into legislation by the end of the year, is viewed as a major victory by the health care industry since the legislation did not include price controls on drugs or the legalization of importing drugs from Canada. While drug companies, insurers, doctors and hospitals are most likely going to see more patients and higher fees in 2006, this probably will not result in a large profit gain since the bill also aims to increase competition among private insurers. The lack of price controls and the failure to legalize the importation of drugs from Canada, however, is an important benefit for the pharmaceutical industry, whose support was crucial since the legislation centered around the prescription drug benefit. Price controls on drugs in the future can be expected since historically large legislative overhauls such as this one are far more expensive than initially stated.
The Medicare debate started six years ago with a joint presidential-congressional commission. In the wake of the collapse of an idea for universal health insurance promoted by then first lady Hilary Clinton during the President Clinton's first term, attention was directed toward the high cost of prescription drugs. By the close of Clinton's first term 6 years ago, debate began on drug benefits. Not much was accomplished, however, until January 2003, when President Bush persuaded Congress to set aside $400 billion over 10 years for prescription drugs for seniors. This money initially provided benefits only for seniors enrolled in managed-care plans. Congressional members of both parties viewed this plan as coercion, although the Medicare bill was backed by Republicans from the start. The chair of the joint commission in 1997-1998, Sen. John Breaux D-La, and Sen. Max Baucus, D-Mont. were the only two Democrats allowed in the negotiations this fall. Led by House Speaker Dennis Hastert, R-Ill., and the chairman of House Ways and Means Committee, Rep. Bill Thomas, R-Calif., Congressional members from both the House and the Senate met for two weeks to agree on a compromise. As the chairman of the House Ways and Means Committee, Thomas was one of the few congressmen who understood how Medicare actually worked, but his lecturing manner alienated even his supporters.
When a stalemate became inevitable, Hastert and Senate Majority Leader Bill Frist decided that Thomas was incapable of reaching an agreement. Together, they formed the basis of the bill and allowed Thomas to use his knowledge of the details "to make it workable." Key Republicans and Democrats, as well as the AARP which spent millions on a television campaign for the measure, now backed the bill, yet the strongest support still came from the congressional conservatives. While the measure did pass along partisan lines in the House with a vote of 220-215, the Senate voted for the bill 54-44 with 11 Democrats voting yes and 9 Republicans voting no, illustrating that the legislation was not completely a partisan plan.
Conservative supporters of the bill agree that the measure will serve to modernize Medicare coverage in America. Democratic opponents argue, however, that the new legislation will result in the end of Medicare because of the new option for private health insurance. They also criticize the coverage gap for the prescription drug benefits. After paying a premium of $35 per months and meeting a $275 yearly deductible, Medicare patients will only have to pay 25 percent of drug costs up to $2,250. Over $3,600, 95 percent of drug costs will be covered by insurance after the payment of a small premium. Between $2,250 and $3,600, insurance would not cover any drug costs. Low income seniors will have the premium, deductible and coverage gap for the plan waved. The Congressional Budget Office, however, estimates that plan members will average $3,245 in drug costs in 2006, which under the plan results in only $1,745 out-of-pocket expenses. While the legislation's supporters point at examples of those who will benefit from the Medicare overhaul, and critics illustrate the problems, especially the costs, associated with the plan, the actual implications of the legislation remain to be seen in 2006.
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