Possible Amendments to the Senate Medicare Compromise

The Senate Finance Committee's compromise Medicare reform and drug benefit package can be gradually improved as it moves through the legislative process. Although the committee's approach is not ideal in some respects, compromises are rare, and any amendment strategy should be supportive of the overall measure, not destructive, or delaying, or "message" oriented. The following suggested amendments deal mostly with the structure of the drug benefit.

In general, the drug benefit should be as close to universal as possible, for clinical reasons and to prevent workability problems. To achieve near-universality, the premium should be lowered, even if that means higher beneficiary payments at the point of drug purchase. Also, the benefit should not cause disincentives for employers to offer prescription benefits to their retirees.

All of the amendments below are intended to be budget neutral. The estimates of budget neutrality are based on rough calculations from the drug benefit "calculator" provided by the Congressional Budget Office (CBO), and semi-educated hunches. CBO is the final judge of budget neutrality, and supporters of these types of amendments should contact CBO as soon as possible.

Option 1. is the preferred approach. It simplifies the benefit structure, reduces the premium, and eliminates disincentives for employer-based retiree coverage.

Option 1. Simplify the Benefit, Lower the Premium, Help Retiree Coverage.
Specifics: Raise the coinsurance rate from 10 percent to 20 percent above the catastrophic level; Eliminate the "upfront" deductible and the "doughnut hole" entirely; Increase the coinsurance rate from 50 percent to 75 percent below the catastrophic level; Allow employer-based retiree coverage to count toward the catastrophic benefit; Lower the monthly premium to approximately $24.

Before: $275 upfront deductible, 50% coinsurance above deductible before "doughnut hole" begins, 10% coinsurance above catastrophic level, retiree coverage does not count toward the catastrophic benefit, $35 premium.

After: No upfront deductible, 75% coinsurance, no "doughnut hole," 20% coinsurance above catastrophic level, retiree coverage counts toward catastrophic benefit, $24 premium.

Note: This option would effectively convert the upfront deductible, the 50 percent benefit range, and the "doughnut hole" zero-benefit range into a simple, 25 percent benefit from the first prescription of the year until a senior's annual drug spending reached the catastrophic level. At that point, an 80 percent benefit (similar to Part B) would kick in.

Option 2. Help Retiree Coverage, Raise Catastrophic Coinsurance.
Specifics: Raise the coinsurance rate from 10 percent to 20 percent above the catastrophic limit; Use the savings to allow employer-based retiree benefits to count toward the catastrophic coverage; (if necessary, boost the catastrophic level slightly).

Before: $275 upfront deductible, 50% coinsurance above deductible before "doughnut hole" begins, 10% coinsurance above catastrophic level, retiree coverage does not count toward the catastrophic benefit, $35 premium.

After: $275 upfront deductible, 50% coinsurance above deductible before "doughnut hole" begins, 20% coinsurance above catastrophic level, retiree coverage counts toward the catastrophic benefit, $35 premium, (possibly) slighly higher catastrophic level.

Note: Under this option, the catastrophic level -- that is, the point where the catastrophic benefit "kicks in" -- could be raised slightly to ensure budget neutrality.

Option 3. Lower the Premium, Raise Upfront Deductible and Catastrophic Coinsurance.
Specifics: Raise the coinsurance rate from 10 percent to 20 percent above the catastrophic level; Raise the "upfront" deductible from $275 to $500; Use the savings to lower the monthly premium from $35 to $22.

Before: $275 upfront deductible, 50% coinsurance above deductible before "doughnut hole" begins, 10% coinsurance above catastrophic level, $35 premium.

After: $500 upfront deductible, 50% coinsurance above deductible before "doughnut hole" begins, 20% coinsurance above catastrophic level, $22 premium.

Option 4. $10,000 Catastrophic Benefit With Discount Cards in 2004.
Specifics: Improve the discount card program that the proposal would initiate in 2004 by adding an extreme catastrophic benefit for total drug spending over $10,000. Pay for this by increasing the coinsurance on the larger drug benefit from 10 percent to 20 percent above the catastrophic limit.

Notes: This option would immediately create a combined discount card/extreme catastrophic option available to seniors for a nominal fee. Then, in 2006, when the fuller benefit was up and running, seniors could purchase that instead if they wished.

This option could be combined with elements of 1. 2. or 3. Like the universal catastrophic benefit proposal by Rep. Dooley and the cosponsors of H.R. 1568, a near-universal extreme catastrophic benefit (as proposed in the House by Reps. Burr, Norwood and others) would have helpful clinical implications far exceeding its apparent insurance benefit. It would provide Medicare with comprehensive information base that could be used to target disease management programs and other efforts to improve chronic care.

Links: Centrist Policy Network Legislative Resources Page (incomplete)
H.R. 1568 The Medicare RX Now Act of 2003 (Dooley)
President Bush's Medicare Framework
Centrists.Org The President's Medicare Framework: Good Ideas, Bad Rhetoric (4/20/2003)

Posted by Jeff Lemieux at June 7, 2003 10:28 AM