Senate Reaches Compromise Plan for Medicare Prescription Benefit

June 7, 2003
This is shaping up as the month that Congress tries to hammer out an agreement on adding a prescription drug benefit to Medicare. President Bush on Saturday urged Congress to take action and two prominent senators have offered a compromise plan to add prescription coverage.

In his Saturday radio address, Bush said Congress has a "tremendous opportunity to reform Medicare and help our seniors." He urged Congress to adopt a plan that offers seniors incentives to switch to private health plans. He will deliver speeches on the Medicare theme in Chicago on Wednesday and New Britain, Conn., on Thursday.

Meanwhile, Sen. Charles E. Grassley (R-Iowa), chairman of the Finance Committee, and Sen. Max Baucus (D-Mont.) have offered a compromise plan to add prescription drug benefits to Medicare, with equal benefits for seniors who remain in traditional Medicare and those who join private Medicare plans. The estimated cost of the plan is $400 billion.

Under the bill, the government would define a standard drug benefit:

• Beneficiaries would have to pay a deductible of $275 a year and an average premium of $35 a month.
• Medicare would pay 50 percent of drug costs from $276 to $3,450 a year.
• The beneficiary would then be responsible for all drug costs up to about $5,300 a year.
• Beyond that point, Medicare would pay 90 percent of drug costs, and the beneficiary would have to pick up 10 percent.

But many Democrats and senior groups aren't buying the plan.

"The Senate Finance Committee plan is disguised as a prescription drug plan but in reality is just another scheme aimed at undermining the traditional Medicare program and forcing vulnerable seniors into private insurance plans," said George J. Kourpias, President of the Alliance for Retired Americans, which represents retired union members.

"If enacted, the Grassley-Baucus plan will almost certainly ensure that future generations of older Americans will be without a guaranteed health care plan," Kourpias said.

Medicare administrator Thomas Scully called the Grassley-Baucus plan "a step in the right direction" but he said the Administration had "significant disagreements" with the measure and reaffirmed President Bush's desire to encourage the elderly to join private health plans by offering them extra drug benefits if they do so.

Under the senators' plan, Medicare drug benefits would begin in 2006. In 2004 and 2005, beneficiaries could save money by using drug discount cards approved by the government.

Medicare beneficiaries would have the option to enroll in health maintenance organizations and preferred provider plans, which cover doctors' services and hospital care as well as prescription drugs. Those who stay in the fee-for-service Medicare program could get drug coverage from private insurance plans subsidized by the government.

Medicare officials would sign contracts with insurers, to guarantee at least two such prescription drug plans in each region of the country.

The Grassley-Baucus bill includes a complex formula for calculating federal payments to private health plans. Dozens of managed care providers have pulled out of Medicare in recent years, saying federal payments did not cover costs.

Scully said the measure will not give Medicare beneficiaries a strong incentive to enroll in private plans and said he doubts private insurers will want to offer the kind of drug coverage the Senate bill envisions.

But Sen. Bill Frist, R-Tenn., the Senate majority leader, said he was determined to push the legislation through the Senate this month.

The House has twice passed Medicare drug legislation -- in both 2000 and 2002 -- and is likely to do so again this month. House Republican leaders have said that drug benefits should be roughly equal ni both private plans and traditional Medicare.

Republicans feel intense political pressure to show action before the 2004 elections.