House GOP Unveils Final Version of Medicare Package; Ways and Means, Energy and Commerce Committee To Consider Legislation This Week

House Republicans on June 17 unveiled a final version of their Medicare package, which in part would provide Medicare beneficiaries a prescription drug benefit through private health insurers, the New York Times reports. The bill will move through the Ways and Means and the Commerce and Energy Committees June 18 and June 19, with the full House expected to vote on the plan next week (Pear, New York Times, 6/18). However, Republicans, including the two committee chairs, are divided over whether the bill should include "broader changes" to Medicare or focus solely on a drug benefit for the program. Majority Leader Richard Armey (R-Tex.) has "pleaded" with Ways and Means Chair Bill Thomas (R-Calif.) to remove provisions within the bill that could be viewed as "tilting Medicare more toward the private sector," the Washington Post reports.

Scope and Structure
Under the $350 billion, 10-year House GOP plan, Medicare beneficiaries would purchase drug coverage directly from private insurance companies (Goldstein/VandeHei, Washington Post, 6/18). While such "drug-only" coverage does not currently exist, Republicans maintain that the bill offers seniors billions of dollars in subsidies to purchase coverage, which would create a market for drug-only coverage. The bill outlines a "model" drug plan for insurers to offer to Medicare beneficiaries. Insurers' plans can differ in terms of premium and benefit, but the overall value of each plan must be equivalent to "standard coverage" defined under the model plan (New York Times, 6/18). Under the model plan, Medicare beneficiaries would pay a $250 annual deductible and a $35 monthly premium. Low-income seniors would be exempt from the premiums and deductible. Seniors would receive coverage for 80% of their annual prescription drug costs up to $1,000, 50% up to $2,000 and nothing between $2,000 and $4,500, after which a catastrophic benefit would begin (Carter, AP/Nando Times, 6/17). Thomas said he plans to lower to less than $4,000 the amount of out-of-pocket expenses before the catastrophic benefit takes effect. Under the bill, Medicare would "directly compete" with the private insurers offering drug-only coverage in a four-region experiment (New York Times, 6/18). The drug benefit would not begin until 2005.

Other Reforms
The House GOP Medicare plan also would increase payments to Medicare providers over 10 years, including:

• $11 billion for doctors;
• $9 billion to $10 billion for hospitals;
• $3 billion to $4 billion for Medicare+Choice plans; and
• $2 billion for nursing homes.

Reaction
The Wall Street Journal reports that the House Republican plan, which is less expensive than competing plans, "highlights the philosophical differences" on how to structure a Medicare drug benefit (Lueck, Wall Street Journal, 6/18). Under the Senate Democrats' plan, which would cost between $400 billion and $500 billion over 10 years, Medicare beneficiaries would pay a $25 monthly premium with no deductible, a $10 copayment for generic drugs and a $40 copayment for brand- name drugs, and Medicare would cover their annual prescription drug costs that exceed $4,000. The plan also calls for reduced premiums and copayments for low-income beneficiaries (Kaiser Daily Health Policy Report, 6/17). House Democrats have proposed a plan, which would cost between $750 billion and $800 billion over 10 years, would cover 80% of seniors' drug costs up to $2,000 and 100% above that figure. Seniors would pay a $100 annual deductible and a $25 monthly premium (Kaiser Daily Health Policy Report, 6/13). Regarding the House Republican plan, Sen. Edward Kennedy (D-Mass.) said, "The only thing worse than not passing a Medicare prescription drug reform would be to pass a phony program that undermines the coverage that already exists -- but that is what the House Republicans have offered." AARP policy director John Rother did not endorse either plan but did say he is "concerned" that the House bill would not offer seniors coverage for drug costs between $2,000 and $4,500 (Wall Street Journal, 6/18). Thomas, however, defended the House plan for providing a drug benefit "at a price that taxpayers can afford" and criticized the Democratic plan as a "political ploy" (CongressDaily/AM, 6/18). "Our legislation adds a voluntary prescription drug benefit that is available to all seniors, while significantly reducing their out-of-pocket costs," he added (Fulton, CongressDaily, 6/17). The United Seniors Association, American Medical Association and American Hospital Association are backing the Republican plan, the Times reports. Families USA, the AFL-CIO and other consumer and labor groups support the Democrats' plan (New York Times, 6/18).

Drug Industry Issue Ads
In related news, the pharmaceutical industry is running television advertisements in support of Republican congressional candidates who support the House Republican Medicare drug bill. The drug industry supports the Republican Medicare drug benefit plan because it believes the proposal is less likely to lead to medication price controls, the Journal reports. Paid for with a block grant from the Pharmaceutical Research and Manufacturers of America, the ads are sponsored by the United Seniors Association. The ads are running in more than a dozen Republican districts (Hamburger, Wall Street Journal, 6/18).

Republican Model 'Unworkable'
While both the House Republican and Senate Democrat Medicare drug benefits plans are "election-year gesture[s]," the Republican plan would "quickly turn into a fiasco," columnist Paul Krugman writes in the June 18 New York Times. Conversely, Senate Democrats' plan "can be criticized but is definitely workable." Besides the House Republican plan's coverage gaps -- "a crippling expense for many families" -- its reliance on private insurance companies is "an even bigger flaw" because "few if any" seniors would take advantage of subsidies offered within the bill, Krugman says. He adds that insurance companies have been unsuccessful in their attempts to create business models for senior prescription drug coverage, noting, "[T]here is no reason to believe that the House Republicans have found a way to change [insurers'] minds." Because House Republicans are unlikely to accept the Senate Democrats' plan, it is possible that a Medicare drug benefit will not be enacted this year, which is "what the Republican leaders really want in any case," Krugman concludes (Krugman, New York Times, 6/18).