Senate Defeats Second Republican-Backed Medicare Drug Benefit Proposal

One day after rejecting competing proposals to add a prescription drug benefit to Medicare, the Senate on July 24 defeated a Republican-backed proposal to create a prescription drug discount card for Medicare beneficiaries, the New York Times reports. Sponsored by Sens. Chuck Hagel (R-Neb.), the measure received more support than expected but failed by a vote of 51-48, short of the 60 votes needed for passage under Senate budget rules (Pear, New York Times, 7/25). The proposal would have established a 10-year, $160 billion national prescription drug card program designed to lower drug prices through a bulk-rate pooling program. Pharmacy benefit managers would have administered the benefit, and Medicare would have endorsed and promoted the program. Seniors would not have paid any premiums but have would been responsible for a one-time $25 fee -- which would have been waived for seniors earning less than 200% of the federal poverty level -- to have access to the discounted drugs. Once they reached an out-of-pocket limit that varies by income, seniors would have paid only a small copayment. Seniors earning less than $17,720 would not have paid more than $1,500 a year for drugs. The drug payment cap would have been set at $3,500 annually for seniors earning between $17,721 and $35,440 per year. Seniors with annual incomes between $35,441 and $53,160 would have paid no more than $5,500, while those earning more than $53,160 would have spent no more than 20% of their income on drugs (Kaiser Daily Health Policy Report, 7/24). Democratic senators and AARP said the programs' benefits were "inadequate," the Times reports (New York Times, 7/25). Sen. Edward Kennedy said the plan offered "little more than 'crumbs'" because seniors would have needed to reach an out-of-pocket limit before receiving assistance (Dewar, Washington Post, 7/25). Hagel and Ensign, however, said the plan was affordable, easy to implement and would have protected seniors from catastrophic costs. Ensign also noted that the plan would have provided seniors with incentives to question physicians about the need for a drug and to shop for cheaper treatments. Ensign said, "Let's keep the patient accountable; let's keep the senior citizen accountable" (Kenen, Reuters/Detroit Free Press, 7/25).

Democratic Concessions Possible
Despite the rejection of the Hagel-Ensign plan, providing assistance to low-income seniors and those with high drug costs is emerging as the Democrats' "favored basis for a compromise," the Post reports (Washington Post, 7/25). At a Democratic caucus meeting on July 24, Sens. Blanche Lincoln (D-Ark.) and Jeff Bingaman (D-N.M.) proposed a $400 billion plan, which would cover all drug costs for seniors earning less than 200% of the federal poverty level. Under the proposal, Medicare also would cover all drug costs above $4,000 a year for all seniors, regardless of income. Lincoln said that the plan was an attempt to win Republican support by cutting the cost of the package proposed by Sens. Bob Graham (D-Fla.) and Zell Miller (D-Ga.) that would have established a Medicare prescription drug benefit at an estimated cost of $594 billion over seven years. Many Democrats said they would consider the Lincoln-Bingaman plan if a more comprehensive package was not feasible, but some raised concerns about applying income qualification to Medicare for the first time, CongressDaily/AM reports (Fulton/Rovner, CongressDaily/AM, 7/25). Senate Majority Leader Thomas Daschle (D-S.D.) said, "I think it's fair to say that we are unlikely to get as robust a drug benefit plan as many of us would envision, but we've got to begin somewhere. I'm willing to accept a beginning, but it has to be a good beginning" (Washington Post, 7/25).

'Merger' Talks Continue
Meanwhile, closed-door Finance Committee negotiations continued on a plan to combine the Graham-Miller and tripartisan-backed proposals, which the Senate rejected on July 23 (CongressDaily/AM, 7/25). Under the possible compromise, proposed by Finance Committee Chair Max Baucus (D-Mont.), Medicare would start providing drug coverage in 2005, and private insurers and health plans would begin to contract with the government in future years to offer the benefit, which would require them to provide benefit packages similar to those proposed in the Democratic plan. Insurers would slowly assume the financial risk of providing coverage, but the government would limit their potential losses and profits. Medicare would deliver the benefit in areas where private insurers do not (New York Times, 7/25). A Democratic aide said that lawmakers would study 10-year benefit packages of $350 billion, $400 billion and $450 billion (CongressDaily/AM, 7/25). Several Democratic senators said they did not anticipate much support from their colleagues for a plan that would allow private insurers to provide a Medicare benefit. A negotiation session on the Baucus proposal is scheduled for today (Washington Post, 7/25).

HealthCasts of the July 23 and July 24 votes are available online.