Practical, But Not Perfect, Help on Prescription Drugs
By Rep. Cliff Stearns
In a few weeks, Medicare beneficiaries will receive information about a prescription drug discount card that will make their drugs more affordable until the actual prescription drug benefit becomes effective in 2006.
I voted to establish this voluntary prescription drug benefit, and I want to let you know why. One letter I received written by an unsteady hand pleaded, "Please support the passage of the Medicare Prescription Drug Benefit Bill! I am 75 years old - I need my medicine - but gosh, it is too expensive!"
Seniors and the disabled on Medicare deserve health care choices, and I believe in their ability to make smart health care decisions. This benefit opens a new door for Medicare beneficiaries by providing incentives for a variety of new options, allowing them to tailor their health care to their own needs. . Medicare beneficiaries need options, and as in other market situations, competition in offering options lowers costs and improves services.
Medicare should promote competition to contain costs and to enhance services. Just because Medicare started in the 1960s does not mean it should be bound by the failed big-government, one-size-fits-all policies of that decade. Instead of imposing price controls through negotiations, Medicare should promote competition, mirroring the Federal Employee Health Benefits Plan that administers a cafeteria of health plan options for its enrollees who benefit from competition for their business.
In addition to its improvements to Medicare, this law creates personal, interest-bearing Health Savings accounts (HSAs), which give individuals more control over their own health care dollars. This is especially good for younger citizens. Contributions to these accounts will be pre-tax and earnings and withdrawals will be tax-free. These HSAs will be portable from job-to-job and into retirement, and money saved can be carried forward year to year to cover qualified health care expenses.
I appreciate the support of my colleagues for my provision establishing a demonstration project for Consumer-Directed Chronic Outpatient Services. Beneficiaries with a chronic condition, such as diabetes, which follows a relatively predictable treatment path, would be particularly well-suited for such a model. My provision was guided by a promising pilot project called "Cash and Counseling" in Medicaid, the federal-state health insurance program for the low income, conducted in Arkansas, New Jersey, and Florida.
It permits beneficiaries to receive an account worth the value of their benefit to purchase services, in essence directing their own care. It has proven cost-effective, has reduced fraud, and instills more choice into the rigid Medicaid program. Again, this is a matter of giving consumers a choice.
On the whole, this new benefit is good for the millions of Americans relying on Medicare. Yet, I must admit that the measure is not perfect and I had some reservations. Here are some of the concerns I have over this new benefit.
Number 1: Some seniors are content with their current retiree prescription coverage, and I appreciate their concern that a former employer might eliminate this once Medicare begins covering prescription drugs. The new plan addresses this concern by providing tax incentives for employers to continue to provide coverage. As a result, the Employee Benefit Research Institute estimates a very low employer "dropout" rate (2-9 percent). Retiree plans offering actuarially equivalent coverage would receive 28 percent payment for prescription costs between $250 and $5,000. It would be excludable from taxation, but all types of employers would be eligible, such as for-profit, nonprofit, state and local governments.
Number 2: Another cause of concern is that after a beneficiary spends $3,600 out of pocket, the federal government will cover up to 95 percent of their drug costs (even more for low income beneficiaries). Potentially, this could lead to abuse and over-utilization. However, the fact that under this threshold there are levels where one is personally responsible for 100 percent of costs should act as a restraint on spending.
Number 3: I am also disappointed that the "premium support" - allowing private plans to compete directly with traditional Medicare - was reduced to six demonstration projects, and not beginning until 2010. I find this too little and too late.
Number 4: One final objection I had is the so-called cost containment language. The law contains a mechanism triggering congressional response to the Medicare program if general revenue contributions (i.e. non-Medicare dedicated sources) exceed 45 percent of program spending. However, this language is too vague and lacks the teeth ensuring that the program does not become a "run away" spending program.
Even with these concerns, I voted for this bill because it targets limited resources to those who need it most and on a voluntary basis. What does this mean for the people of Florida? Starting soon, Florida residents will receive information about prescription drug discount cards providing savings of between 10 and 25 percent off the retail price of most drugs. The 590,000 low-income beneficiaries in Florida without drug coverage will get up to $600 annually to help them buy their medicines.
Beginning in 2006, three million Floridians can choose to pay a monthly premium of about $35, reducing the direct costs of drugs for most by 30 to 50 percent. Almost 900,000 low-income seniors in Florida will pay no premium and will only pay a nominal co-payment.
Although I had reservations, I decided to support this legislation. However, I am prepared to work to improve or modify this benefit where necessary to make it fiscally responsible and more workable. We had the chance to make prescription drugs more affordable for millions of Americans, and we took it. This is the first step.
