In the Public Interest

In a year in which there hasn't been a lot of good news, the likelihood that Congress was going to amend Medicare to include a prescription drug benefit was certainly a bright spot.

Medicare (Title XVIII of the Social Security Act) was established in 1965 to provide health-care benefits to persons 65 years old or older and was later amended to include persons with disabilities. For persons over 65, it generally proved to be a universal program, in that wealthy as well as low-income persons were eligible. The program also provided reasonable coverage for hospital services and required premiums for outpatient coverage and provider services, but it did not include a prescription benefit.

So, as Medicare nears its 40th anniversary, the addition of prescription benefits would create a federal health insurance program for elders similar to commercial ones available to others. Certainly, constituents of APA's Committee on Aging and Committee on Disability Issues in Psychology would be pleased, as would senior members of APA.

What concerns everyone, however, is that Congress is going about this prescription benefit piece with the legislative equivalent of "blue smoke and mirrors." What has started out as a benefit to older persons and those with disabilities seems to be more and more taking on the status of a liability.

Proposals being considered

As usual, the House of Representatives and Senate have different approaches to establishing the benefit, yet both are attempting to work within a $400 billion cap over a period of ten years. The Senate proposal creates a benefit that requires recipients to pay a $35 monthly premium, a $275 deductible and a 50 percent co-payment for up to $4,500 in prescription expenses. From $4,500 to $5,800 in prescription purchases, recipients would pay the entire cost of prescriptions, but after prescription expenses exceed $5,800, the Senate bill would provide 90 percent coverage, with recipients making a 10 percent co-pay. Low-income persons would receive subsidies, but those who qualify for Medicaid (Title XIX of Social Security Act) would be required to receive their benefits from that program, moving their prescription costs to the states, which jointly operate Medicaid with the federal government.

The House bill is only slightly different, also requiring a coverage gap in which the beneficiary purchases medications without coverage. In the House bill, recipients would pay a $35 monthly premium, a $250 deductible and 20 percent of prescription expenses after the deductible. However, the support gap begins after $2,000 in out-of-pocket expenses and ends at $5,100, after which coverage is 100 percent. Low-income persons would receive a subsidy for premiums, deductibles and co-payments, and it is proposed that high-income persons pay greater out-of-pocket costs.

Within the Senate and House, there is a continuing desire to begin privatization of Medicare by, for example, offering certain incentives for persons to switch from the federal program to Health Maintenance Organizations, Preferred Provider Organizations and the like. Many health-care analysts believe that, should this happen, it is likely that Medicare as we know it will change significantly, and, given the understandable profit motives of private companies, premiums and deductibles would likely be raised over time to maintain profit margins.

It is highly unlikely that a nationwide network of private providers will be able to operate with an administrative overhead of 3 percent as the federalized program has done over the years.

A rush to privatization?

This brief summary probably doesn't do justice to the range of these bills. As always, the "devil is in the details." But, despite its simplicity, I hope the summary provides an indication of what is likely to be in the final legislative package and how it is likely to modify Medicare, which historically has been one of the most efficiently operated federal programs.

It also appears that one of the most influential political constituencies--the elderly and their powerful advocacy groups--are not being heard in the rush to provide an underfunded prescription benefit in a privatized system. The $400 billion Medicare allotment over 10 years--beginning in 2006--pales when put alongside the Congressional Budget Office estimate of $1.8 trillion to be spent on prescription drugs by Medicare recipients over that same 10-year period. The people do not appear well-served this time. Perhaps the next time?