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For Better or Worse, New Medicare Bill Set to Become Law

  • November 25th, 2003

The U.S. Senate has passed a Medicare bill that gives beneficiaries a limited prescription drug benefit but also forbids the government from bargaining with drug companies for lower prices and offers subsidies to insurance companies and HMOs that will compete with Medicare.

President Bush, who will sign the legislation, hailed the bill's passage, saying the measure will "modernize Medicare" and "enable us to help millions of seniors."

But most Democrats, including eight of the nine presidential candidates, assailed the bill as a threat to Medicare and a giveaway to the drug companies and HMOs. "This is a continuation of this administration and this Republican Party selling out government to special interests," said Rep. Richard Gephardt (D-MO).

Under the new Medicare drug benefit, which will start in 2006, Medicare recipients will pay premiums projected to average $35 a month (although no one knows for sure how much the premiums will be since no insurance company has ever offered a stand-alone drug policy). After meeting a $250 deductible, the beneficiary will pay 25 percent of drug costs up to $2,250, with Medicare footing the bill for the other 75 percent. Coverage will then stop completely until drug expenses reach $5,100 -- and consumers have spent another $2,850 of their own money -- after which Medicare will pay about 95 percent of costs.

The Kaiser Family Foundation has posted an updated Medicare Prescription Drug Benefit Calculator on its Web site that can help recipients gauge how much the new Medicare legislation will assist them in paying for prescription drugs. But according to Robert M. Hayes, president of the Medicare Rights Center, 'Americans would gain a better drug benefit by repeal of this legislation and replacement with a single sentence bill that says: 'U.S. citizens will pay for medicine the same prices as Canadians pay'." (The Medicare Rights Center has a useful Web page, "Will The New Medicare Drug Benefit Help You?")

But the most controversial provision in the bill is one that will require direct competition between private health plans and the traditional government-run Medicare program. In 2010 the government will select up to six metropolitan areas to participate in an experiment to encourage Medicare recipients to join private managed care plans. If traditional Medicare costs more than the private health plans, its enrollees will have to pay higher premiums in those cities, giving the elderly a financial incentive to join the managed care plans. But those who opt for the private plans will receive a lump sum to buy the private insurance, and Medicare will no longer cover whatever medical costs an individual faces.

Many studies predict that private health plans will "cherry-pick" the healthiest Medicare beneficiaries and leave those with high medical costs to remain in traditional Medicare, a practice that could make traditional Medicare too expensive for many beneficiaries.

Other controversial provisions:

  • Medicare will abandon the program's tradition of providing everyone in the program the same benefits for the same price. People with incomes over $80,000 a year will pay higher premiums for Medicare Part B, the portion of Medicare that covers doctors' services and other outpatient care.
  • The yearly deductible that patients pay for outpatient care, fixed at $100 for years, will increase annually starting in 2005.
  • The federal government will be forbidden to negotiate with the drug companies to secure lower prescription drug prices for Medicare beneficiaries.
  • The amount of Medicare expenditures funded out of general revenues will be capped. As soon as it is projected that the cap will be reached within seven years, the President must recommend changes to either bring expenditures down or raise premiums.

For an article in The New York Times on the bill, go to: http://www.nytimes.com/2003/11/25/politics/25CND-MEDI.html?hp (Free registration required and article may no longer be available.)

For the text of the bill, click on: http://thomas.loc.gov/cgi-bin/query/z?c108:H.R.1:

Some winners and losers under the Medicare bill.

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Samantha Fredieu

Hale Ball Carlson Baumgartner Murphy PLC
Fairfax, VA

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Daniel N. Steven, LLC
Rockville, MD

Mindy Felinton

Felinton Elder Law & Estate Planning Centers
Rockville, MD

Last Modified: 11/25/2003

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