Divided Congress Returns

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Divided Congress Returns

Takes Up Prescription Drug Coverage

The new and sharply divided Congress returns to Washington and the highly contentious matter of adding prescription drug coverage to Medicare. The issue topped the agenda of both parties last year, but prescription drug manufacturers spent record amounts on lobbying and campaign contributions. Combined with election year gridlock, passage of legislation was prevented.

Seniors face annual prescription drug spending increases of 15-18% for the next three years. Nearly one million seniors lost prescription drug benefits when their Medicare Health Maintenance Organization (HMO) discontinued service at the end of 2000. Seniors lucky enough to have prescription drug coverage are experiencing cuts in benefits along with hefty premium and co-payment increases.

Although both Republicans and Democrats agree that drug coverage is needed, they are very divided over how this should be done. Key sticking points include how drug prices will be negotiated, who pays, and how much. Democratic plans favor expanding Medicare to offer voluntary prescription drug coverage directly through Medicare. Under Democratic plans, the government would become the largest buyer of prescription drugs and would have the power to leverage the lowest prices from the pharmaceutical companies.

Pharmaceutical companies fear price controls saying it would hamper research and development. Other critics don`t want to add an expensive new program to Medicare without first dealing with Medicare`s longer term financing problems.

Under Republican drug plans, private health plans would compete for Medicare enrollees while the government subsidizes the insurance companies directly for a portion of the prescription drug costs. Under Republican proposals multiple insurance companies, instead of the government, would negotiate prices with prescription drug companies.

The pharmaceutical manufacturers support the approach, but the insurance industry does not. Both the insurance companies and critics of the plan say private health plans could not provide affordable coverage.

One area of agreement under both Democratic and Republican plans: low-income Medicare beneficiaries, those above 135% of poverty (or about $11,300 individual, $15,200 couple), would not have to pay premiums for drug coverage. But for those with incomes above 136% of poverty, Republican and Democratic plans vary tremendously in the portion of out-of-pocket costs.

Source: `Prescription Drugs Cost Report,` Blue Cross Blue Shield, October 2000.

This article first appeared in Volume 6, Issue 3 of "The Social Security and Medicare Advisor" newsletter (February/2001). To receive future editions of "The Advisor" in its special, free e-mail version, please click here.