Medi-Scared

by Cara Gardner


Don't be alarmed if the elderly members of the family are moodier than the adolescents this Thanksgiving; they've got good reason. Politicians have managed to hash out a deal by way of favors, bargains and monetary incentives, making the biggest overhaul to the Medicare program since its inception in 1965. Polls show that a vast majority of Americans over 55 aren't pleased.


Critics say the new law was written and passed by people who are not and never will be dependent on government-subsidized healthcare; still, the new Medicare program will have a direct affect on more than 40 million Americans.


"In simplistic terms, what it's going to do is end up destroying Medicare as we know it. That's the big picture," predicts Michael Warren, secretary of the Washington State Alliance for Retired Americans (ARA) and a chapter president of Retired Public Employees. "The small picture is it will do very little good for most people. It will end up costing more for most people, and those of us in public retirement programs and many private programs will end up losing the coverage that we currently have."


Nick Beamer, the executive director for Aging and Long Term Care of Eastern Washington, (ALTCEW), agrees: "The interesting thing about this whole compromise is it's advertised as a prescription drug bill, but you look at it and it's doing a whole lot of other things to Medicare that aren't beneficial to the recipient," Beamer explains, referring to the bill's focus on giving private insurance providers a larger role in Medicare.


Proponents of the Medicare prescription drug legislation promise that involving private industry even more will increase competition, lowering prices. In addition, the prescription drug legislation has provisions to help rural doctors and hospitals. The bill provides about $28 billion in order to correct inadequate reimbursement systems for rural providers. The National Rural Health Association (NRHA) supports the legislation because of these provisions.


But Beamer says even though the new Medicare prescription drug plan may help some of our area doctors and hospitals, it won't help seniors, particularly those in Eastern Washington.


"Under this compromised bill, where there's supposed to be different competing drug plans, there just isn't a big enough market for them to make a go in Eastern Washington," he argues. "Several years ago, we had an interest in Medicare choice plans and everyone in the insurance market was offering seniors zero out-of-pocket premium. Where have all those gone? Over the last seven years, every one of those plans have pulled out of Eastern Washington except one. I think the same thing would happen [with this Medicare legislation]."


As in other areas of the healthcare industry, more competition has not always meant better prices.


"Competition has a down side in the health industry," says Beamer. "[Private insurance providers] all exited Eastern Washington because they couldn't make any money and all that caused was a tremendous amount of confusion for seniors and quite a bit of consternation about how to transfer back. And guess what? It was more expensive when they had to transfer back."


Warren, with the ARA, says that even if the new plan gives seniors more choices about drug coverage, it's going to end up costing them.


"[It will] stop Medicare from being a basic benefit plan and make it into a contribution plan, where the government gives you a voucher and says, 'Go out and find good insurance,'" explains Warren, "When I'm 65 that's easy, but when I'm 85 and have serious problems and am less able, I'll have greater and greater cost of insurance. It'll end up costing more for those most in need."


For a majority of citizens, that's not OK. A recent poll conducted by the Peter D. Hart Research Associates shows more than two-thirds of Americans over 55 don't agree with the proposed Medicare prescription drug plan.


"Members [of ARA] are not very happy right now," says Warren. "They're really angry. I was at a meeting and they couldn't understand how a bill like this could even see the light of day."


How could a bill like this pass if a majority of American seniors disagree with it? Most of those backing the legislation, including the AARP, the nation's leading senior advocacy group, say Americans have waited long enough for prescription drug coverage. Earlier this week, Republican senators argued before their colleagues that it's now or never.


"This historic opportunity may never come again, and we cannot afford to let it pass," said Senator Susan Collins (R-Maine), on Monday before the Senate's final vote.


"Waiting is not going to produce a better bill," said Senator Max Baucus (D-Mont.), before voting for the bill. "Waiting will deny seniors a prescription-drug benefit that they so desperately need."


Baucus and others admit the legislation isn't perfect, but say it's better than nothing. The AARP, too, contends that while this prescription drug plan isn't ideal, it's mostly good. Opponents say the AARP isn't compromising for the good of seniors; it's selling out.





Good for Business -- The AARP represents more than one-tenth of the U.S. population. After endorsing the Republican-led Medicare legislation, the organization has come under fire from many of its 35 million members. Protesters are cutting up their membership cards; among those furious at the organization for supporting the Medicare legislation are 85 members of Congress.


"Any organization that is willing to sacrifice its principles for short-term political gain... no longer deserves our membership," wrote R-Lynn Woolsey, (D-Calif.) in a letter to the AARP Executive Director Bill Novelli. The AARP has been inundated with so many calls regarding the legislation that it has set-up an automated voice answering service to deal with them.


The Washington State Office of AARP automatically sends all calls regarding the Medicare legislation to an office in California. Calls to the Washington state office were not returned.


Many of those who've followed the AARP closely say its support of the drug legislation isn't a surprise.


"I don't like to say anything against AARP," Warren says cautiously, "but the current leadership is not in line with its membership."


Novelli, AARP's executive director, recently wrote the foreword to Newt Gingrich's book. Gingrich, a long-time opponent of Medicare, has said he'd like to see the program "wither on the vine."


The AARP may be losing thousands of members over its support of the Medicare legislation, but it stands to gain millions of dollars.


"Insurance companies would gain [from this legislation]," says Beamer. "All of a sudden you have a whole new product line of prescription drug policies that are available. AARP sells insurance, so they would benefit, you see, and they would put together a policy for prescription drugs. Basically, the insurance business supports the prescription drug companies: it allows them to access a market they have not had before."


According to Public Citizen, an advocacy and policy think tank, AARP would stand to gain $60 million or more a year, mainly from royalties on its insurance policies.


Insurance providers aren't the only ones predicted to benefit. It's estimated the pharmaceutical industry could make as much as $139 billion due to the fact that the legislation does not provide a means to control drug prices, nor does it allow the government to negotiate prices for prescription medication. This has been the most hotly contested issue.


Secretary of Health and Human Services Tommy Thompson urged those concerned with that aspect of the legislation to vote for it anyway, saying that the government could possibly get the power to negotiate drug prices in coming years.


Meanwhile, the legislation specifically prohibits people from going into Canada to get their prescription drugs.


"We live on the border, and if Health and Human Services can't negotiate for lower prices, Canada has and we've taken buses of people up there to buy drugs because it's so much cheaper," says Warren. Those days will be over.


The legislation has earmarked $400 billion in the next 10 years for its prescription drug coverage -- an amount that supporters and opponents of the package have admitted may not be enough.


"We always tend to underestimate," says Beamer. "That's been the pattern in the past when we've looked at Medicare and Medicaid. That $400 billion is a new amount of money that will go to these drug policies."


Even so, $400 billion is too much for some members of Congress, especially because the legislation doesn't allow the government to negotiate for price controls, leaving that to the insurance companies. Many have cited the record deficit, saying that, essentially, the government will be borrowing money to fund senior citizens' drugs. The cost of the current energy bill and the cost of rebuilding Iraq are also being cited as reasons to halt the Medicare legislation.


"We are building a new expansion onto a house that's teetering on a cliff," said Sen. Don Nickles (R-Okla.), who voted against the bill. "We are saddling future generations with enormous liabilities."


Despite such concerns, the legislation squeaked through the House and passed the Senate. President Bush, with reelection looming, has said he will sign it.


Warren, with the ARA, is still baffled by the legislation.


"It's not what I considered conservative, it's not even in line with conservative action," he muses, regarding the Republicans' push. "This is going to hurt us. If it goes into effect, when it actually does, it is going to be harmful. It's going to lead to a form of privatization, which has been the goal of the insurance industry for quite a while."


Beamer, too, worries that the Medicare bill is about lining pockets, not getting better, less expensive drug coverage to seniors who most need it.


"From a consumer's standpoint, how does this [bill] help is the major point. It looks like it has less help than we would have wanted -- a lot less for the individual trying to purchase prescription drugs."





The Details - By the time you're reading this, members from both parties will most likely be home for Thanksgiving, having passed the most significant overhaul of the Medicare program since its inception in 1965.


The legislation earmarks about $400 billion for the next 10 years for a new drug benefit for senior citizens. The legislation also calls for the following:





Drug Discount Card


* Medicare-endorsed prescription drug discount cards will save seniors an estimated 15 percent on drugs and be available to beneficiaries by April 2004.


* Low-income beneficiaries would receive $600 per year for 2004 and 2005.





2006 Benefits


* Medicare beneficiaries would have to choose between a private insurer with prescription drug coverage or a stand-alone drug plan. Estimated premiums are at $35 a month. Deductibles are estimated at $250, after which 75 percent of drug costs up to $2,250.


* There would be a coverage gap in drug costs between $2,250 and $3,600, which beneficiaries would have to pay out of pocket.


* After a cap of $3,600, catastrophic coverage would apply and pay 95 percent of drug costs, with a co-pay.


* Low-income assistance would provide those earning up to $12,123 with coverage and with no gap.


* Billions would be provided to employers to keep their retirees covered once the Medicare benefits go into effect.





Rural Health


* Over $25 billion would go toward struggling rural hospitals and doctors as reimbursement.





Canadian Drugs


* Health and Human Services would not be allowed to authorize the importation of cheaper drugs from Canada.





Private Insurers


4* Private insurance companies would compete regionally. Private insurers would receive about $12 billion in subsidies for offering basic health insurance.





For more information on deductibles, premiums, coverage gaps, hospital payments, physician payments, cost containment and new benefits, please visit the Department of Health and Human Services at www.hhs.gov





Publication date: 11/27/03