Medicare Reform Battle Intensifies

Ron Pollack, director of Families USA, says the legislation provides too little help for poor seniors and does too much harm to traditional Medicare.

"It still can and should be changed," he says.

Gail Shearer, director of health policy for Consumers Union, Washington, says the legislation requires seniors to pay too high a price for relief that is modest at best.

She charges that in developing the legislation, the Congressional supporters "relied on profit-seeking insurance companies and private health plans to make this work, which guarantees a perpetual flood of lobbyists coming back to Congress requesting larger and larger subsidies."

On the political front, sharp divisions have emerged both among Republicans and Democrats.

On the Republican side, members of the leadership, such as Ways and Means Committee Chairman Bill Thomas, R-Calif., says the legislation will strengthen Medicare.

"In my view, complete success means that Medicare?a program headed toward bankruptcy?would not just reverse course but be made sustainable for future generations of seniors," Thomas says. "By definition, we've achieved success."

But some Republicans, such as Rep. Mike Pence, R-Ind., say the legislation fails to enact enough free-market reforms in the Medicare program. With a $400 billion deficit, Pence says, the legislation is not fiscally responsible.

On the Democratic side, Senate Majority Leader Tom Daschle, D-S.D., blasts the legislation.

"It keeps drug prices high, causes two to three million retirees to lose drug coverage and coerces seniors into HMOs," Daschle says. "It is hard to imagine a plan less faithful to what seniors have been promised, but with help from drug companies and HMOS, that's what Republicans have written."

But Sen. Max Baucus, D-Mont., ranking Democrat on the Senate Finance Committee, says that while the legislation is not perfect, it is a good bill and will accomplish the goal of providing seniors with a prescription drug benefit.

Under the legislation, the prescription drug benefit would begin in 2006. The premium would average $35 per month, and there would be a $275 deductible.

Medicare would then cover 75% of all drug costs up to $2,200. There would be no coverage for costs between $2,200 and $3,600. But above $3,600, Medicare would cover 95% of costs for beneficiaries above 150% of the poverty line and 100% for those below 135% of the poverty line.

Beneficiaries in between those percentages would have a copay of between $2 to $5 per prescription.

Beneficiaries could receive the prescription drug benefit as either stand-alone coverage or as part of a private health plan that offers drug coverage.

Private health plans that offer basic health coverage would receive a $12 billion subsidy also to provide the drug coverage.

In addition, beginning in 2010, the legislation launches a pilot program under which Medicare would face competition from private health plans in six Metropolitan Statistical Areas for six years.

The demonstration sites would have two local private plans and enroll at least 25% of local beneficiaries.

Beneficiaries who chose to remain in the traditional Medicare program would be assured that their premiums could not increase by more than 5% in any year during the six years of the pilot project.

The legislation also creates health savings accounts. Individuals would be allowed to put $1,000 annually ($2,000 for couples) into an HSA, which would be tax deductible, would earn tax-free interest and would allow tax-free withdrawals to pay for qualified medical expenses.