Bush Alters Medicare Plan After Bipartisan Criticism

President George W. Bush’s anticipated plan to “reform” Medicare had not yet become a formal proposal before it was attacked by Democrats and some Republicans.

In his State of the Union address, Bush said, “Seniors happy with their current Medicare system should be able to keep their coverage the way it is. And just like you—the members of Congress—and other federal employees, all seniors should have the choice of a health care plan that provides prescription drugs.”

Members of Congress and federal employees are covered by the Federal Employees Health Benefits Program (FEHBP), through which they select among competing health plans offered by insurance companies.

Congressional Democrats and some Republicans took Bush’s second statement as a signal that he might propose restricting prescription drug benefits to Medicare beneficiaries willing to give up the current fee-for-service program for benefits administered through insurance companies.

On February 14, the Washington Post reported that even before a fully developed administration proposal was announced, several senior Republicans had criticized Bush’s “anticipated suggestion” to provide prescription drug benefits only to Medicare beneficiaries who are willing to join insurance plans.

Sen. Charles Grassley (R-Iowa), chair of the Senate Finance Committee, and House Speaker J. Dennis Hastert (R-Ill.) have said the government must help all older people with the costs of prescription drugs.

According to the Post, Grassley said that the administration “botched” the development and announcement of its Medicare plan.

Thompson Denies Coercion

In a hearing before the House Energy and Commerce Committee on February 12, Tommy Thompson, secretary of Health and Human Services (HHS), responded repeatedly to concerns by committee members that persons on Medicare would be forced into managed care programs in order to receive prescription drug benefits.

He said, “There’s not going to be any attempt to force seniors into HMOs in order to get prescription drugs.”

Thompson, however, echoed Bush’s implicit support for the FEHBP. He said, “[Participants] deserve more choice or at least the same choices as Congress and staff [get] through the FEHBP.”

By early March Bush had retreated from an effort to restrict drug benefits only to people who enroll in Medicare managed care plans.

On March 3, the New York Times reported that Bush planned to propose making a prescription drug card available to all seniors and to offer a $600 subsidy to low-income participants for drug costs. Catastrophic coverage of an amount that had not been determined would also be available for all seniors.

According to the Times, Bush would offer “comprehensive coverage of prescription drugs and preventive services to people who join private insurance plans.”

Both those who want greater involvement of private-sector health plans in the Medicare program and those who want to add a prescription drug benefit to the existing fee-for-service program cite Medicare+Choice (M+C) in their arguments.

The program was authorized by the Balanced Budget Act of 1997 with the intent of expanding health care services to Medicare beneficiaries by savings generated through what advocates assumed would be the efficiencies of managed care. Those savings were to be used to reduce premiums or offer benefits such as prescription drugs.

Beneficiaries could enroll in private plans, including health maintenance organizations, preferred provider organizations, and provider-sponsored organizations (Psychiatric News, December 21, 2001).

In a February 13 press release, Karen Ignagni, president and CEO of the American Association of Health Plans, said, “The facts show that Medicare+Choice plans today are delivering more and better coverage—including access to prescription drugs—than the fee-for-service program.”

Problems in M+C Program

The “Fact Sheet on Medicare+Choice” published by the Kaiser Family Foundation in February, however, describes several problems.

Since 2000, M+C enrollment has declined by 27 percent to 11 percent of the Medicare population. Only 13 percent of those eligible living in rural areas have the option of enrolling in a M+C plan.

There has been a decline in availability and breadth of key benefits, particularly prescription drugs, while the percentage of beneficiaries who are charged premiums in addition to the monthly Part B premium has increased.

The evidence on quality of care and satisfaction is mixed, but several studies report problems for people with disabilities and those who want to access a specialist.

The government’s General Accounting Office reported in August 2000 that Medicare “aggregate payments to Medicare+Choice plans in 1998 were about $5.2 billion (21 percent) more than if the plans’ enrollees had received care in the traditional FFS program.” It is “these excess payments and not managed care efficiencies” that enable M+C to offer more comprehensive benefits with small or no premium.

Edward Gordon, M.D., chair of APA’s Medicare Advisory Corresponding Committee, told Psychiatric News, “Medicare+Choice failed to do the job of providing quality care and additional Medicare benefits through insurance companies. If enacted, Bush’s effort to move from fee-for-service to a greater involvement of insurance companies would fail to help those on Medicare and represents a payoff to those companies.”

Gordon said that in late February he met with Rep. Sue Kelly (R-N.Y.) as a member of her advisory committee on Medicare. She told the group that she supported a Medicare drug benefit that would be “minimally disruptive to seniors” and that Medicare beneficiaries should be able to stay in fee-for-service Medicare and still “access a drug benefit.”

In related news, Thompson failed to secure the support of the National Governors Association (NGA) for the Bush administration’s Medicaid proposal when the organization met in late February.

Under that proposal, states would have total flexibility in designing the benefits package and in determining beneficiaries for “optional” populations and services.

“Mandatory” populations and services must be covered for a state to participate in the Medicaid program. States determine what optional populations and services they will cover and receive federal matching Medicaid funds for them, as long as they adhere to certain guidelines.

In 1998 optional spending comprised 65 percent of total Medicaid spending and included such items as prescription drugs and case-management services.

At his January press conference announcing the proposal, Thompson said, “We can’t get this legislation passed unless the governors are enthusiastically behind it and push it.”

The governors expressed concern about the fact that funds would be “front-loaded” for seven years, with reductions in following years to compensate for those additional funds (Psychiatric News, March 7).

After disagreement between Republican and Democratic governors about the extent of financial help they would request from President Bush, the NGA passed a resolution asking the federal government for additional funds for three federally mandated programs: homeland security, special education, and the No Child Left Behind education bill. The NGA also separately requested funds to cover the cost of long-term care for people who qualify for both Medicare and Medicaid.

Bush turned down those requests, but offered to work with the states to reform Medicare and Medicaid.

On February 25 the NGA announced that it would seek financial assistance from Congress to help alleviate state budget crises.

“Medicare+Choice: Payments Exceed Cost of Fee-for-Service Benefits, Adding Billions to Spending” (HEHS-000161) is posted on the Web at www.gao.gov. Medicare fact sheets are available at www.kff.org. ▪