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Executive Summary

Sen. Bentsen (D-Texas) will support the addition of outpatient prescription drug coverage under Medicare as part of catastrophic care legislation if the benefit is phased in, Senate Finance Committee staffers indicate. Bentsen is also seeking a provision for an advisory study to determine costs of Medicare drug coverage and to measure how proposed generic drug incentives would affect pharmaceutical industry research and development. Chairman of the Finance Committee, Bentsen is a sponsor of catastrophic care legislation (S 1127), which the panel unanimously passed last spring without a drug benefit ("The Pink Sheet" June 1, T&G-1). Since then Bentsen has expressed concern about the costs of adding a drug provision. He reportedly has been one of the key figures holding back a proposal cosponsored by Sens. Heinz (R-Pa.), Mitchell (D-Me.), and other committee members. Although one Senate proposal provides for two years to phase-in drug coverage, Bentsen reportedly favors more gradual implementation so that the program will have time to adjust to cost pressures, committee aides explain. The Mitchell-Heinz proposal would provide Medicare beneficiaries with immunosuppressive drugs and home-use I.V. anti-infectives and chemotherapeutic agents during 1989. The program would begin covering all other pharmaceuticals in 1990 ("The Pink Sheet" Aug. 3, p. 7). The catastrophic care bill cannot be brought up for expedited floor debate because several Republican senators have "holds" on it. The measure has been on the Senate calendar since early August. While minority members do not want to be perceived as responsible for blocking substantive legislation, particularly for a bill touted as a benefit to the elderly, other substantive legislation, such as the Defense Department authorization bill, has been available to deflect attention from catastrophic care. Because of a full agenda, the Senate may remain in session well into December. An extended session should benefit the proponents of a drug coverage program. Heinz reportedly considers it inequitable to extend the phase-in of Medicare drug coverage beyond two years. In his view, diseases such as heart disease, which are often treated with oral medications, can be as serious as those treated by I.V. products. Bentsen's position on drug coverage became clearer after the Reagan Administration began to renew its overt opposition to the drug benefit. The Reagan Administration had been relatively quiet since threatening a veto in mid-June of any catastrophic bill that included a drug benefit. Using the recent predictions of sharp increases in Medicare monthly premiums for existing programs as an attention-getter, the Administration has been distributing program cost estimates on Capitol Hill. One set of estimates, distributed on Sept. 18, portrays "exploding out-year costs" for Medicare. The estimates, prepared by the Medicare actuary and the Treasury Department, maintain that the Administration catastrophic care proposal would cost $3.9 bil. in 1990, $15.2 bil. in 2000, and $67.7 bil. in 2010. In contrast, S 1127, without adding a drug benefit, would cost $5.0 bil. in 1990, $27.2 bil. in 2000, and $142.2 bil. in 2010. The House-passed catastrophic care bill would cost $14.3 bil., $51.2 bil., and $198.9 bil. over the same period. The Administration's renewed efforts against add-ons to the original catastrophic care bill probably forced Bentsen's hand and led him to publicize his support for the drug coverage. However, Bentsen's description of a slow phase-in still separates him from the Heinz proposal. In its Sept. 18 analysis, the Administration attacked the House bill directly as a measure which "could transform the drug industry into a federally regulated utility." Under the bill the government would "fix drug prices," the Administration declares. In addition, the measure presents an "administrative nightmare" by requiring the Medicare program "to count millions of bills." Administrative overhead for the House drug benefit would amount to "five to 10 times the current overhead cost ratio," the Administration maintains. The House bill's drug benefit alone would cost $5.8 bil. in 1989, $6.3 bil. in 1990, $10 bil. in 1995, $15.7 bil. in 2000, $24.7 bil. in 2005, and $38.9 in 2010, the Administration estimated. The Administration also is urging the Senate to tie patient spending to increases in Medicare program costs rather than to comparatively "slow-growing" general inflation. Unless the threshold that triggers catastrophic coverage is increased to reflect health costs, "the utilization control for routine care will erode over time," and even "routine health costs [could] trigger 'catastrophic' protection," the Administration asserted. "Flawed" indexing could "undermine precarious Medicare trust fund solvency," the Administration added. Over the long term, the nonmedical index is "the most expensive feature of S 1127." The Senate bill proposes that patients be liable for $1,700 in out-of-pocket expenses for covered services in 1988, and that the cap be raised by the same amount Social Security cost-of-living adjustments, which reflect general inflation as measured by the Consumer Price Index. A catastrophic care proposal advanced by the Administration last February would cap patient spending at $2,000, indexed by medical inflation. To counter renewed opposition to the bill, the American Association of Retired Persons is planning a formal announcement of the results of a recent telephone survey that indicates broad popular support for adding a drug benefit under Medicare. According to the survey, 76% of those polled consider prescription drugs a very important component of catastrophic coverage. Slightly less than half of the survey respondents, 42%, indicated that catastrophic coverage is very important without a drug benefit. Conducted during the week of Sept. 14, the poll includes 1,000 respondents representing all age groups over 18 years. The survey also found that 53% of the respondents would support a catastrophic coverage plan with a drug benefit but only 27% would support such coverage without a drug benefit.

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