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PRESCRIPTION DRUG BENEFIT MAY BE EXPENDABLE IN MEDICARE FUNDING DEBATE; SENATE FINANCE COMMITTEE PLANNING TO UNVEIL NEW PROPOSAL AT SEPT. 7 MARKUP

Executive Summary

Senate Finance Committee Chairman Bentsen (D-Texas) may be ready to abandon the scheduled implementation of the Medicare outpatient drug benefit to balance the costs of the overall catastrophic health care package. Bentsen is preparing to sponsor a proposal to trim the costs of the benefits and to cut back on program receipts by modifying the premium structure for Medicare beneficiaries. The Senate Finance Committee will unveil the Bentsen proposal at a markup session scheduled for Sept. 7. Bentsen has been meeting with committee members to sound out ways to modify the current catastrophic coverage plan. To reduce the overall cost of the program, he is advocating scaling back the benefits and the supplemental premium. During those conversations, Bentsen is said to be focusing on the prescription drug coverage as a conspicuously expensive benefit which Medicare recipients will begin to feel in 1990, when the drug premium rate is scheduled to begin at $ 10.36 per $ 150 of tax liability. It is clearly politically appealing to head off that added premium bite before it takes effect. The drug benefit is also an attractive political target now as a not-yet-implemented program. After 1991, when the major portion of outpatient drugs are supposed to become available to Medicare participants, the program will be much tougher to take away. Also on the expenditure side, Bentsen is reportedly looking at the law's cap on overall out-of-pocket medical expenses. The Finance Committee chairman is said to be expressing concerns that even with a scaleback in benefits, a reduction in premiums will require the committee to come up with new ways of supplementing beneficiary payments for the catastrophic package. A Congressional Budget Office report sent to the committee July 13 predicts that the catastrophic drug insurance trust fund will be insolvent by 1991 with a negative balance of $ 300 mil., that will deepen to $ 4.7 bil. by the end of 1993. The forecast marked a dramatic turnaround from earlier CBO projections, which had shown a surplus in the drug program, and added impetus to the Finance Committee's move toward modifying the catastrophic law. On the revenue collection side, Bentsen is said to favor making the catastrophic benefits voluntary by tying them to Medicare Part B. The voluntary Part B funding plan was originally proposed by the Senate in 1988 drafts of the Catastrophic Health Care Act. During the House/Senate conference on the law, however, the House prevailed in its position to make the benefits and additional premiums mandatory. In a reversal of its previous position, the House Ways & Means Committee recently adopted a new plan which would tie to Part B all catastrophic benefits except some Part A benefits, which would already be in effect. * Thomas Burke, chief of staff to former HHS Secretary Bowen, suggested in an Aug. 15 meeting with reporters that making the Medicare catastrophic care law voluntary could be a key step in retaining the new benefits in some form. Now a principal in the consulting firm National Health Care Practice Employee Benefits, Burke worked with Bowen in 1988 to develop the Reagan Administration's original Medicare catastrophic care proposal. Asked how the law could be reworked to make it more acceptable to critics, Burke said, "one of the things I'd do is appease those that are making all the noise . . . I'd make [catastrophic care] a Part B benefit, which is how we had it originally." Under such an approach, the catastrophic care benefits would be voluntary in that Part B is optional for Medicare beneficiaries. He noted that the decision not to particpate would be a difficult one for a beneficiary. A beneficiary would also have to give up Part B physician coverage in order to opt out of catastrophic care. Burke advocated a provision that beneficiaries who opt out of catastrophic care could rejoin the program within two years. Commenting on present efforts to modify the law, Burke said, "I suspect what Ways and Means did will probably be what carries on the Hill." But Burke criticized the plan as shifting more of the costs to poorer income elderly. "What they are thinking of doing is reducing the impact on the wealthy and increasing the impact on the poor," he remarked. The congressional Joint Committee on Taxation has estimated that the House proposal would result in a $ 42 increase in total catastrophic care-premiums for couples with incomes below $ 20,000 in 1990, while cutting premiums by $ 10 to $ 342 for couples with incomes between $ 25,000 and $ 80,000. * Burke reiterated his previous opposition to the outpatient prescription drug benefit. "I would have liked not to have had a drug benefit. We didn't want it, we don't know how to run a drug program . . .," he maintained. Instead, he advocated a "two-gate plan," whereby beneficiaries would receive drug reimbursement only if they exceed both a drug deductible, and the out-of-pocket spending limit for health care services.
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