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SENATE FINANCE COMMITTEE MAY SAVE MEDICARE DRUG BENEFIT WITH MUCH HIGHER DEDUCTIBLE, ONE-YEAR DELAY IN IMPLEMENTATION: DECISION EXPECTED SEPT. 19

Executive Summary

The Medicare outpatient prescription drug program appears to be headed at least for a substantially higher deductible and a delayed start-up date as the Senate Finance Committee prepares for a showdown on modifications for the Catastrophic Care Act. The committee is discussing raising the deductible for the drug benefit to more than twice the current level so that only 10% of beneficiaries would be eligible for coverage instead of the 16.8% targeted by the bill enacted last year. The deductible in the first year of full implementation could increase from $ 600 to $ 1,357, rising to about $ 1,500 in the second year. By comparison, the existing modification package in the House calls for an increase in the drug deductible from $ 600 to $ 800 in 1991 and from $ 650 to $ 950 in 1992. The committee had earlier discussed increasing the deductible to assure that coverage is actually limited to 16.8% of beneficiaries. Recent estimates by the Congressional Budget Office have predicted that 27% of Medicare beneficiaries would have qualified for drug coverage at the present deductible levels ("The Pink Sheet" Sept. 11, p.7). A one-year delay of the full outpatient drug benefit, from 1991 to 1992, is also being seriously considered. The Finance Committee can justify the delay for practical as well as cost reasons. As the deadline for implementing the huge claims system approaches, the Senate is more concerned about the mechanics of HCFA implementing the benefit. The committee is also considering delaying implementation of the drug utilization review (DUR) component to the drug program for two years, until 1993. Sen. Pryor (D-Ark.), one of the committee's main proponents for saving the drug benefit, is strenuously opposed to such a high increase in the deductible. He would accept an increase to about $ 1,000 at the most, according to staff. Pryor is also opposed to the one-year delay for the program and the two-year delay for DUR. Senate Finance Committee plans for modification of the catastrophic law has boiled down to what committee Chairman Bentsen (D-Texas) describes as a trade-off between keeping the drug benefit or keeping the cap on out-of-pocket spending for Part B services. The committee will debate the choice at a markup scheduled for Sept. 19. Following a Sept. 14 executive committee session, Bentsen said either the drug benefit or the Part B cap would have to be fully eliminated in order to salvage the program and reduce beneficiary premiums. Whichever of the benefits is saved is likely to be less generous than it is under current law; the committee is also looking at ways to reduce the cost of the Part B cap. The debate between the drug benefit and cap on out-of-pocket expenses pits two schools of thought against each other. One, led by Sen. Durenberger (R-Minn.), maintains that the financial protection provided by the cap is at the heart of the original idea behind catastrophic health care coverage and therefore should be kept. Those in defense of the drug benefit, led by Sens. Pryor (D-Ark.) and Chafee (R-R.I.), and including Sens. Heinz (R-Pa.) and Rockefeller (D-W.Va.), point out that it may be easier for beneficiaries to find outside insurance coverage for physician costs than for drugs, so the drug benefit is more necessary. Pryor and Chafee also support retaining the skilled nursing facility benefit. Coverage of home I.V. and immunosuppressive drugs would go into effect as planned in 1990 no matter what the decision on the full outpatient drug benefit, under a plan tentatively agreed to by the committee. Those product classes are referred to as the so-called "Mitchell drugs" in the Senate in reference to Sen. Mitchell's interest in that coverage during the 1987-88 development of the law. When the Finance Committee was developing its drug proposal in 1987, Sen. Mitchell (D-Maine) proposed a Medicare drug benefit focusing on home I.V. therapies and immunosuppressives. He joined with Heinz and other committee members to develop a proposal to phase in the benefit by drug type -- first I.V. products and immunosuppressives, then certain therapeutic categories such as cardiovascular drugs and diuretics. The committee is working from a proposal developed by Durenberger that the catastrophic package be reduced to its core Part A benefits, many of which have already gone into effect. The proposal would also keep the Part B benefits scheduled under current law to go into effect in 1990 such as coverage of home I.V. and immunosuppressive drugs and mammography screening. At the markup, the committee will also debate whether to keep the skilled nursing facility (SNF) benefit in the program, Bentsen said. However, the SNF benefit is not being considered as part of the drug benefit or out-of-pocket cap trade-off. The three benefits, drugs, the Part B cap and SNF, are the most expensive parts of the catastrophic package. According to Bentsen, HHS has told the committee that the department would support a repeal of the drug benefit if its removal would make the program revenue neutral, according to Bentsen. HHS Secretary Sullivan will be invited to attend the Sept. 19 markup. In other changes to the catastrophic program, the Finance Committee has tentatively agreed to reduce the supplemental premium without increasing the flat premium and to allow beneficiaries to "opt out" of the catastrophic benefits by tying them to Medicare Part B. The Blue Cross and Blue Shield Association told the committee in a Sept. 12 letter that Medicare enrollees who choose not to take a combined package of catastrophic care and Part B benefits might have no alternative private coverage available. Making the benefits optional by tying them to Part B has been proposed by the House Ways and Means Committee in recently completed budget reconciliation legislation. House floor consideration of the Ways and Means plan may be scheduled for the week of Sept. 25. A necessary step prior to House floor consideration is the development of a rule governing floor debate by the House Rules Committee. Rep. Donnelly (D-Mass.) plans to ask the Rules Committee to allow a free-standing amendment repealing the law to accompany the budget bill to the floor.
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