Medicare Could Offer "Two Or More" Defined Rx Benefits, Sen. Graham Says

A Medicare prescription drug benefit offering a choice between catastrophic-only and comprehensive drug coverage is being considered by Sen. Graham (D-Fla.) for inclusion in a revised version of his "Medicare Outpatient Drug Act."

"I've been thinking about a variation on the defined [drug] benefit, and that is two or more defined benefits" under Medicare, Graham told a March 22 Senate Finance Committee hearing.

Graham suggested that the catastrophic option would be offered at lower monthly premiums and would allow seniors to continue using their existing prescription drug coverage while insuring against high out-of-pocket drug costs.

"The reason I have been thinking of this is looking at the percentage of Medicare beneficiaries who already have some form of prescription drug coverage," which is about 60% of beneficiaries, Graham said.

"What they typically don't have is a kind of catastrophic coverage, in case they get very sick and their costs become extremely expensive," he continued, "so they might decide what I need is not a full-blown policy, but I need essentially a policy against all these exorbitant costs."

"Conversely," Graham explained, "people who have no coverage at all are going to need that catastrophic when very sick but they are also going to have some coverage between zero and catastrophic."

The dual option would provide Graham a defense against criticism that a prescription drug plan under Medicare would encourage employers to terminate drug coverage benefits for retired employees. Graham's bill will include incentives to maintain employer-sponsored drug coverage.

Responding to Graham's suggestion, Kaiser Family Foundation VP & Director-Medicare Policy Project Patricia Neuman said, "I see one major advantage and one potential disadvantage."

While the plan would be attractive to beneficiaries by allowing them to choose a package that suits their needs, "the major consideration would be whether the different benefits package results in a selection problem...because you would not want a situation where sicker and higher-cost people are attracted to one benefit package and healthier people go to the other benefit package."

Sens. Graham and Conrad (D-N.D.) will add elements of comprehensive Medicare reform to their earlier drug benefit proposal before reintroducing the legislation later in the 107th session, Graham said during a March 20 press event.

The bill, which will expand on the MOD Act authored by Graham and Senate Finance Committee Democrats during the 106th Congress, will address concerns voiced by lawmakers that the earlier bill did not adequately reform the program as a whole.

The three elements of reform that will be newly included are providing competitive bidding in the Medicare+Choice program, improving fee-for-service Medicare by injecting market forces into the program and adding more prevention benefits, Graham said.

The prescription drug component of the Graham/Conrad plan is expected to be similar to that included in the MOD Act, which would provide a drug benefit for a $35-$40 monthly premium and a $250 deductible. Cost-sharing would provide 50% of drug costs up to $3,500, 75% up to $4,000 and 100% of costs over $4,000 per year (¹ (Also see "Sen. Finance Medicare Rx Plan Still Being Developed In Lieu Of Graham Bill" - Pink Sheet, 26 Jun, 2000.)).

The Congressional Budget Office scored Graham's bill at $245 bil. for 10 years during the 106th Congress. Following an increase in CBO baseline numbers, Graham expects the bill to be scored between $330 bil. and $350 bil.

While the MOD Act gained support from the majority of Finance Democrats in the previous session, the makeup of the committee changed significantly following the 2000 election.

Graham indicated he is in discussions with Finance Republicans to gather support for the revised bill. Finance Committee Chairman Grassley (R-Iowa), however, has indicated that the committee will mark up legislation along the lines of the Breaux/Frist Medicare reform plan.