WASHINGTON, Sept. 19 (UPI) -- After four years of debate over the issue, the U.S. Congress has barely moved toward adding a drug benefit to Medicare. According to think tank policy analysts on all sides of the issue, continued debate over how to best structure the program may combine with growing budget constraints to threaten the effectiveness of any final Medicare drug plan.
Joseph Antos, resident scholar at the conservative American Enterprise Institute, told United Press International that one of the major consequences of continued delay is that Congress will start at the bottom of a much steeper financial hill next year. The costs for such a program are likely to increase 20 percent or more due to increased prescription drug costs and other factors, which will make passage even more difficult.
"Every year this (delay) continues, the harder is will be to do something because of the cost," Antos said. "That will call for a reasonable policy approach that bluntly isn't going to give everybody everything," he said. "There have to be compromises on how generous the benefit is."
The amount of money needed to fund such a program over the next 10 yeas would be enormous, with Medicare beneficiaries expected to spend $1.8 trillion for prescriptions.
Although the House passed what most analysts consider a highly flawed bill this summer, the Senate was unable to wrangle a compromise out of a tangle of competing plans. The measure passed by the House, and competing proposals in the Senate and from policy experts, would range in cost from around $300 billion to $500 billion, each with limited coverage.
In addition to the increasing costs for the program, the growing budget deficit also will constrain spending. A wild card in the mix is the November elections and the potential shift in power between parties in the House and Senate.
The other major obstacle to passage of a drug benefit package -- probably the most significant of the lot -- is the divide between Democrats and Republicans over whether to develop stand-alone benefit programs run by private sector insurance companies (run in the same manner as the program that provides health benefits to federal employees), or to establish a federal program within the existing Medicare structure.
"The big ideological question is, are we going to go with a government program run like Medicare and risk the kinds of things we have seen with (constraints on) physician payments, or are we going to give a Federal Employees Health Benefits Program-style market program a chance in this small but important area," said Antos.
Antos and Grace-Marie Turner, president of the Galen Institute, have come up with a plan to provide coverage targeted at low-to-middle income individuals that they feel can bridge the gap between the conflicting congressional plans while also avoiding their key failures.
In their recent AEI paper, "What Congress Should Do about Prescription Drugs for Seniors," Antos and Turner argue that the leading proposals in Congress would effectively displace the existing insurance coverage that many seniors already carry, while also imposing high new costs on taxpayers.
They believe that their proposal targets those most at risk of not having prescription drug coverage, while laying the groundwork for market-oriented reforms to the Medicare program as a whole.
Under the plan, the government would spend $300 billion over 10 years to provide an up-front subsidy for routine drug expenses and coverage for high end and catastrophic drug costs. The aim of the plan is to fill the void between low-income individuals who can receive drug benefits through Medicaid, and those with high enough incomes to purchase Medigap insurance coverage.
Antos and Turner's Prescription Drug Security plan, or PDS, would provide $600 a year, on a card, to help low- to moderate-income Medicare beneficiaries (with incomes equal to 200 percent of the poverty line and below) pay for their routine prescription purchases.
The amount of government funds on the card would be reduced on a sliding scale for those with incomes between 200 percent and 350 percent of the poverty line. In addition, those living at the program's lowest economic threshold would receive government-subsidized private insurance coverage for large drug purchases.
Under the plan by Antos and Turner, private insurance would pay 80 percent of drug costs between $2,000 and $6,000 per year, with full coverage for expenses beyond that point.
As an incentive to get those with incomes above this level involved in the program, higher-income people would receive a tax deduction for making their own deposits to the PDS cards and for paying premiums for the catastrophic insurance coverage. All program participants would also be eligible for negotiated drug discounts as developed by the private plans. The plan would be administered by a new, independent, federal agency.
Tom Miller, director of health policy studies at the libertarian Cato Institute, said there are good and bad points to the Antos/Turner plan.
"It is important to focus the emphasis of Medicare drug coverage towards a competitive situations and provide catastrophic coverage for high drug costs," Miller told UPI.
"I am not, however, in favor of the cash-on-a-card walking around," he said. "If you want to give more money to Medicare beneficiaries, put more money in their social security checks."
Miller said that instead of funding a PDS card, more emphasis could be placed on the private catastrophic insurance that could kick in at high levels without requiring the 20 percent co-insurance payment.
For market-based programs to work alongside Medicare, he said, the entire federal program would have to be reformed in a market direction.
Turner and Antos say that although this type of wholesale reform of the Medicare program would be preferable, it is not politically viable.
"Nobody is more convinced than me that the best way to address the problem of the Medicare drug benefit is to modernize Medicare so that, just like with a private health plan the drug plan is an integral part of the (overall) benefit plan," said Turner. "The problem is how to get there from here?"
Antos added that a stand-alone plan is the option in which Congress has shown the most interest. As one of the behind-the-scenes architects of the troubled Medicare privatization experiment, Antos said that Congress's plan could actually set the stage for more market-driven reforms, by experimenting in this small portion of the Medicare structure that can be easily modified.
Knowledge gained from this, he said, can eventually be brought to reforming the entire program in a market-oriented direction.
No matter what changes are made, a benefit program that relies upon private insurers is not likely to provide the kinds of drug benefits that Americans want or need, says Marilyn Moon, an economist and senior fellow at the health policy center of the left-leaning Urban Institute.
She said that although the intent of the Antos/Tuner plan is a good one, there are parts of it that "don't make good sense."
"I think it will be very difficult because the formularies of the private companies will be involved," she said. Moon pointed out that private insurers base the list of prescription drugs they will cover and their prices, known as formularies, upon discounts given to them by drug companies, not on what is necessarily the best choice for patients.
This approach would likely result in a limiting of access to prescriptions under market-controlled programs that provided "arbitrary control" to insurers, she said.
Turner responded to this criticism by noting that health insurers typically cover most drugs under their formularies, just at tiered rates. She said this could continue under hers and Antos's proposal.
But unlike existing health plans -- whose benefits are set by employers based upon cost -- she said that insurers would have an incentive to keep their coverage generous in order to attract the most subscribers.
She also said that drug choice would be limited under most of the competing House and Senate plans.
"You don't have to choose between one or two drugs per therapeutic class (in our plan)," she said. "You don't want the government telling you what drugs you need. This is what most of the bills will lead you to one way or another."
Overall cost of the program is another area of disagreement. Moon said the $300 billion in spending proposed under the Antos/Turner plan is only about one-sixth of what Medicare beneficiaries will spend over the next six years on prescription drugs. She said that although a major focus of the debate has been how to ease costs, the reality is that an effective prescription drug benefit will cost much more than the numbers being discussed.
"People say this is a very expensive benefit and they are absolutely right, but if you make it much less expensive and provide too-limited coverage, you will leave people very unhappy," she said. "This is a cost that society is going to have to bear. The question is, how are we going to share the expense?"
Turner said that calls for more spending were unrealistic, especially considering the increasing cost constraints.
"We don't have a trillion dollars to spend on a Medicare drug benefit," she said. "We are trying to get to people who most need help with an incentive program. That is a very realistic thing to do."
Jeff Lemieux, senior economist at the Progressive Policy Institute, said that the he did not think the Antos/Turner proposal is flexible enough to ensure that the new benefit doesn't offset existing Medicare drug coverage options.
Turner, whose center-left think tank has ties to the Democratic Leadership Council, said it is important to note that most Medicare beneficiaries already have some form of prescription drug coverage through Medigap coverage or an employer.
Lemieux added that the PDS card concept is a "good idea" for the poor without coverage, but thinks the plan does not adequately address the issue of how to attract healthier beneficiaries with lower drug costs to join the program, in order to balance the program's higher-cost beneficiaries.
Turner dismissed this logic.
"There are not any other plans out there that have figured out the adverse selection process. But we do it by bribing healthy people as well as sick people to participate with the $600," she said.
Despite their conflicting viewpoints, all the analysts agreed that time is of the essence.
Moon said that although it is still possible for a compromise bill to be developed this year, it is unlikely given how far apart both parties are on the key issue of how to structure the program.
"We will likely have less flexibility than we have today in terms of the federal budget, and so as a consequence, I believe it will be very hard to resolve the funding question, she said. "Just as hard is the issue of structuring the program. It may well be that this will become a presidential election issue again in 2004."
