Changes in Medicare prescription drug bill tough to swallow

WASHINGTON, D.C. — The U.S. Senate approved a sweeping Medicare prescription drug bill (54-44) Nov. 25 that threatens the health benefits of millions of retirees, moves Medicare toward privatization and forces 32.5 million retirees to pay more for Medicare, the national AFL-CIO said.

AFL-CIO President John Sweeney said the bill is a “partisan proposal that, under the guise of creating the much-needed and long-promised prescription drug benefit, would reward the pharmaceutical companies and health maintenance organizations (HMOs) that are the political backers of the plan’s sponsors.”

Senator Ted Kennedy (D-Mass.), who led an unsuccessful filibuster against the bill, called it “the first step towards a total dismantling of Medicare ... In exchange for destroying Medicare, it offers senior citizens a paltry and inadequate drug benefit. And the moment it is implemented, it will make 9 million senior citizens ... almost a quarter of all senior citizens, worse off than they are today.”

The Senate vote followed an unprecedented three-hour House vote that concluded at 6 a.m. Nov. 22. During the three hours that the vote was held open — normally votes are open 15 to 20 minutes — the bill’s opponents held a narrow lead. But following intense arm-twisting by President George W. Bush and Republican House leaders, several Republican members gave in to pressure and political promises and switched their votes.

Sweeney called the House action “a pre-dawn highway robbery.”

Congressmen David Wu, a Democrat, and Republican Greg Walden were the only Oregon representatives to support the bill, along with Oregon Senators Ron Wyden, a Democrat, and Gordon Smith, a Republican. Washington Democratic Senators Patty Murray and Maria Cantwell opposed it.

As described by the International Foundation of Employee Benefit Plans, the prescription drug benefit will be available to Medicare beneficiaries beginning in 2006. In the interim, prescription drug discount cards will be available starting six months from the enactment date of the new bill. An annual enrollment fee of up to $30 may be charged by card sponsors offering negotiated prices and discounts. Savings will vary but are estimated to reduce retail prices by 15 to 25 percent. Low-income beneficiaries would also be eligible for up to $600 in subsidies to offset the cost of prescriptions.

The main drug benefit that begins in 2006 requires a monthly premium, estimated at $35, and a $250 annual deductible. Once the deductible is met, the plan pays 75 percent of prescription drug costs up to $2,250. Costs from $2,250 to $5,100 are not covered by Medicare and are paid out-of-pocket by the beneficiary. For costs beyond $5,100, the Medicare plan covers 95 percent of costs for most beneficiaries. Low-income beneficiaries are eligible for cost-sharing and premium assistance with no gap in coverage. However, individuals with more than $6,000 and couples with more than $9,000 in assets, excluding house and car, do not qualify for this assistance.

Michael Arken, president of the Oregon chapter of the Alliance for Retired Americans, which opposed the bill, said the interim discount card of 15 percent may sound good until you realize that prescription drug prices are increasing by roughly 15 percent a year. He said the $600 credit also is inadequate and the amount could be “as much as some Oregonians get.”

Arken said ARA “was very disappointed in Wyden’s and Wu’s votes,” emphasizing that the organization will make sure senior citizens are made aware of how they voted.

Wyden and Wu are up for re-election in 2004.

The Oregon AFL-CIO called the bill, “a political payoff for pharmaceutical companies and HMOs.”

The final bill was crafted in closed-door, Republican-dominated House and Senate meetings and backed by Bush. According to the national AFL-CIO, the bill also will:

• Move Medicare toward privatization and steer seniors and people with disabilities to private HMOs.

• Force 32.5 million beneficiaries to pay higher premiums and other Medicare costs.

• Open the doors to a whopping $139 billion in profits for the pharmaceutical industry.

• Threaten the employer-provided drug benefits of millions of retirees.

While the final product provided a small amount of funding designed to discourage employers from dropping their retiree drug coverage and forcing seniors into Medicare or private HMOs for drug coverage, it set aside more — $12 billion — in what Senator Kennedy described as a “slush fund” to help private insurers take over Medicare’s role in providing drug benefits.

The $12 billion is in addition to the “already inflated payments to private plans that amount to 25 percent more than traditional Medicare is paid,” Sweeney said. “This will creates a two-tiered system that allows private managed care plans to offer better benefits and lower premiums than seniors would get under the traditional Medicare program.”

In addition, the pharmaceutical industry — which lobbied heavily for the bill — will reap a $139 billion windfall profit because the legislation does not contain mechanisms to control prices and does not allow Medicare to negotiate prices for prescription medication, according to a report by the Health Reform Program at Boston University’s School of Public Health.

“This will mean higher costs for Medicare beneficiaries and U.S. taxpayers, who will pay ‘everyday high prices’ for prescription drugs, and higher profits for the pharmaceutical industry,” the Oregon AFL-CIO said in its Weekly Report.

In pushing for the Medicare bill, the pharmaceutical industry ramped up its already extravagant lobbying on Capitol Hill: In the first six months of this year alone the Pharmaceutical Research and Manufacturers of America — the drug industry trade association — spent $8.5 million lobbying Congress and federal agencies, according to federally filed lobbying reports.

Wyden said the Medicare reform bill was not perfect, but “its flaws simply did not outweigh the enormous number of Oregonians who will benefit from this new, voluntary coverage.”

Wyden, who serves on the Senate Special Committee on Aging, said data that he collected showed that 106,765 low-income retirees in the state (with incomes at or below $12,123 for an individual or $16,362 for a couple) would pay no premium for their drug coverage and would have co-payments of between $2 to $5. He said another 78,829 Oregon seniors who had annual drug bills of more than $5,000 would have their prescription costs reduced by one-half. Wyden also saw as a plus a provision in the bill that offers $71 billion tax-free to employers who keep providing retiree health benefits.

“I voted to break the gridlock and enact a $400 billion drug benefit in Medicare,” he noted.

“He’s saying there’s more good than bad in the bill, we’re saying it’s mostly bad,” ARA’s Arken responded.

(Editor’s Note: Press Associates Inc. contributed to this report.)

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