The New Medicare Prescription-Drug Legislation
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《新英格兰医药杂志》
In terms of dollars, the number of people affected, and the political stakes involved, the Medicare prescription-drug bill is the most important health care legislation passed by Congress since the enactment of Medicare and Medicaid in 1965. The six-month roller-coaster ride taken by the legislation made its passage all the more dramatic and surprising. The legislation had very good prospects when a compromise was reached in the Senate, and Senator Edward Kennedy (D-Mass.) threw his support behind a Republican bill; it seemed in need of life support when the House passed a bill too conservative for most liberals and moderates to endorse. Then, fairly suddenly, after pressure from the leadership helped to forge a new deal supported by the American Association of Retired Persons (AARP), it garnered enough votes to pass but left both liberals and conservatives unhappy with the result.
Liberals believe that the benefit is far too skimpy and that private health insurance plans will skim off the healthiest beneficiaries, driving up the costs of the traditional program and undermining it over time. They also worry that the plan does too little to control rising drug prices. Conservatives do not like the establishment of a big new entitlement program, mourn the loss of provisions in the House bill creating open competition between Medicare and private plans by 2010 (ultimately pared down to demonstrations in six regions), and believe that the legislation does not do enough to put a lid on Medicare spending in the future. Almost nobody on Capitol Hill thought that the bill was perfect, but for a majority, the lure of taking advantage of a $400 billion opportunity, delivering on campaign promises, and worrying about problems later was too powerful to resist.
Regardless of the result, there is no disagreement that the problem being addressed is real. Many seniors have drug coverage that they purchase privately or get through their employer's retiree health benefit plan, but about one quarter of Medicare's elderly and disabled beneficiaries, or about 10 million people, do not. The median household income for a senior is just over $23,000. As a result, whether they have drug coverage or not, many seniors struggle to pay for medicine, and beneficiaries with no drug coverage can suffer particularly serious health consequences. For example, studies show that more than one quarter of seniors without coverage who have congestive heart failure, diabetes, or hypertension report not filling prescriptions because of their cost, and about one third report skipping doses to make their medicine last longer.
Seniors will receive a drug-discount card in 2004, but the drug benefit does not go into effect until 2006. When it does, most seniors who enroll will have two options. They can leave traditional Medicare and get all their health care, including drug coverage, from a private health maintenance organization or preferred-provider organization, or they can remain in Medicare and get their drug coverage from a private drug-only plan. Either way, their drug coverage will come from a private plan.
The drug benefit itself is complex, largely because it was designed not to exceed an arbitrary amount of money that Congress decided to make available for drug coverage — $400 billion over a 10-year period. The Congressional Budget Office estimates that seniors will spend more than $1.8 trillion on drugs during this period, so gaps in coverage are inevitable. One highly publicized example is the so-called "doughnut hole" — a $2,850 gap in the coverage of drug costs between $2,250 and $5,100 per year.
In general, beneficiaries will choose a plan and pay a monthly premium, estimated to be about $35 per month in 2006, or $420 for the year. After a $250 deductible, seniors will pay 25 percent of drug costs until they reach the benefit limit ($2,250 in total drug bills), then pay 100 percent of drug costs until they incur $5,100 in total costs ($3,600 in out-of-pocket expenses), after which they will pay 5 percent of any additional costs. The cost sharing is indexed so that the deductible will increase from $250 in 2006 to $445 in 2013, and the point at which seniors get help with catastrophic drug costs rises from $3,600 in out-of-pocket drug spending in 2006 to $6,400 in 2013. These indexing provisions have not received much attention but could have important implications, since income will grow more slowly than cost sharing does.
Under the new law, a relatively healthy 65-year-old man with hypertension who now spends $730 per year filling his brand-name prescription at his local pharmacy would spend a total of $790 per year, including premiums ($420), the deductible ($250), and coinsurance. Thus, he would spend more in premiums and cost sharing than his drugs actually cost. During the same year, a 79-year-old woman with multiple chronic (but common) conditions, including a history of congestive heart failure, hypertension, chronic arthritic pain, and Parkinson's disease, who takes nine different generic and brand-name medicines costing about $4,600 per year would pay $3,520 in premiums, deductibles, and cost sharing; she would fall into the doughnut hole. At the high end, a beneficiary with drug costs of $8,000 would end up paying just over $4,100 in premiums, deductibles, and cost sharing. The new benefit is structured to provide substantial relief to persons with catastrophic expenses of $5,100 or more. Nearly one fifth of beneficiaries are projected to have costs at this level or higher in 2006.
How much any given persons actually spend will depend on a number of factors, including what medications they take, which plan they choose, and whether they qualify for low-income assistance. The law provides substantial assistance to Medicare beneficiaries with an income below 150 percent of the poverty level (less than $13,470 per person), provided that they meet an asset test (less than $10,000 per person); the most generous subsidies are targeted to people with an income below 135 percent of the poverty level. The low-income subsidy represents a fundamental change in Medicare, which has traditionally provided the same benefit to all, regardless of income.
In addition to the Medicare drug benefit, there are several provisions in the bill that will affect health care providers. The bill provides nearly $20 billion over a 10-year period in additional payments for rural providers, mostly hospitals. It prevents a planned 4.5 percent cut in Medicare payments to physicians from going into effect in 2004 and provides 1.5 percent increases in both 2004 and 2005 instead. And it provides a $14 billion boost in payments to private health plans to entice them to enroll more Medicare beneficiaries.
Polls and focus groups suggest that the drug bill will not fully meet the expectations of seniors who have been listening to promises about drug coverage for years and were expecting a more generous benefit more closely resembling that provided by many employers. Seniors are confused by the complexity of the benefit and surprised to learn that, except for the discount card, it will not be implemented until 2006. Physicians can expect questions from their patients about what they should do, including which plan they should join, and whether the drugs their doctors prescribe are covered by a particular plan's formulary. Physicians should also be prepared to assist in appealing plan decisions if formularies are too restrictive or if drugs needed by their patients are not on a plan's preferred-drug list.
Although the bill will help many seniors to afford prescription drugs, it is entirely unclear whether it will do much to control rising drug prices. Indeed, one provision of the bill prohibits the federal government from using its buying power to drive a harder bargain with drug companies, as the governments of other developed nations do. The issue of increasing drug costs can be expected to reemerge in the future.
As with any major piece of legislation, there are many questions that cannot be answered until the law is implemented. How many seniors will sign up for the benefit, and what plans will they choose? How many employers will drop drug coverage because Medicare is providing it? How willing will private insurance companies be to provide drug coverage? Nor can we know with certainty whether the real 10-year cost of the bill will be $400 billion or some larger or smaller amount.
Ultimately, the future of prescription-drug coverage may depend less on the content of this legislation than on who controls the White House and Congress after the 2004 elections. If Democrats win, they can be expected to work to make the drug benefit more generous, to preserve the entitlement nature of Medicare, and to reduce the roles of competition and private plans. If Republicans win, they can be expected to try to slow the growth in Medicare spending and increase the roles of the private sector and competition. The passage of any law is a step in a continuing process.
Finally, there is one consequence of the bill that few have mentioned. It should be no mystery why this year's great health debate was about prescription drug coverage for seniors rather than other health care issues. Seventy percent of seniors said they voted in 2002, as compared with less than 52 percent of people younger than 65 years of age and about one third of the 43 million Americans without health insurance. With the $400 billion committed to prescription drugs, the federal deficit growing, and an election year looming in which it will be even more difficult to forge compromise on health legislation, it is not clear when the political process will again be able to turn to serious debate about other pressing health care concerns.
Source Information
From the Henry J. Kaiser Family Foundation, Menlo Park, Calif.(Drew E. Altman, Ph.D.)
Liberals believe that the benefit is far too skimpy and that private health insurance plans will skim off the healthiest beneficiaries, driving up the costs of the traditional program and undermining it over time. They also worry that the plan does too little to control rising drug prices. Conservatives do not like the establishment of a big new entitlement program, mourn the loss of provisions in the House bill creating open competition between Medicare and private plans by 2010 (ultimately pared down to demonstrations in six regions), and believe that the legislation does not do enough to put a lid on Medicare spending in the future. Almost nobody on Capitol Hill thought that the bill was perfect, but for a majority, the lure of taking advantage of a $400 billion opportunity, delivering on campaign promises, and worrying about problems later was too powerful to resist.
Regardless of the result, there is no disagreement that the problem being addressed is real. Many seniors have drug coverage that they purchase privately or get through their employer's retiree health benefit plan, but about one quarter of Medicare's elderly and disabled beneficiaries, or about 10 million people, do not. The median household income for a senior is just over $23,000. As a result, whether they have drug coverage or not, many seniors struggle to pay for medicine, and beneficiaries with no drug coverage can suffer particularly serious health consequences. For example, studies show that more than one quarter of seniors without coverage who have congestive heart failure, diabetes, or hypertension report not filling prescriptions because of their cost, and about one third report skipping doses to make their medicine last longer.
Seniors will receive a drug-discount card in 2004, but the drug benefit does not go into effect until 2006. When it does, most seniors who enroll will have two options. They can leave traditional Medicare and get all their health care, including drug coverage, from a private health maintenance organization or preferred-provider organization, or they can remain in Medicare and get their drug coverage from a private drug-only plan. Either way, their drug coverage will come from a private plan.
The drug benefit itself is complex, largely because it was designed not to exceed an arbitrary amount of money that Congress decided to make available for drug coverage — $400 billion over a 10-year period. The Congressional Budget Office estimates that seniors will spend more than $1.8 trillion on drugs during this period, so gaps in coverage are inevitable. One highly publicized example is the so-called "doughnut hole" — a $2,850 gap in the coverage of drug costs between $2,250 and $5,100 per year.
In general, beneficiaries will choose a plan and pay a monthly premium, estimated to be about $35 per month in 2006, or $420 for the year. After a $250 deductible, seniors will pay 25 percent of drug costs until they reach the benefit limit ($2,250 in total drug bills), then pay 100 percent of drug costs until they incur $5,100 in total costs ($3,600 in out-of-pocket expenses), after which they will pay 5 percent of any additional costs. The cost sharing is indexed so that the deductible will increase from $250 in 2006 to $445 in 2013, and the point at which seniors get help with catastrophic drug costs rises from $3,600 in out-of-pocket drug spending in 2006 to $6,400 in 2013. These indexing provisions have not received much attention but could have important implications, since income will grow more slowly than cost sharing does.
Under the new law, a relatively healthy 65-year-old man with hypertension who now spends $730 per year filling his brand-name prescription at his local pharmacy would spend a total of $790 per year, including premiums ($420), the deductible ($250), and coinsurance. Thus, he would spend more in premiums and cost sharing than his drugs actually cost. During the same year, a 79-year-old woman with multiple chronic (but common) conditions, including a history of congestive heart failure, hypertension, chronic arthritic pain, and Parkinson's disease, who takes nine different generic and brand-name medicines costing about $4,600 per year would pay $3,520 in premiums, deductibles, and cost sharing; she would fall into the doughnut hole. At the high end, a beneficiary with drug costs of $8,000 would end up paying just over $4,100 in premiums, deductibles, and cost sharing. The new benefit is structured to provide substantial relief to persons with catastrophic expenses of $5,100 or more. Nearly one fifth of beneficiaries are projected to have costs at this level or higher in 2006.
How much any given persons actually spend will depend on a number of factors, including what medications they take, which plan they choose, and whether they qualify for low-income assistance. The law provides substantial assistance to Medicare beneficiaries with an income below 150 percent of the poverty level (less than $13,470 per person), provided that they meet an asset test (less than $10,000 per person); the most generous subsidies are targeted to people with an income below 135 percent of the poverty level. The low-income subsidy represents a fundamental change in Medicare, which has traditionally provided the same benefit to all, regardless of income.
In addition to the Medicare drug benefit, there are several provisions in the bill that will affect health care providers. The bill provides nearly $20 billion over a 10-year period in additional payments for rural providers, mostly hospitals. It prevents a planned 4.5 percent cut in Medicare payments to physicians from going into effect in 2004 and provides 1.5 percent increases in both 2004 and 2005 instead. And it provides a $14 billion boost in payments to private health plans to entice them to enroll more Medicare beneficiaries.
Polls and focus groups suggest that the drug bill will not fully meet the expectations of seniors who have been listening to promises about drug coverage for years and were expecting a more generous benefit more closely resembling that provided by many employers. Seniors are confused by the complexity of the benefit and surprised to learn that, except for the discount card, it will not be implemented until 2006. Physicians can expect questions from their patients about what they should do, including which plan they should join, and whether the drugs their doctors prescribe are covered by a particular plan's formulary. Physicians should also be prepared to assist in appealing plan decisions if formularies are too restrictive or if drugs needed by their patients are not on a plan's preferred-drug list.
Although the bill will help many seniors to afford prescription drugs, it is entirely unclear whether it will do much to control rising drug prices. Indeed, one provision of the bill prohibits the federal government from using its buying power to drive a harder bargain with drug companies, as the governments of other developed nations do. The issue of increasing drug costs can be expected to reemerge in the future.
As with any major piece of legislation, there are many questions that cannot be answered until the law is implemented. How many seniors will sign up for the benefit, and what plans will they choose? How many employers will drop drug coverage because Medicare is providing it? How willing will private insurance companies be to provide drug coverage? Nor can we know with certainty whether the real 10-year cost of the bill will be $400 billion or some larger or smaller amount.
Ultimately, the future of prescription-drug coverage may depend less on the content of this legislation than on who controls the White House and Congress after the 2004 elections. If Democrats win, they can be expected to work to make the drug benefit more generous, to preserve the entitlement nature of Medicare, and to reduce the roles of competition and private plans. If Republicans win, they can be expected to try to slow the growth in Medicare spending and increase the roles of the private sector and competition. The passage of any law is a step in a continuing process.
Finally, there is one consequence of the bill that few have mentioned. It should be no mystery why this year's great health debate was about prescription drug coverage for seniors rather than other health care issues. Seventy percent of seniors said they voted in 2002, as compared with less than 52 percent of people younger than 65 years of age and about one third of the 43 million Americans without health insurance. With the $400 billion committed to prescription drugs, the federal deficit growing, and an election year looming in which it will be even more difficult to forge compromise on health legislation, it is not clear when the political process will again be able to turn to serious debate about other pressing health care concerns.
Source Information
From the Henry J. Kaiser Family Foundation, Menlo Park, Calif.(Drew E. Altman, Ph.D.)