Medicare Proposals Leave Big Questions Unanswered

It has taken four years of serious effort following about five years of talk, but Congress has finally reached the point where overhauling Medicare -- complete with a prescription drug benefit -- is a real possibility.

The full Senate will begin debating a Medicare bill this week. Two House committees will try to complete their own plan.

Yet no one seems to understand exactly how -- or if -- the complex, detail-laden, concept-driven reform plans would work.

To provide the new drug benefit, the proposals rely in part on things such as stand-alone, private drug-benefit plans, which, as several senators and government officials noted last week, “don’t exist in nature.”

They also rely on private health plans to constrain health-care costs. As of now, 88% of the 40 million senior and disabled Medicare beneficiaries get their health care the old-fashioned way -- one freely chosen doctor at a time. The plans in Congress would encourage those in traditional Medicare to switch to managed-care plans or networks of doctors that would offer “packages” of benefits.

The Bush administration and many Republican lawmakers believe these preferred-provider organizations or HMOs would save the government money. The nonpartisan Congressional Budget Office, however, says PPOs would cost the government more than traditional Medicare.

Some Senate Finance Committee members voted for the bill last week but said they objected to some of its features and intended to try to fix them on the Senate floor. Democrats will push for a more generous drug benefit. Republicans will try to increase the role of private health plans and market competition.

As the legislation moves ahead, here are some of the most commonly raised questions and concerns about the proposed changes:

Q. If I’m already on Medicare, how would I get prescription drug coverage?

A. For now, you would do nothing. If approved, the drug benefit wouldn’t be available until January 2006, and you wouldn’t need to enroll until 2005. Starting in 2004 you could buy a drug discount card, which the Bush administration says would save you money on your prescriptions.

When the benefit becomes available, you could get it -- and all your health coverage -- through a Medicare-approved health maintenance organization or preferred-provider organization. If you chose to stay with your current doctor, the administration says you would be able to get your prescription drug coverage by choosing between at least two stand-alone drug plans.

Q. Is there such a thing?

A. Not at the moment. But administration officials say private insurers and pharmacy-benefit managers have expressed interest in developing such a venture. To encourage it, the government would share the companies’ financial risk.

If there aren’t at least two plans in your area, the Medicare program would provide “fallback” coverage. But under the Senate plan, you could choose Medicare coverage only if there weren’t two stand-alone drug plans in your area.

Q. Why do President Bush and many Republicans want to change Medicare?

A. They point out that Medicare hasn’t kept up with all the advances of modern medicine. It doesn’t cover preventive care, for example, nor does it recognize the growing importance of drugs in treating disease.

In addition, Washington now makes all the payment decisions -- how much hospitals and doctors will be paid and how much a certain surgery is worth. Bush and the Republicans say that the private marketplace would do a better job of setting prices and keeping them low.

They also note that the Medicare trust fund is projected to run out of money in 20 to 25 years, when millions of retired baby boomers will be straining the system. If Medicare costs aren’t contained now, they argue, the system might disintegrate then.

Q. Why do Democrats have a problem with that?

A. They’re concerned that the administration really wants to move all seniors into managed-care plans, and they worry that private plans would be more concerned with making money than providing seniors with the best care. On the question of cost efficiency, they note that Medicare’s administrative costs, at 2% to 3%, are far lower than the 10% to 12% administrative costs of private health insurers.

Q. I get drug coverage and other supplemental Medicare coverage from my former employer. Would that change?

A. There is not yet a good answer to that question. The government wants to encourage employers to continue offering retiree health coverage. The reform plans would pay them a subsidy -- about 70% of the value of the drug benefit -- to encourage them to stay the course.

But corporations, stung by rising health-care costs, already have begun dropping retiree health coverage, and some believe that prescription drug coverage under Medicare would only give them another reason to bail out. The CBO says 37% of those beneficiaries who have employer coverage -- about 11% of all beneficiaries -- could lose it as a result of the new plan.

Q. A few years ago, I joined a Medicare HMO. But then the HMO dropped out of the program, and now there are no Medicare HMOs where I live. Under this new system, is there any guarantee I’ll be able to join a PPO or HMO?

A. The Congressional Budget Office thinks there could be a similar problem under the new system. That’s one reason it predicts that no more than 2% of beneficiaries would join private health plans. They note that insurance companies generally aren’t eager to cover people who are older and more likely to have expensive illnesses.

The Bush administration, however, says that if you build it right, they will come.

Its risk-sharing provisions will make participation in the huge Medicare market worth the private companies’ investment, administration officials say. They think as many as 40% of seniors could join PPOs or HMOs.

Q. I take a lot of prescriptions. Will Medicare -- or a private plan -- pay for them all?

A. Not unless your income is very low. Otherwise, as with any other kind of insurance, you’d have to pay premiums and deductibles. Medicare coverage gets confusing where it differs from other insurance. Instead of covering a portion of all your costs once you’ve met your deductible, the Senate and House plans have coverage gaps.

Under the Senate plan, after a deductible of $275, insurance covers 50% of drug expenses for the year up to $4,500. Then you’re on your own for the next $1,300. Above $5,800, insurance would cover 90% of your drug costs. The CBO estimates that about 4.7 million seniors, or 12% of all beneficiaries above low income, would fall into the coverage gap.

The House plan follows the same pattern. After a $250 deductible, insurance would pay 80% of drug expenses up to $2,000. But you’d then have to cover all your costs up to about $5,800, at which point insurance would cover 100%.