Medicare Drug Benefits Periled by Rising Costs

Cost estimates of the controversial Medicare catastrophic care program have risen so dramatically that Congress might have to reconsider coverage of prescription drugs, Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) said Tuesday.

The newly pessimistic appraisal of the program’s cost is a dramatic reversal for Bentsen and will give ammunition to critics who have pushed to delay its implementation.

Previously, Bentsen had said that the drug benefit fund would have excess revenues that could be used to reduce the surtax levied to finance catastrophic care.

‘Serious Look’ Needed

However, at a Finance Committee hearing Tuesday, Bentsen said that “a serious look has to be taken at the benefits” in the catastrophic care legislation because of rising cost estimates. High on the list of benefits to be considered is “prescription drugs, whether that should be retained or dropped,” he said.

Bentsen was immediately criticized by Sen. John Heinz (R-Pa.), one of the key Republican members of the committee, who said that it would be a “grave error” to cut the drug benefit. By first promising a surtax cut and now saying that the surplus funds have disappeared, Bentsen “has left himself and the rest of us a bit out on a limb,” Heinz said.

The drug benefit “has the best value and does the most benefit for the greatest number of people,” among all the provisions of the catastrophic care bill, Heinz said. At least 5 million people a year would be helped with their drug bills, he said.

Bentsen’s pessimism on costs will intensify the already volatile debate over catastrophic care, adopted by Congress last year as the biggest expansion of Medicare benefits since the program was created in 1965.

Starting Jan. 1, the law provided unlimited hospital care after the beneficiary pays the first $560. Future benefits are planned to include a cap on out-of-pocket spending for doctor bills, and phased-in coverage of prescription drugs for the first time.

Because of budget constraints, Congress decided to require all 33 million Medicare beneficiaries to pay $4 a month for the new services.

But the bulk of the program’s financing is to come from a surtax that will be levied on only the 40% of beneficiaries who pay federal income taxes. This surtax, which is called a supplemental premium, is calculated at the rate of $22.50 for every $150 owed in federal taxes. Thus, a person with a federal tax bill of $1,500 would pay another $225 for the catastrophic care program. The premium rises with income, reaching a maximum of $800 a year for an individual and $1,600 for a married couple.

Higher Taxes Opposed

The surtax, which will be paid for the first time with 1989 tax returns filed next year, generated considerable controversy, particularly among retired government employees, military personnel and union workers already enjoying good medical coverage. These retirees argue that they will be paying higher taxes for coverage that they already have.

Bentsen and other supporters of the law have barely fought off efforts in the Senate to delay its implementation. In an effort to assuage the critics, Bentsen had said that he would support a cut in the surtax of as much as 16% because of an expected surplus of revenues.

But he met Monday with officials of the Congressional Budget Office who told him that the cost of the drug benefit may be far greater than expected. The benefit begins with a few rare drugs next year. In 1991, the program will pay half the cost of prescription drugs and insulin after the patient pays the first $600.

Although the benefit has yet to begin, estimates have been soaring because drug prices are rising rapidly, as are estimates of the amount of drugs that the elderly will consume when the government helps pay the bill.

The Finance Committee on Tuesday heard a long list of witnesses appeal for delay or changes in the catastrophic program.

“There is a great desire for change in this area,” said Sen. Larry Pressler (R-S.D.). The special surtax is a “burden borne by too few people,” he said.

Sen. Bob Graham (D-Fla.) called for a delay of one or two years in the full catastrophic care coverage. Congress should take “a broad look at our future direction in health care for retirees--a topic of which catastrophic coverage is only a part.”

Some critics of the catastrophic care program say that it should be offered on a voluntary basis, giving Medicare beneficiaries the chance to reject this additional coverage.