Clinton Calls for Medicare Prescription Drug Benefit

President Clinton proposed far-reaching changes Tuesday in the Medicare program, including a new $1,000-a-year prescription drug benefit.

Congressional Republicans signaled that they will fight the Clinton plan because two-thirds of the elderly already have some form of prescription coverage. But they indicated their support for a more modest drug benefit.

“Why would you want to make it available to many people who already have it?” asked Senate Majority Leader Trent Lott (R-Miss.).

Although the president’s plan contains measures to save money for Medicare through competitive bidding and other reforms, the focus of the political debate is likely to be on his proposal to add drug coverage, which would be the most significant new benefit since Medicare was created in 1965.

The president said he wants to use $794 billion from the ballooning budget surplus to extend Medicare solvency through 2027, when millions of baby boomers will be collecting benefits.

The administration believes that the issue of prescription drug coverage will have more political appeal to Americans over the age of 65--who are more likely to vote than members of any other age group--than the abstractions of the budget surplus.

In announcing his Medicare plan at the White House, the president focused primarily on prescription drug coverage.

“The original Medicare law was written at a time when patients’ lives were more often saved by scalpels than by pharmaceuticals,” Clinton said. “Many of the drugs we now routinely use to treat heart disease, cancer, arthritis, did not even exist in 1965.”

If the president’s proposal is approved by Congress, Medicare beneficiaries would initially pay $24 a month for the prescription coverage, starting in the year 2002. There would be a 50% co-payment for each prescription, with coverage up to $2,000 a year for the first two years of the plan. That means a person with $2,000 in yearly drug expenses would pay $1,000 out of pocket, while Medicare would pay the rest.

After 2002, the coverage and premiums would rise in stages to an annual maximum of $5,000 in 2008 (with Medicare paying $2,500) and a premium of $44 a month.

The benefit would be free for individuals with incomes up to $11,000 a year and couples with incomes up to $17,000.

About 40 million persons are covered by Medicare, including those 65 and over and the disabled of all ages. Because this group is so dependent on medications for a variety of problems, about 31 million people a year would benefit from the coverage, the White House said. The new program would cost about $118 billion over 10 years.

The premium of $24 a month would be in addition to the current premium of $45.60 a month paid by Medicare recipients for their Part B coverage, which helps pay for doctor bills and home health care.

Politicians from both parties appear to agree that prescription drug coverage under Medicare is an idea whose time has come.

“It’s essential to include prescription drugs in today’s Medicare as well as tomorrow’s Medicare,” said Rep. Bill Thomas (R-Bakersfield), chairman of the House Ways and Means health subcommittee. “Giving seniors affordable access through Medicare to the latest advances in drug therapies is a priority for House Republicans.”

House Minority Leader Richard A. Gephardt (D-Mo.) praised Clinton for offering “the single greatest improvement to the Medicare program since its inception.”

But the Republicans and some Democrats said that they prefer the proposal by the Medicare Reform Commission issued earlier this year. That plan called for delivering drug prescriptions through HMOs and managed-care organizations and subsidizing the new drug benefit for low-income beneficiaries. Supporters of this approach argued that, because most Americans already have some degree of coverage, either from their former employer or through supplemental insurance, a new universal benefit would be an unreasonable burden on taxpayers.

“If you’re adding something for the first time, it’s appropriate to look at” linking it to incomes, said Sen. John B. Breaux (D-La.), who served as co-chairman of the Medicare commission along with Thomas.

Despite the interest in both political parties in Clinton’s proposal, officials in the health care and pharmaceutical industries expressed doubts.

The pharmaceutical industry favors “improving drug coverage for all seniors,” but is concerned that a Medicare benefit could lead to government restrictions on prices. Pharma, the industry’s trade association, said that it would study the plan. It also asked whether Clinton’s proposal would “lead to inevitable price controls on drugs, discouraging life-extending medical research?”

With the 2000 campaign season drawing near, a bipartisan deal on prescription drugs might be hard to achieve.

“The president’s proposal will probably help Medicare reform in the long run but in the short run I don’t think it’s going to happen,” said Tom Scully, president of the Federation of American Health Systems, which represents for-profit hospitals.

“There will be a great debate about Medicare and tax cuts but in the end it won’t come together because the trust really isn’t there between the two parties,” Scully said. “It will create a great political issue . . . but there are huge differences philosophically.”

For the long run, the biggest financial threat to Medicare comes from the sheer size of the Baby Boom generation, the 76 million Americans born in the years 1946 through 1964. The president’s proposed solution is to use 15% of the anticipated budget surplus to bolster Medicare’s trust fund. The injection of additional revenue would “eliminate the need for future excessive cuts and radical restructuring that would be inevitable in the absence of these resources,” the White House said in its explanatory materials.

The president’s plans also call for savings by increasing competition among Medicare health maintenance organizations and other managed-care programs.

But the health care industry worries that such a policy change would cut into already narrow profit margins.

The Clinton plan also asks Congress to give the government new powers to order competitive bidding for goods and services purchased by Medicare.

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Video of the president’s speech on Medicare is on The Times’ Web site: https://www.latimes.com/medicare

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Prescription Plan

President Clinton’s Medicare plan contains prescription drug provisions that would:

* Cover half of prescription drug costs up to $2,000 a year ($1,000 in benefits) starting in 2002.

* Increase gradually to $5,000 ($2,500 in benefits) by 2008.

* Require beneficiaries to pay a $24 monthly premium for drug coverage in 2002, rising to $44 a month in 2008.

* Eliminate the premium for low-income beneficiaries (below $11,000 for singles and $17,000 for couples)