Insurers Line Up for Drug Coverage

Times Staff Writers

Scores of insurers have signed up to offer Medicare prescription coverage next year, the federal government said Friday, but conservatives are trying to delay the benefit because of mounting hurricane relief costs.

Ten companies have been approved to offer government-subsidized drug plans at the national level. Many more choices will be available in individual states; senior citizens in California will have 18. It will mark the first time that Medicare has offered outpatient drug coverage to its 40 million elderly and disabled beneficiaries.

Among some Republicans, however, there is renewed concern about the benefit’s cost, estimated as high as $700 billion over 10 years, when Hurricanes Katrina and Rita are putting new demands on the federal budget.

The White House insists the drug coverage will begin on schedule Jan. 1.


“We have rescinded spending in the past,” said Rep. Gil Gutknecht (R-Minn.). “I believe in ‘last in, first out’ budgeting. If you go to any company, any family budget, that’s what you usually cut when you can’t afford things. We have to make decisions about whether we can really afford this huge new entitlement.”

Delaying the effective date of drug coverage by one year could save as much as $40 billion, but it would create serious disruptions for insurers, retiree health plans and state health programs, said health economist Jack Rodgers of PricewaterhouseCoopers.

“It sounds easy to postpone it for a year, but a lot of advance planning has taken place, and that’s a big issue,” Rodgers said. “It would create an emergency of its own -- a bit of a Katrina -- to say let’s not do this next year.”

Health and Human Services Secretary Mike Leavitt said the contracts were “a major step forward” that would enable seniors to have affordable coverage and peace of mind.


Nationally, the average monthly premium for standard coverage is expected to be $32.20. The benefit will be heavily subsidized for low-income recipients, but many others will face an annual deductible and a gap in coverage. Some analysts predict that health maintenance organizations will be able to deliver the most comprehensive benefits.

Of the 18 insurers in California selected to offer the drug benefit, five will offer at least one option with premiums of less than $20 a month. Premiums for the standard plan in California are expected to be lower than the national average. Eight will provide prescription plans with no premium to beneficiaries who qualify for extra help.

“As a result of the strong competition in California, Medicare coverage will include options that cost less and also that provide coverage that goes beyond Medicare’s standard benefit,” said Mark B. McClellan, administrator of the Centers for Medicare and Medicaid Services.

Specific options, including costs, will not be available until Oct. 1, when insurers are allowed to begin marketing their plans. Participants will not be able to sign up until Nov. 15.

McClellan cautioned beneficiaries to watch out for scam artists. He reminded them not to give out credit card or bank account numbers over the phone.

“Not one of these plans is allowed to call them up or go to their homes unsolicited and ask for personal financial information,” he said. “If someone calls up saying they are from Medicare and asks you to give them financial information, don’t do it.”

McClellan said his agency was working with law enforcement agencies to monitor fraud and abuse in the new program.

Zaldivar reported from Washington and Vrana from Los Angeles.