Sponsor: Senator Bill Frist (Tennessee)

Cosponsors: 4

Sponsor: Congressman Dennis J. Hastert (Illinois)

Cosponsors: 20

Summary:  Amends Title XVIII of the Social Security Act to provide for a voluntary prescription drug benefit under the Medicare program

Comments: It is estimated that 14% of Medicare recipients -- nearly 6 million people-- are individuals with disabilities who are under the age of 65. Many policy makers and advocates have expressed concern over this new law even though it will provide Medicare coverage for prescription drugs. For example, many advocates are concerned that the law has too many gaps in coverage and includes systemic changes that will have a negative impact on the effectiveness of Medicare.

Major provisions of new law

Beneficiaries selecting the coverage will have to pay a monthly premium of approximately $35.00, and an annual deductible of $250, both of which will increase each year. Enrollees will then pay 25% of their prescription drug costs after paying the initial deductible amount. However, Medicare will only cover prescription costs up to a set limit of a beneficiary's total drug costs. After this $2,250 limit is met, beneficiaries will have a gap in coverage, and will have to pay for all of their own prescription drugs until their total costs get large enough for them to qualify for catastrophic coverage.

• becomes effective in fiscal year 2006
• establishes a pilot competitive bidding process between government funded traditional fee-for-service Medicare and private insurers which will subsidize lower cost plans and require enrollees of higher-cost plans to pay higher premiums
• prohibits government negotiation with drug manufacturers on pricing
• provides premium and co-payment subsidies to people with incomes below 150% of the federal poverty level
• standard coverage includes:
• enrollees pay a monthly premium of approximately $35 ($420 / year)
• enrollees pay an annual deductible of $250
• Medicare pays 75% of drug costs up to $2,250
• enrollees pay all drug costs between $2,251 and $3,600
• Medicare pays 95% of cost once the beneficiary has reached the $3,600 catastrophic out-of-pocket threshold

Many advocates oppose the provisions in the legislation that will require the Medicare traditional fee-for-service program to compete with private managed care plans. The Consortium for Citizens with Disabilities (CCD) asserts that this aspect of the law will have a significant negative impact on individuals with disabilities. Specifically, CCD and others maintain that people with disabilities generally select fee-for-service plans because managed care plans do not offer access to all the specialists and treatment they need. Consequently, since fee-for-service Medicare programs have more enrollees with extensive medical needs than private, managed care insurers maintain, Medicare fee-for-service programs have much higher costs than managed care plans. For this reason, it is likely that private managed care insurance plans will outbid the traditional Medicare program for government support for its Medicare prescription costs. Advocates believe that people will then be forced to choose between switching to private managed care plans in order to get affordable prescription drug benefits or staying in traditional fee-for-service government funded Medicare plans in order to have access to specialized doctors and treatments. CCD therefore believes that competition will reduce the quality and availability of health care for people with disabilities.

Similarly, the bill also offers tax benefits to workers who can afford to switch from their employer's health insurance plan to a private plan with high deductibles. Since these plans will attract healthy individuals who do not have high medical costs, it will alter the pool of beneficiaries supported by employers and raise employers' health insurance costs.

Advocates have also argued that the law will make the Medicare system less effective because it prohibits the government's Medicare program from negotiating prices with drug companies and does not resolve questions over the importation of lower cost prescription drugs from Canada into the United States.

To estimate your prescription drug costs under the new law go to the following link on the Kaiser Family Foundation website: http://www.kff.org/medicare/rxdrugscalculator.cfm

Summary of Legislative Activity:
6/11/03 Introduced

6/27/03 Passed Senate with amendment (76-21)

Subsequently, text of Senate bill incorporated into HR 1 and vote vitiated

Summary of Legislative Activity:
3/25/03 Introduced

6/27/03 Passed House with amendment (216-215)

7/7/03 Received in Senate, passed in lieu of S1 with amendment; Senate asked for conference

11/22/03 House agreed to conference report (220 - 215)

11/25/03 Senate agreed to conference report (54 - 44)

12/8/2003 Signed by the President - Public Law No: 108-173

UPDATE: On December 9, 2003, Senator Edward Kennedy introduced "The Defense of Medicare and Real Medicare Prescription Drug Benefit Act" (S1992), which has been referred to the Finance Committee. The bill addresses many issues important to disability advocates: