Medicare: Selected Prescription Drug Proposals

Publication Date: September 2000

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Health

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Abstract:

The Medicare program does not offer protection against the costs of most outpatient prescription drugs. Some observers suggest that a drug benefit should be added to the federal program while others recommend alternative approaches to assuring access for the target population.

In 1999, the issue received attention as part of the overall discussion of Medicare reform. The National Bipartisan Commission on the Future of Medicare was charged with making recommendations concerning a number of program issues. The Commission failed to get the necessary votes for a reform proposal. The plan designed by Senator Breaux and Congressman Thomas (Co-Chairmen of the Commission) failed 10-7. A modified version of this reform plan was introduced by Senators Breaux and Frist as S. 1895. A significantly modified measure, S. 2807 (referred to as "Breaux-Frist 2000") was introduced June 28, 2000. S. 2807 would give beneficiaries access to outpatient drugs and, in certain cases, other supplemental benefits, through enrollment in either a Medicare Prescription Plus plan offered by a private entity or a Medicare+Choice plan.

The Administration's Medicare reform plan introduced by Senator Moynihan (S. 2342) would establish, as part of the Medicare program itself, an optional prescription drug benefit for all beneficiaries. The federal government would assume the financial risk of covering drug costs up to a specified limit. On June 24, 2000, the Administration announced a revision to its bill; under the revision the benefit would begin in 2002 rather than 2003, have a $25 monthly premium, and include a first year limit on beneficiary out-of-pocket costs of $4,000. The Congressional Budget Office (CBO) cost estimate of the revised proposal is $98.4 billion over the FY2001-FY2005 period and $337.7 billion over the FY2001-FY2010 period.

On June 28, 2000, the House passed H.R. 4680 (Thomas et al.) by a vote of 217-214. Under the bill, beneficiaries could choose from a variety of private sector plans which would be partially subsidized for assuming the risk of prescription drug costs. There would be a maximum limit on beneficiary out-of-pocket costs ($6,000 in 2003) and assistance would be provided to low income seniors. The drug benefit and the current Medicare+Choice program would be administered by a new Medicare Benefits Administration. The estimated premium for private sector plans would be $35 - $40. The CBO cost estimate for the new drug program is $35 billion over the FY2001-FY2005 period and $142 billion over the FY2001-FY2010 period. Associated administrative costs would total an additional $2 billion over the FY2001FY2005 period and $5 billion over the FY2001-FY2010 period.

Senator Roth, Chairman of the Senate Finance Committee has taken a different approach. On September 7, 2000, he introduced two bills (S. 3016 and S. 3017) which would set up a temporary program to provide assistance to states to provide coverage for the low-income and, at state option, to beneficiaries with high drug costs. The Roth bills are intended to be a stop-gap measure until Congress can agree on permanent reforms. This report provides an overview of selected plans currently pending before the Congress. It will be updated to reflect any legislative action.