Medicare: Major Prescription Drug Provisions of Selected Bills

Publication Date: August 2002

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Health

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Abstract:

Medicare, the nationwide health insurance program for the aged and disabled, does not cover most outpatient prescription drugs. The absence of an adequate prescription drug benefit has been of concern to policymakers since the enactment of Medicare in 1965. On several occasions, the Congress has considered providing coverage for at least a portion of beneficiaries' drug costs. The issue has again received attention this year.

There are a number of issues driving the prescription drug debate. One of the key concerns in designing a drug benefit is the potential cost and how costs would increase over time. Another issue is the appropriate role of both the federal government and the private sector in assuming the financial risk of coverage and administering the benefit. Some observers suggest that a single uniform drug benefit should be added directly to Medicare's other benefits. Others recommend offering benefits through private plans which could offer different benefit packages provided certain minimum standards were met. A further consideration is whether a major new benefit should be added until structural reforms are made to the Medicare program as a whole.

On June 28, 2002, the House passed the Medicare Modernization and Prescription Drug Act of 2002 (H.R. 4954). Under the bill, a new optional benefit would be established, effective January 1, 2005. The program would rely on private plans to provide drug coverage and to bear some of the financial risk for drug costs; federal subsidies would be provided to encourage participation. Coverage would be provided through prescription drug plans (PDPs) or Medicare+Choice (M+C) plans. Beneficiaries could purchase either a standard plan or an actuarially equivalent plan. Low-income subsidies would be provided for persons with incomes below 175% of poverty. A new Medicare Benefits Administration (MBA) would be established within the Department of Health and Human Services (HHS) to administer the benefit and the M+C program.

In July 2002, the Senate considered and passed the Greater Access to Affordable Pharmaceuticals Act (S. 812, Schumer et al). Most of the debate on that measure was devoted to consideration of several Medicare prescription drug amendments; however, none of these amendments was able to garner the necessary votes. Several key issues drove the debate. These included whether the benefit should be administered as part of the current Medicare program or by private entities, the degree of financial risk that should be assumed by the federal government, and what the benefit structure should look like and whether it should be the same nationwide. A number of Senators have indicated their interest in revisiting the prescription drug issue when the Congress reconvenes in September. This report will be updated to reflect any further legislative action.