National Alliance on Mental Illness
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(800) 950-NAMI;
Medicare Coverage of Mental Illness Treatment
July 2002


  • NAMI strongly supports congressional efforts to modernize coverage of mental illness treatment under the Medicare program - specifically to address the discriminatory aspects of programs such as the 50 percent co-payment requirement for outpatient mental illness treatment and a 190 day lifetime limit on inpatient hospitalization. NAMI supports the following bills in Congress to address these other inequities in Medicare: HR 599, S 841, S 690 and HR 1522.
  • NAMI strongly supports bipartisan efforts in Congress to add a prescription drug benefit to the Medicare program that provides adequate protections against the high cost of medications, ensures eligibility for both senior citizens and non-elderly people with disabilities on SSDI and does not administer benefits through use of restrictive formularies.
Parity Under Medicare

Medicare coverage of mental illness treatment has remained virtually unchanged since the program's inception in 1965. This coverage continues to impose stigma-based distinctions in coverage between mental illness and other medical treatment. Medicare beneficiaries must pay 50 percent of the cost of outpatient mental illness treatment, as opposed to 20 percent for all other outpatient services. Similarly, Medicare imposes a 190-day lifetime limit on inpatient psychiatric hospitalization that is not imposed on all other inpatient treatment.

NAMI strongly supports various bills now before Congress to address these historic inequities in the Medicare program. Among these are HR 599 (Roukema), S 841 (Snowe/Kerry), S 690 (Wellstone) and HR 1522 (Stark) and urges the Bush Administration and Congress to incorporate them into efforts to enact comprehensive restructuring of the program.

Outpatient Prescription Drug Coverage Needed

Both President Bush and congressional leaders have pledged to make coverage of outpatient prescription drugs part of the Medicare program. This issue has been commonly framed as "coverage of prescription-drug benefits for seniors." Much to NAMI's regret, few elected officials have discussed this popular issue in terms of providing such coverage for the 1.3 million non-elderly people with disabilities who are eligible for Medicare by virtue of having been on Social Security Disability Insurance (SSDI) for a minimum of two years.

Later this year, Congress is expected to take up several competing measures to add a prescription drug benefit to Medicare. All of these competing plans agree on the need for any Medicare drug benefit to be universal (all Medicare beneficiaries would be eligible for the benefit) and an entitlement. Further, all of the competing plans include some type of "stop loss" coverage - establishing a threshold above which all costs are covered (ranging from as low as $3,500, up to $7,000 in competing bills).

The separate House and Senate bills vary widely on several critical issues: a) costs and b) whether the program should be administered within the existing structure of the Medicare program (generally favored by Democrats) or through private sector plans (generally favored by President Bush and Republicans). On the issue of costs, proposals vary from as low as $200 billion over 10 years, up to more than $750 billion over 10 years. Because of the looming retirement of the large baby-boom generation, putting off enactment of a drug benefit raises the eventual costs by as much as 18% a year.

On the issue of program structure and delivery, a leading proposal authored by Senate Democratic leaders would add a new Part D to Medicare would administer a new prescription drug benefit through the existing Medicare structure. By contrast, a proposal being pushed by House Republican leaders would direct insurance companies and HMOs to offer prescription-drug coverage. This new benefit would be enacted in conjunction with larger, systemic reform of the entire Medicare program. Under this legislation, the government would not directly provide drug coverage, purchase drugs, or regulate prices. Instead, private health plans would be expected to offer a variety of options that would include drug coverage integrated into Medicare as well as "drug only" coverage added to the traditional Medicare program. These private plans would be expected to pass discounts to beneficiaries based on a federal subsidy for the premium costs for drug coverage. Other proposals would rely on Pharmacy Benefit Management (PBM) providers to administer a new drug benefit and penalize manufacturers that refuse to discount drug prices.

On the issue of restrictive prescription-drug formularies, most of the competing congressional proposals attempt to respond to Medicare-enrollee frustrations about access to the newest and most effective medications. Most proposals would bar the establishment of a uniform national formulary for any class of FDA-approved drugs. At the same time, each proposal either explicitly or implicitly assumes that insurers will be able establish their own formularies and each will have a process to allow beneficiaries to appeal decisions to deny non-formulary drugs.

As part of the debate over Medicare prescription drug coverage, NAMI supports the following principles:

  • prescription drug coverage must address the underlying discrimination in Medicare's existing, overall mental illness benefit,
  • the 1.3 million non-elderly persons receiving SSDI benefits (25 percent of whom are eligible for SSDI because of a mental illness) must be eligible on the same terms and conditions as elderly beneficiaries),
  • coverage should be a standardized with entitlement for all eligible Medicare recipients,
  • coverage must be sufficient enough to pay for the most expensive drugs for the treatment of severe and persistent mental illnesses and include "stop loss" coverage, and
  • prescription drug formulary policies must adhere to a principle of open access to the newest and most effective medications for serious brain disorders such as schizophrenia, bipolar disorder and major depression.