National Alliance on Mental Illness
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July 1, 2003
House and Senate Complete Action on Medicare Prescription Drug Legislation, House-Senate Conference Awaits
As is being widely reported in the press, both the House and Senate on June 27 cleared separate bills to add a prescription drug benefit to the Medicare program. The vote in the House was 216 to 215, largely along party lines. By contrast, the Senate cleared its version 76 to 21 with support from both Democrats and Republicans. When Congress reconvenes after this week's July 4th recess, a House-Senate Conference Committee will be convened to reconcile the two bills, a process likely to take at least a month, if not longer. It is expected that President Bush will take a major leadership role in pushing all sides to agree and bring forward final legislation on his top domestic priority, coverage of outpatient prescription drugs under Medicare.
Action Requested: Advocacy Needed to Ensure a Strong Drug Benefit for Medicare Beneficiaries With Mental Illness
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Background on Medicare Prescription Drug Legislation
The basic structures of the separate House and Senate bills are the same. Both would deliver a new prescription drug benefit through private sector "drug only" coverage that would be subsidized by the federal government beginning in 2006. Starting next year, both bills would establish a transitional program of discount cards that beneficiaries could purchase until the full program takes effect. Both bills call for private sector plans to compete within 10 separate regions and both grant the federal Department of Health and Human Services (HHS) the ability to minimize risk for these plans in order to induce them to participate. The Senate bill also provides for a government-run fallback plan in a region if no plans bid to participate.
Under both bills, coverage would be voluntary on the part of beneficiaries and would require payment of monthly premiums of $35 and annual deductibles ($275 in the Senate and $250 in the House). Both bills include subsidies for low-income Medicare beneficiaries electing to participate. Both bills also contain important gaps in coverage for beneficiaries with high annual drug costs and then a threshold above which catastrophic coverage would go in to effect.
However, beyond this basic structure, the bills contain substantial differences on critical issues such as beneficiary cost sharing, gaps in coverage and even additional financial burdens for higher income beneficiaries. On the issue of cost sharing, the Senate bill would require participants to pay 50% of costs from $276 (just above the annual deductible), up to the $4,500 threshold at which catastrophic coverage begins. By contrast, the House bill requires only a 20% beneficiary co-payment from $251 of costs up to a $2,000 catastrophic threshold.
More significantly, both bills contain important gaps in coverage below the catastrophic "stop loss" limit. For example, under the Senate bill a Medicare drug plan would pay 90% of drug costs exceeding $5,813 per year. This coverage would begin when a beneficiary's out-of-pocket spending on prescription drugs reaches $3,700 per year. Under the House bill, a Medicare drug plan would be required to pay 100% of drug costs exceeding $4,900 a year. This coverage would begin when a beneficiary's out-of-pocket cost reaches $3,500 a year. In addition, the House bill contains an additional feature not in the Senate bill. It would require participating beneficiaries with annual incomes of more than $60,000 to spend more of their own money before being able to qualify catastrophic coverage. This limit on out-of-pocket spending would rise with income.
Both bills contain premium subsidies and limits on cost sharing for low-income Medicare beneficiaries. For beneficiaries at or below 135% of the federal poverty line, both bills waive deductibles and premiums. Both bills also limit cost sharing for each prescription filled – 2.5% in the Senate and $5 in the House – for those below 100% of poverty (rising to 5% in the Senate bill for those between 100% and 135% of poverty). The Senate bill would require beneficiaries between 135% and 160% of poverty to pay a $50 annual deductible and pay a 10% co-payment for each prescription. As with SSI and Medicaid, both the House and Senate bills would require low-income beneficiairies to meet an assets test.
However, the Senate bill does include an amendment sponsored by Senators Jeff Bingaman (D-NM) and Pete Domenici (R-NM) increasing this asset limit test from $4,000 per individual and $6,000 per couple to $10,000 per individual and $20,000 per couple (with a requirement for inflationary increases thereafter). The amendment also allows people to self-declare that their assets that do not exceed these levels, thereby avoiding the current complex and bureaucratic application process that is invasive to personal privacy. NAMI strongly supports the Bingaman-Domenici amendment, not only as part of any new Medicare drug benefit, but also as part of the current asset test for SSI (and persons dual eligible for SSI and SSDI). These onerous limits that have not been increased since 1989.
Total Cost of Medicare Drug Coverage Limited to $400 Billion
One key factor driving the limitations on coverage in both bills is that the FY 2004 budget resolution – which has already been approved by both the House and Senate – sets a maximum ceiling of $400 billion over the next decade for the cost of any new drug benefit in Medicare. This agreement on the overall cost of a new Medicare drug benefit means that more expensive alternative proposals and amendments to enrich the coverage cannot be offered under House and Senate budget rules. At the same time, this $400 billion cost limit means that for many Medicare recipients, the benefits included in any new program are likely to fall far short of actual prescription costs for many beneficiaries.
It is important to note that while this issue is typically framed in the press, and by politicians, as "drug coverage for seniors," both the House and Senate bills, as well as the President's proposal, include drug coverage for non-elderly Medicare beneficiaries. This includes the 6.9 million Social Security Disability Insurance (SSDI) beneficiaries under age 65 – approximately 25% of whom qualified for SSDI on the basis of a disabling mental illness. Both the House and Senate bills allow for non-elderly SSDI beneficiaries to participate in any new Medicare drug coverage program on the same terms and conditions as elderly beneficiaries.
White House Proposal to Foster Private Sector Alternatives to Medicare Rejected
Both the House and Senate bills thus far reject President Bush's plan to provide an enriched drug benefit for Medicare beneficiaries willing to leave the current fee-for-service Medicare program to enroll in privately run Preferred Provider (PPO) plans. The Bush Administration had hoped to use new drug benefits as a means of promoting long-term reforms of the Medicare program – including inducing more beneficiaries to choose private sector plans over the current fee-for-service program. The Senate bill largely excludes any long-term systemic reform to modernize the Medicare program and promote participation in private sector alternatives. By contrast, the House bill includes a new optional "premium support" program beginning in 2010 that is designed to vastly expand available private sector alternatives to traditional Medicare. This proposal has generated strong resistance from Democrats and is expected to be a major source of contention in upcoming House-Senate negotiations.
Restrictive Formularies Would Be Allowed
Under the Senate bill, both "drug only" plans and PPO "Medicare Advantage" plans would be allowed to establish formularies according to standards set forth in the legislation. These include standards for an appeals process, access for medications not on the formulary and a requirement for beneficiaries to be represented on "Pharmacy and Therapeutics Committees." The Senate bill also allows plans to use tools such as "prior authorization" to restrict access to medications not on the formulary. In addition, the bill would permit plans to require an "adverse outcome" with an on-formulary medication before allowing a patient and their doctor to request an off-formulary alternative (commonly referred to as "fail first"). However, during debate last week the Senate rejected a much more far-reaching proposal that would have allowed states nearly unlimited authority to impose prior authorization requirements in their Medicaid programs as leverage for seeking discounts from manufacturers for health plans serving non-Medicaid beneficiaries.
The House bill contains similar authority for Medicare "drug only" plans to develop and implement a formulary, so long as they are based on established clinical treatment guidelines, with full disclosure to (and input from) physicians and pharmacists with relevant experience in specific clinical treatment areas. Likewise, the House bill would also require a plan to have an appeal process to allow a plan participant and their doctor to access a medication not on the formulary.
Parity for 50% Co-Payment Requirement Not Included
The absence of major structural reform to Medicare in this year's legislation means that Congress will likely be unable to address parity for current restrictions in the program that apply only to treatment for mental illness. These restrictions include the current 50% co-payment requirement for outpatient mental illness treatment (all other services have a 20% co-payment) and the 190-day lifetime limit on inpatient psychiatric treatment. Representative Ted Strickland (D-OH) and Senators Olympia Snowe (R-ME) and John Kerry (D-MA) offered separate amendments calling for a phase-in of parity for the 50% outpatient co-pay over a 6-year period.
This proposal was estimated by the Congressional Budget Office (CBO) to cost as much as $5.9 billion over 6 years. Because the entire cost of the bill could not exceed $400 billion, the sponsors of these amendments would have been forced to include an offsetting cut within Medicare to "pay for" the proposal. In the end, finding an offsetting reduction within the current Medicare program, or the proposed new drug benefit, that did not generate intense political opposition was not possible. As a result, these amendments were withdrawn without being voted on.
Despite this setback, NAMI will continue making the case for addressing the discriminatory benefit in the Medicare program – including both the 50% outpatient co-payment requirement, and the 190-day lifetime limit on inpatient services – both for the current fee-for-service Medicare program and for coverage standards for future private sector Medicare plans.