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Congress Begins Work On Medicare Prescription Drug Benefit Legislation, Full House Expected To Act Next Week


For Immediate Release, June 23, 2000
Contact: Chris Marshall

Despite sharp partisan differences, the House Ways and Means Committee on June 21 reported legislation to add a new outpatient prescription drug benefit to the Medicare program. The full House is likely to act on the bill (HR 4680) before the 4th of July recess. Yesterday, the Senate, on a near party-line vote of 53-44, rejected an attempt by Senate Democrats to attach a Medicare prescription drug benefit to the FY 2001 Labor HHS Appropriations bill. This Senate Democratic bill is discussed in greater detail below. Despite the defeat of this amendment by the full Senate, the Finance Committee is still expected to tackle the issue of Medicare prescription drugs after the 4th of July recess.

As is being widely reported in the press, Congress and the Clinton Administration have both made adding a new voluntary prescription drug benefit to Medicare the top health care priority for 2000. Despite this consensus, the two sides remain far apart over the details. While both sides agree that any new benefit should be voluntary, they disagree over how it should be delivered. President Clinton and most congressional Democrats believe that the new benefit should be universal to all Medicare beneficiaries, part of the traditional program and administered by the federal Health Care Financing Administration.

House GOP Plan Relies on Private Coverage

By contrast, the House Republican's bill - sponsored by Representative Bill Thomas (R-CA) - delivers coverage through subsidies to private plans who would then offer coverage to all beneficiaries. Under HR 4680, the government would not directly provide drug coverage, nor purchase drugs or regulate prices. Instead, beginning in 2003 private health plans would be expected to offer "drug only" coverage on top of the traditional Medicare program. These private plans that offer drug coverage would be expected to pass discounts on to beneficiaries based on the amount of the subsidy. Plans would be given flexibility to offer different varieties of coverage with varying deductibles and premiums, so long as each plan had an actuarial value of about $740. The government would pay beneficiary costs above a "stop loss" threshold of $6,000. The government would oversee the program through a new agency within the Department of Health and Human Services known as the Medicare Benefits Administration. This agency would be responsible for negotiating with plans until at least two agreed to enter a geographic area and provide coverage.

If fewer than two plans failed to enter an area, then the government could offer additional incentives. The government would be expected to increase financial incentives until insurers agreed to participate. Although the options would vary widely, HR 4680 assumes that the typical plan would cost about $40 per month in premiums, with a $250 annual deductible. Participants would pay half of drug costs up to $2,100. For persons with incomes under 135% of the federal poverty level, the government would pay the entire premium and all of the beneficiary's costs. For Medicare beneficiaries between 135% and 150% of the poverty level, premiums would be reduced on a sliding scale. The Congressional Budget Office (CBO) estimates that the House Republican bill would cost $39.7 billion over 5 years - within the $40 billion set aside in the FY 2001-2004 budget resolution.

Finally, HR 4680 contains provisions encouraging use of generic drugs and would allow use of formularies by participating health plans. However, beneficiaries could appeal decisions denying coverage of specific non-formulary drugs (including atypical anti-psychotic medications and SSRIs). A change made during Ways and Means Committee debate on the House GOP bill would broaden the criteria for such appeals to include cases where a prescribing physician "determines that the therapeutically similar drug that is on the formulary is not as effective for the enrollee or has significant adverse effects for the enrollee." This added language is intended to provide greater protections for beneficiaries with severe mental illnesses who experience side effects from medications that are otherwise effective. It also corrects problems associated with previous drafts of HR 4680 which limited appeals to instances where a formulary drug is determined to be "not effective," as opposed to "not as effective."

During debate on the GOP bill in the Ways and Means Committee, Democrats and White House officials sharply criticized the bill as flawed, focusing mainly on the potential incentives for insurers to hold out for higher government subsidies before agreeing to offer "drug only" coverage. For its part the insurance industry has been slow to support HR 4680 out of concern over whether such coverage can be made affordable to Medicare beneficiaries with high drug costs. Eventually, the bill was approved on a party-line vote of 23-14. A similar outcome is expected in the full House next week. A substitute proposal to authorize the federal government to offer a national standard package of drug benefits was put forward by Democrats and rejected 12-22.

Clinton Plan Would Extend Medicare

President Clinton's proposal, first put forward in June 1999, would have Medicare administer the program drug benefit. Under this approach, HCFA would define a standard drug package as part of a new Medicare benefits program, Medicare Part D. The monthly premium would be set at about $24 in 2003 and rise to about $51 by 2010. There would be no deductible, and it would pay half of recipients' annual drug costs up to $2,100, rising to half of $5,000 in 2009. Benefit limits would be allowed increases up to the Consumer Price Index. An as yet undefined $35 billion "catastrophic" benefit would be added in 2006. The President's plan assumes that low-income beneficiaries below 135% of the poverty level would have all their premiums paid by Medicaid, while those between 130% and 150% would get a partial subsidy through Medicaid. The President's plan bars HHS from establishing a national formulary. However, benefit managers could use formularies, so long as any specifically named drug prescribed would be covered.

Senate Democratic Plan

While the philosophical debate about how best to provide prescription drugs continues in the House, a group of Democratic senators (led by Senator Bob Graham of Florida) has introduced their own proposal, S 2541. Like the President's plan, it would establish a new Medicare Part D (administered by HCFA) for drug coverage with a universal entitlement. However, it would cost at least $10 billion more than either the Clinton or the House GOP plans - largely by accelerating the effective date of coverage and filling in important gaps in coverage.

Under S 2541, premiums would be between $35 and $40 per month, with higher income beneficiaries (individuals above $75,000, families above $150,000) paying more. Government subsidies would be gradually reduced as incomes rose, with a cap on premiums set at 50% above the basic premium. Beneficiaries would pay the first $250 per year in prescriptions, with the government sharing costs beyond that limit, paying a larger proportion as drug expenses increased.

Specifically, the government would pay 50% of expenses from $250 to $3,500, and the beneficiary would pay the rest. The government would pay 75% of costs from $3,500 to $4,000 per year, and all expenses above $4,000.

This is in contrast to the House Republican bill which has a gap in coverage - HR 4680 would have Medicare paying half of drug costs from $250 to $2,100 with beneficiaries then solely responsible for significant costs up until the "stop loss" level of $6,000. Under S 2541, the protection against catastrophic would begin in 2003, along with the basic benefit (the President's plan delays such coverage until 2006).

In order to help NAMI members navigate through the complicated provisions in each of these competing bills, a "side-by-side" comparison is in the process of being posted to the NAMI website in the Policy Updates section of the Policy Page at This chart includes HR 4680, the President's plan, S 2541 and a competing bill introduced by Democrats on the House Commerce Committee (led by Representative Anna Eshoo of California).

NAMI Position

Thus far, NAMI has not endorsed any of the competing plans for Medicare prescription drug coverage. As the above analysis indicates, each plan offers advantages and disadvantages for Medicare beneficiaries with severe mental illnesses, depending on one's unique circumstances. Earlier this year, NAMI President Jacqueline Shannon submitted testimony on NAMI's behalf to both the House Ways and Means and Senate Finance Committees outlining a set of criteria by which to measure alternative proposals in meeting the needs of Medicare beneficiaries seeking coverage for the newest and most effective psychiatric medications. A copy of this testimony can be viewed at

On many of these criteria set forth by NAMI, all of the major proposals now before Congress fare well. For example, all of the bills include non-elderly people with disabilities who are eligible for the Medicare program on the same terms as the elderly. Despite the fact that press reports continue to report on this issue as "drug coverage for seniors," 5 million of Medicare beneficiaries are people with disabilities under age 65 (13% of the 39 million on Medicare). It is important to note that 30% of the 5 million Medicare beneficiaries with disabilities under age 65 have incomes below 100% of the federal poverty level and 63% have incomes at or below 200% of poverty.

Further, it is estimated that a quarter of these non-elderly disabled Medicare beneficiaries have a severe mental illness. Most become eligible for Medicare by virtue of being on Social Security Disability Insurance (SSDI). This occurs through their own earnings history or their status as a "Disabled Adult Child" (DAC) once their parents retire. While many are simultaneously eligible for Medicaid on the basis of being low-income and disabled, a significant number have no outpatient prescription drug coverage. Under federal law, most states are obligated to continue Medicaid eligibility for these individuals if they have previously been on the SSI program. More information on the complicated rules governing Medicare and Medicaid standards for dual-eligibles is available at Thus, this legislation is critically important to enhance their ability to access adequate coverage for their treatment needs.

Recent history on this issue demands vigilance on NAMI's part. In response to mounting public concern about lack of coverage for prescription drugs under Medicare, many states have stepped in and developed their own programs for low- and moderate-income beneficiaries. Over half the states have these programs. Unfortunately, many of these programs specifically exclude disabled Medicare beneficiaries under 65 including those in Florida, Kansas, Nevada, New York, North Carolina and South Carolina.

A second key criteria set forth by NAMI is adequate coverage for individuals with very high drug costs. This is common for individuals with severe mental illnesses who must take multiple combinations of drugs to deal with complex symptoms or disabling side effects. It worth noting that the House Republican bill includes an annual out of pocket "stop loss" threshold of $6,000. By contrast, both the President's plan and the Senate Democratic bill both include thus far undefined "catastrophic" coverage that would not go into effect until 2006 and 2003 respectively.

Finally, on the issue of restrictive prescription drug formularies, all of the current proposals attempt to respond to enrollee frustrations about access to the newest and most effective medications. All would bar establishment of a uniform national formulary for any class of FDA approved drugs. At the same time, each either explicitly (or implicitly) assumes that plans will be able set their own formularies and each will set up processes that allow consumers to initiate an appeal when a non-formulary drug is denied. The House GOP bill goes the furthest in expanding the grounds for such an appeal.

Even though NAMI has not endorsed any of the current Medicare prescription drug bills now before Congress, advocates are nonetheless urged to continue educating their members of Congress on the importance of this issue for beneficiaries living with severe mental illnesses. In the few remaining weeks and months of the 106th Congress, it is highly unlikely that any single proposal will prevail over the others. Rather, if Congress is to pass a Medicare prescription drug proposal before the November elections it will require bipartisan agreement that combines elements of each. Thus, NAMI will continue to closely monitor the details on specific issues of concern to beneficiaries with severe mental illnesses, rather than the larger partisan debate that this legislation is set in.


NAMI advocates are urged to contact their members of Congress and push for action on Medicare prescription drug legislation that meets the needs of non-elderly beneficiaries with severe mental illnesses including:

  • terms and conditions that are identical to those for individuals over age 65,
  • affordable premiums, deductibles and cost sharing requirements,
  • adequate coverage for catastrophic drug expenses,
  • a bar on the use of overly restrictive formularies that limit access to the newest and most effective psychiatric medications (with adequate appeals to ensure access to non-formulary medications).
All members of Congress can be reached by calling the Capitol Switchboard at 202-224-3121 or by going to the policy page of the NAMI Web site at and click on "Write to Congress."

Side-by-Side Chart on Major Medicare Prescription Drug Proposals