. . . [The CBO] said that spending for prescription drugs averaged $1525 for each Medicare beneficiary in 2000. It estimated that this amount would triple by the year 2011. There are presently about 39 million Medicare beneficiaries, of whom about one-third have no prescription-drug coverage once outside the hospital. This number is expected to grow to 47 million by the year 2011. Last year, when the House passed a bill offering drug coverage to Medicare beneficiaries, the 10-year cost was estimated to be $159 billion. In testimony that he gave recently to the House, Tommy G. Thompson, secretary of health and human services, stated that the new official estimate of the cost had risen to $213 billion.

     The CBO further estimated that spending for drugs for people on Medicare would grow to about $70.6 billion in 2001, which represents a 7-percent increase over the amount of [its] previous estimate made in May. In light of these new numbers, the cost for prescription-drug coverage for the elderly becomes even more expensive than previous estimates. This, in turn, means that either the government will have to increase the amount being allocated for any Medicare prescription-drug coverage plan, or increase the premiums being charged to beneficiaries who are to be covered under the plan. . . .

     On average, people over 65 pay about 16 cents per health-care dollar [for medication] versus 15 cents for their physician. The average Medicare beneficiary will have 18.5 prescriptions filled in a year. The average price per prescription drug was $37.38 in 1998 and will probably rise about 3.8 percent when the figures are in for 1999. Beginning in the year 2000, no Medicare HMO plan offered prescription-drug coverage without a charge for it. Only 3 of the 10 Medigap plans offer drug coverage, and each of these charges a 50-percent co-payment for prescription drugs. The average Medicare beneficiary spent about $590 to cover the cost of prescription drugs in 1999. Over 80 percent of the people over 65 take at least one prescription drug per day.

     . . . [A]dvocacy groups for seniors and disabled persons denounced the House Republican bill, criticizing its failure to provide drug coverage as a direct part of the Medicare program and warning that the bill reflects the efforts of some in Congress to dismantle and privatize the Medicare program. Beneficiary advocates argued against administering the drug benefit through private insurance, contending that the industry has generally failed to offer Medicare beneficiaries adequate and affordable drug coverage and adding that the private insurance industry, itself, rejects the viability of stand-alone drug plans.

     Similarly, beneficiary representatives dismissed the low-income subsidies provided under H.R. 4680 as grossly inadequate. Like other prescription-drug proposals, H.R. 4680 contains subsidies for beneficiaries with incomes up to 150 percent of poverty ($12,525 for a single person), but adds Medicaid-like resource limitations and requires that subsidies only be offered through the lowest-cost plans. Finally, many organizations have criticized H.R. 4680’s drug benefit as meaningless because it excludes measures to contain the rising costs of prescription drugs.

     Under the bill, insurance companies would receive government subsidies to offer private, stand-alone drug insurance policies to Medicare beneficiaries. The drug benefits offered must meet an actuarial value of $740, but the amount of co-payments, deductibles, premiums, and coverage offered can vary from plan to plan. Under the standard coverage model set forth in the bill, in 2003, beneficiaries would pay a monthly premium of $40, a $250 deductible and half of the next $2100 in drug costs after satisfying the deductible. Catastrophic benefits would begin when out-of-pocket expenses reach $6000.

     Outpatient prescription drug coverage would be offered by private insurers through either a "Medicare Prescription Plus Plan," for seniors wishing to continue with the traditional Medicare program, or through an updated Medicare+Choice Plan.

     The bill would guarantee seniors all current Medicare benefits they now receive. In addition, it would offer standard outpatient prescription-drug coverage with a $250 deductible and initial coverage up to $2100 with 50-percent cost-share. To protect seniors from catastrophic costs, the bill requires that all coverage plans include stop-loss protection of $6000, so a beneficiary would never have to pay more than this amount out-of-pocket. Estimated premiums would be less than $40 for all beneficiaries. Depending on income level, low-income beneficiaries’ premiums would be even less or free of cost on a premium subsidy scale.

     The bill would guarantee all beneficiaries a 25-percent subsidy toward the premium costs of prescription-drug coverage. It also provides additional subsidies for seniors with low incomes. For those with incomes below 135 percent of poverty, the bill provides 100-percent full coverage of premiums, deductible and co-pays associated with prescription-drug coverage. Beneficiaries with incomes between 135 percent and 150 percent would receive premium subsidies on a sliding scale from as much as 100 percent to no less than 25 percent.

     To support lower-cost prescription drugs, the bill would require price discounts negotiated between pharmaceutical companies and insurers to be passed along to beneficiaries. The coverage plans would offer these discounts through a prescription-drug discount card program to ensure [that] beneficiaries never pay retail prices for prescription drugs.

     The first phase of the Bush plan calls for $48 billion in block grants provided to states in order to provide drug coverage for seniors. The intended grants would take effect in 2001 at a rate of $12 billion a year for four years.

     Under the proposal, Medicare would cover prescription drug costs on a sliding scale. People earning at or below 135 percent of the poverty level would have their full prescription-drug costs covered, while those earning up to 175 percent of the poverty rate would have partial coverage. The plan would also provide full coverage for all prescription-drug and catastrophic medical costs over $6000.

     The second phase of the plan calls for $110 billion over 10 years to provide for "Medicare Modernization." It also would give Medicare recipients a choice of health plans and would cover 25 percent of the prescription-drug premium for those making over 175 percent of the poverty rate.

     Perhaps the biggest test of our foresight and courage will be reforming Medicare and Social Security. Medicare’s finances are strained and its coverage is outdated.

     Ninety-nine percent of employer-provided health plans offer some form of prescription-drug coverage. Medicare does not. The framework for reform has been developed by Senators Frist and Breaux and Congressman [Bill] Thomas [R-Calif.], and now it is time to act. Medicare must be modernized. And we must make sure that every senior on Medicare can choose a health plan that offers prescription drugs.

     Under President George W. Bush’s proposed plan, the government would pay all drug costs for the beneficiaries over $6000. Under the new estimates, many more beneficiaries would reach this threshold level, which in turn means higher costs to the plan. These recent figures on drug spending came from government surveys of Medicare beneficiaries, and from commercial sources including IMS Health of Westport, Conn., which collects data from pharmacies across the country.

AFL-CIO. "Food or Medicine." Undated. http://www.aflcio.org/articles/foodmed/

Breaux, John, and Frist, Bill. "Breaux, Frist introduce Senate Prescription Drug Proposal." June 28, 2000. http://www.frist2000.com/release6.htm

Dizikes, Peter. "Bush’s Prescription: GOP Candidate Unveils Medicare Drug Plan." ABC News, September 5, 2000. http://abcnews.go.com/sections/politics/DailyNews/bush_prescriptiondrugs000905.html

Hastert, Denny. "House Republicans Unveil Prescription Drug Plan For A Stronger Medicare." April 12, 2000. http://speaker.gov/library/health/000412medicare.asp

National Senior Citizens Law Center. "House Passes Republicans’ Medicare Prescription Drug Benefit Bill." 2000. http://www.nsclc.org/gopdrugs0600.html

Pfizer Shareholder Advocates. "Get Involved: Mobilize to Protect Your Company!" Undated. http://www.reportgallery.com/pfizer99/get-inv_win.html

Rubin, Allan, and Rubin, Harold. "Medicare and Prescription Drug Coverage." February-March 2001. http://www.therubins.com/aging/drugcost.htm