February 13, 2003
The Honorable George W. Bush Dear President Bush: You have announced your intention to tie significant changes to Medicare to your proposal to extend prescription drug benefits to seniors. Although Secretary Thompson said at yesterday’s Committee hearing that the plan is still under development, recent press reports suggest that your plan is, in part, to use prescription drug coverage as a lever to force seniors out of the current program. Other troublesome aspects include increased costs for beneficiaries, reduced beneficiary protections, and major gaps in the drug coverage. Medicare is a critical safety net for our senior citizens. Changes should not be made precipitously, or without the fullest and most detailed scrutiny. To that end, enclosed is a series of questions that I ask you to have your staff answer at the time your proposal is finalized and released. Thank you for your attention to these crucial questions. Sincerely,
cc: The Honorable W. J. "Billy" Tauzin, Chairman The Honorable William M. Thomas, Chairman The Honorable Charles B. Rangel, Ranking
Member The Honorable Michael Bilirakis, Chairman The Honorable Sherrod Brown, Ranking Member The Honorable Tommy G. Thompson, Secretary
Questions on the President’s Medicare Reform Proposal General 1. How much of the $400 billion allocated in the proposed FY 2004 budget will go to a drug benefit for seniors? How much will go to increased payments for Medicare+Choice plans? How much will go to increased payments to private insurance plans after your Medicare reform plan begins in 2006? 2. CBO projects that over the next 10 years, seniors will spend $1.8 trillion on prescription drugs. Your budget provides $400 billion for prescription drugs and Medicare reform. If all of the money in the budget were to go towards prescription drugs, isn’t it true that $400 billion only represents 22% of seniors’ estimated total drug spending? Medicare in General 1. Will seniors who choose to remain in traditional fee-for-service Medicare receive a drug benefit? Or will seniors be required to leave traditional fee-for-service Medicare for a drug benefit? 2. Why not make a drug benefit available to all seniors, regardless of whether they chose a Medicare+Choice plan, an enhanced fee-for-service plan, or Medicare? 3. Your proposal says that current seniors and "those near retirement" would be able to remain in Medicare without any changes. Who are "those near retirement"? Is it your intent that, at some point, Medicare would no longer be available? If so, when is that point? 4. Your Medicare reform plan would include coverage of more preventive benefits. Will these preventive benefits be added to Medicare? Or will seniors have to leave Medicare in order to obtain these new benefits? 5. The proposed FY 2004 budget states that Medicare needs to be updated to provide a more "rationalized system of cost-sharing." What does this mean? What specific changes will you make in Medicare’s deductibles and copayments? Will seniors have to pay more to go to the doctor? 6. In the year 2006, when the reform plan will begin, what is your estimate of how many seniors will remain in Medicare and how many will join private insurance plans? What is your estimate for 2011? Private Insurance Plans in General 1. Will any of the drug benefit options available to seniors in 2006 be administered by Medicare? Or will all drug benefits be administered by private insurance plans? 2. As you know, private insurance plans have been reluctant to serve seniors in some areas of the country, particularly in rural areas. How will you ensure that all seniors throughout the country have access to private insurance plans that offer a drug benefit? 3. Medicare has very low administrative costs – less than 2% – so seniors get a very good value for their premium dollars. Many private insurance plans have administrative costs 10 times higher. Will there be a limit on the administrative costs of these private insurance plans that administer the drug benefit? 4. It appears that the private insurance plans that offer drug coverage could also be participating provider organizations (PPOs). Will there be any limits on what these PPOs could charge seniors for visiting non-participating doctors and hospitals? Will the balance billing protections that apply in Medicare also apply here? 5. Will the private insurance plans that offer a drug benefit be required to charge the same deductibles and coinsurance as Medicare does for benefits other than drugs? Or will private insurance plans be allowed to vary their cost-sharing? Could they charge higher co-payments on some services, such as home health, than Medicare currently does? 6. Will the private insurance plans that offer drug coverage set their own premiums? What do you estimate that premium will be in 2006, the year the drug benefit begins? Could the plans vary their premiums in different parts of the country, so that seniors in Iowa could pay more than seniors in Texas, for example? Will there be any limit on how much these private insurance plan premiums can vary within a geographic area, or between geographic regions, or from year to year? 7. Exactly how will the private insurance plans that offer drug coverage calculate their premiums? How will Medicare calculate what it paid to these private insurance plans? 8. Will the drug benefit that private insurance plans offer be subsidized? How much will the subsidy be? Will the subsidy go directly to beneficiaries to reduce their premiums, or will it go to the private insurance plans? 9. Will the private insurance plans have to charge the same deductible, the same coinsurance, and have the same benefit limits for drug coverage? Or could the private insurance plans vary their drug benefits? 10. Will there be any guarantee that seniors who find a private insurance plan they like could stay with that plan from year to year? Or could these private insurance plans that offer drug coverage enter and exit the market each year, like so many Medicare+Choice plans have done? 11. Will seniors who enroll in a private insurance plan that offer drug coverage be guaranteed access to their local pharmacy? Or could the private insurance plans exclude some pharmacies from their networks? 12. Will seniors who enroll in these private insurance plans be guaranteed access to the same drug their doctor prescribes? Or could private insurance plans establish formularies that exclude certain drugs? 13. Exactly what sort of protections will low-income seniors have who enroll in a private insurance plan with a drug benefit? 14. The proposed FY 2004 budget states that the drug benefit offered by private insurance plans "would support the continuation of the coverage that many beneficiaries already receive through employer-sponsored and private health insurance plans." Exactly how will this be accomplished? 15. One of your Medicare reform principles is that seniors should have better health insurance plan options available, such as those available to Federal employees and Members of Congress. Is it your intent that seniors have a similar drug benefit to the one Members of Congress have? The most popular plan option for Federal employees and Members of Congress – the Blue Cross Blue Shield Standard Option – has no separate deductible for prescription drugs, a 25% coinsurance on drugs, and a catastrophic limit of $4,000, which includes medical as well as drug costs. Will the drug benefit these private insurance plans offer provide a similar level of coverage for seniors? Standard Prescription Drug Plan under the President’s Medicare Reform Proposal 1. According to press reports, the "standard" prescription drug benefit will include a $275 deductible, 50% coinsurance for drug spending up to $3,050, and catastrophic coverage once a senior has spent $5,500 out of pocket. Does a private insurance plan have to offer a benefit with 50% coinsurance, or could a private insurance plan charge another coinsurance rate? Does a private insurance plan have to provide coverage up to $3,050 in drug spending, or could a private insurance plan place the initial coverage limit at some other number? Is there any requirement that the "standard" benefit actually be available to seniors? Under the House-passed bill last year, the drug benefit offered by private insurance plans could take a variety of different forms, so long as the benefit is determined to be "actuarially equivalent" to the standard benefit. Do you intend to allow plans to offer varied benefits as long as they are "actuarially" equivalent? 2. If you support the use of an "actuarially equivalent" standard, who will determine actuarial equivalence – the Federal Government or private insurance plans? 3. At first glance, there appears to be a $2,450 gap in coverage in your standard drug benefit, which is the difference between the $3,050 initial coverage limit and the $5,500 catastrophic limit. Apparently, once a senior reaches $3,050 in total spending, the plan will pay nothing until the senior reaches $5,500. This $5,500 appears to be total out-of-pocket costs, not total drug spending. So it seems that once a senior reaches the $3,050 limit, they will pay an additional $3,837.50 in out-of-pocket costs until the catastrophic coverage kicks in. Isn’t this "gap" closer to $3,800 instead? (Calculation: $275 deductible + 50%($3050-$275) + $3,837.50 = $5,500 out-of-pocket spending.) 4. What percentage of seniors do you estimate will reach the $3,050 initial coverage limit but NOT the $5,500 out-of-pocket limit? In other words, how many seniors will end up in the "donut hole"? Will these seniors need to continue paying premiums even though they receive no drug coverage? 5. According to press reports, beneficiaries will need to spend $5,500 out-of-pocket in order to qualify for catastrophic coverage. Will any spending by an employer-sponsored plan count toward this $5,500 limit? If not, would you not be exposing employers to unlimited liability if they choose to cover their retirees’ drug costs in the "donut hole"? How much in savings does your reform plan receive by shifting these drug costs to employers? 6. Will the catastrophic coverage in the standard prescription drug benefit pay 100% of drug costs after a senior spends $5,500 out-of-pocket? Or will seniors be required to pay coinsurance of 5% or 10%? There are some Medicare beneficiaries, particularly those who have received organ transplants, whose drug costs can reach $3,000 to $4,000 per month; even a 5% or 10% coinsurance rate will mean that their drugs are still unaffordable. Do you include any special protections for these seniors? Low-Income Protections in the Draft "Standard" Drug Benefit 1. In the "standard" drug benefit, seniors with incomes between about $8,860 and $11,960 a year (100% to 135% of the Federal Poverty Level) will be charged a $3.50 copayment per prescription. It appears that the "standard" benefit could vary from the suggested parameters of a 50% coinsurance rate and a $3,050 initial coverage limit. Is the $3.50 copayment something the plans could vary as well, so long as it was "actuarially equivalent"? 2. Under the standard prescription drug benefit, dual eligibles – seniors earning up to about $6,550 per year (74% of the poverty level) – will retain Medicaid coverage. Seniors earning between $8,860 and $11,960 a year (100% to 135% of poverty) will have their premiums fully subsidized and will pay $3.50 copayments with each prescription. What happens to the seniors who earn too much to qualify for Medicaid but are under 100% of poverty? 3. It appears that seniors earning between $8,860 and $11,960 a year (100% to 135% of poverty) will have their premiums fully paid, while seniors with incomes between $11,960 and $13,300 (135% and 150% of poverty) will receive premium subsidies based on a sliding scale. Will these low income beneficiaries who want to enroll in a private insurance plan with a drug benefit be permitted to enroll in any plan available and have their premiums subsidized? Or would the choices of these low-income seniors be restricted to private insurance plans with average or below-average premiums? 4. What will happen to seniors earning between $8,860 and $11,960 a year (100% to 135% of poverty) once they reached the "gap" in the standard drug benefit between $3,050 in drug spending and $5,500 in out-of-pocket costs? What will happen to seniors with incomes between $11,960 and $13,300 (135% and 150% of poverty) once they reach the gap in the drug benefit? 5. Will there be any assistance for seniors with incomes above $13,300 per year (150% of poverty)? If not, it appears that these seniors potentially will spend $5,500 of their own money – or over 40% of their income – on prescription drugs before they reach the catastrophic limit. Is this the case? Will these seniors have to pay any additional coinsurance after spending $5,500 in out-of-pocket costs? Will the catastrophic limit of $5,500 in out-of-pocket costs also apply to seniors with incomes below $13,300 a year (below 150% of poverty) as well? Will these seniors have to pay any additional coinsurance after reaching the catastrophic limit? Interim Low-Income Drug Benefit in the President’s Proposal 1. According to press reports, your Medicare reform proposal includes an interim drug benefit for low-income seniors in 2004 and 2005. It appears that the interim drug benefit will be available through Medicare+Choice plans. Will low-income seniors be able to remain in Medicare and have the interim benefit? Or will they have to join a Medicare+Choice plan? If so, why not give low-income seniors the option to remain in Medicare and receive the same interim benefit? 2. What happens if no Medicare+Choice plans are available in a low-income senior’s area? How will low-income seniors receive this benefit? Who will administer the interim benefit, and how will it be distributed? 3. According to press reports, the interim low income drug benefit offered by Medicare+Choice plans will be worth $600. What standards will there be for the drug benefit? Will Medicare+Choice plans be required to offer the same deductible, coinsurance, or copayments, if any of these cost-sharing requirements apply to low- income seniors? Or could the interim drug benefit be "actuarially equivalent" to $600? If the interim drug benefit only needs to be actuarially equivalent to $600, could a Medicare+Choice plan set the deductible, coinsurance, or copayments at such rates that low-income seniors could not afford to pay? Or could a Medicare+Choice plan offer only generic drugs in its interim drug benefit, so long as it were actuarially equivalent to $600? 4. Will Medicare+Choice plans offering this interim drug benefit receive a higher annual update? How much will this update be and what will it be based on? How much of the update is attributable to the $600 interim drug benefit, and how much is attributable to other factors? New Cost-Sharing in President’s Medicare Reform Plan 1. According to press reports, your Medicare reform plan will combine the Part A and Part B deductibles into one deductible of $420, so that every senior will have to pay $420 out-of-pocket before receiving any benefits. Seniors who pay only the Part B deductible will have to pay more to see their doctor. In any given year, what percentage of seniors pay only the Part B deductible and thus would have to pay more under the Medicare reform plan? 2. According to press reports, the Medicare reform plan will impose a $10 copayment on home health care services for up to $300 per year. Home health care beneficiaries are certainly among the oldest, frailest, and poorest of all Medicare recipients. How does the average age of a home health care beneficiary compare to the average age for all Medicare beneficiaries? How does the median income of a home health care beneficiary compare to the median income of all Medicare beneficiaries? What percentage of home health care beneficiaries are women? Why did you decide to impose a copayment on home health care services when it could disproportionately affect some of the most vulnerable Medicare beneficiaries? 3. How much in savings does this new copayment on home health care generate for your reform plan? 4. According to press reports, your Medicare reform plan will charge a 20% coinsurance on lab services. Currently, there is no cost-sharing on lab services, so this change will increase costs for all seniors who require any lab work. What percentage of seniors receive lab services in any given year and will be subject to this new coinsurance? 5. In your Medicare reform plan, will Medigap plans or employer plans be prohibited from covering the $420 combined deductible, or any percentage of the home health copayment or the coinsurance on lab services? Will this prohibition also apply to private insurance plans participating in the new Medicare+Choice program? If the intent of this prohibition is to expose seniors to the real cost of health care, why would this prohibition not apply to all insurance plans, so that all seniors are required to pay the same deductibles and premiums? 6. In your Medicare reform plan, will these deductibles and copayments be indexed? If so, what will they be indexed to? How much do you estimate the $450 deductible will be in 2011, and then in 2016? How about the $10 home health payment in 2011 and 2016? Other 1. The proposed FY 2004 budget states that seniors should have access to private insurance plans that operate in a market-based system in which these plans compete. There seems to be an assumption that competition will reduce Medicare expenditures. What specific evidence do you have that competition will save money, when premiums for private insurance plans outside of Medicare are currently increasing at record highs? 2. One of your principles for Medicare reform states that Medicare legislation should strengthen the program’s long-term solvency. Exactly how does your proposal accomplish that? How many years of solvency does your reform plan add to the Part A Trust Fund? 3. What percentage of any savings in your Medicare reform plan will be attributed to increased cost-sharing for seniors, including the new combined deductible and any new coinsurance or copayments, as well as any increases in the premiums seniors pay? 4. How will costs for Graduate Medical Education be paid under your Medicare reform plan? Private insurance plans do not pay hospitals graduate medical education costs; only Medicare does. What will happen to Graduate Medical Education payments if 80% of beneficiaries have to leave Medicare for a private insurance plan in order to receive drug benefits?
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