June 28, 2000
H.R. 4680 - Medicare Rx 2000 Act
(Thomas (R) CA and seven cosponsors)
The Administration strongly opposes House passage of H.R. 4680 because its
private insurance benefit does not meet the President's test of being a
meaningful Medicare prescription drug benefit that is affordable and
accessible for all beneficiaries. H.R. 4680 builds on an unstable and
unreliable Medigap market, an approach which the insurance industry itself
has concluded is unworkable. If H.R. 4680 were presented to the President,
he would veto it.
The President has made passing a voluntary Medicare prescription drug
benefit one of his highest priorities. His principles for a drug benefit
are that it be voluntary; be accessible to all beneficiaries; be
meaningful; give eligible seniors and people with disabilities bargaining
power to reduce drug prices; assure access to medically necessary drugs;
and be affordable to beneficiaries and the Medicare program.
The President's plan would ensure that Medicare pays half of all
participants' prescription drug costs up to $5,000 when fully phased in and
that no eligible senior or person with a disability pays more than $4,000
out-of-pocket. In addition, seniors would benefit from price discounts
negotiated by private pharmacy benefit managers. Beneficiaries would have
a choice of getting coverage through traditional Medicare, managed care, or
retiree plans. Those who voluntarily opted for the new benefit would pay a
monthly premium of $25 in the first year, and low-income seniors would pay
no or lower premiums and cost sharing. This coverage would start in 2002
and is part of the President's overall plan to strengthen and modernize
The Democratic substitute, which the President strongly supports, also
provides an affordable, meaningful Medicare drug benefit. It, too, covers
half of costs up to $5,000 when fully phased in, includes a stop-loss of
$4,000, and ensures that seniors have a choice of coverage through Medicare
fee-for-service, managed care or retiree coverage. The President is
dismayed that the Republican leadership refused to allow a vote on a true
Medicare benefit that provides the resources necessary to ensure that
premiums are affordable.
H.R. 4680 does not meet the President's principles for a meaningful
prescription drug benefit. Specifically:
- Private insurance model does not ensure access to a dependable
benefit. H.R. 4680 relies on private insurers to offer Medicare
beneficiaries a prescription drug benefit. The private insurance
industry itself has repeatedly stated that they would not participate
in this flawed plan. Even if they do participate, insurers could not
be relied on to provide continuous coverage in all areas -- the same
problem that we have in Medicare managed care today. Under the
President's plan and the Democratic substitute, all beneficiaries --
including those in rural or otherwise underserved areas -- would be
guaranteed a defined, accessible, reliable Medicare benefit for the
- Private insurance model would not be affordable to all
beneficiaries. Under H.R. 4680, Medicare would not provide a
single dollar of direct premium assistance for middle-class
beneficiaries (any senior with income above $12,600). Instead, the
plan relies on subsidies to insurers, not seniors. Insurers would set
premiums. Thus, seniors would pay different premiums from plan to
plan and place to place. A rural senior would be at particular risk
of facing excessive premiums since insurers would likely face little
competition and less incentive to offer affordable coverage. The
premium cited by the Republican leadership for H.R. 4680 has not been
confirmed by the Congressional Budget Office or any other independent
entity, unlike the President's plan. Even accepting the Republicans'
claim that the premium would average $37 per month, this premium would
be over 40 percent higher than the President's plan premium of $25 per
- Seniors would pay more for less valuable and meaningful
coverage. Under H.R. 4680, seniors and people with disabilities
would pay a higher premium for less generous coverage. According to
an analysis by the Department of Health and Human Services, the
President's benefit would be 25 percent more valuable in 2003 and 50
percent more valuable when fully phased in than that of H.R. 4680.
Moreover, private insurers may vary their benefits by setting their
own deductibles, copays, and benefit limits within an actuarial value.
This allows insurers to discourage enrollment by the oldest seniors
and most disabled beneficiaries by offering no deductible and low
copays, but also a low benefit cap that leaves a large gap in coverage
before the stop-loss kicks in. In addition, private plans could limit
access to community pharmacists and needed medications. Under the
President's plan, seniors and people with disabilities would have a
real choice: choice of using their community pharmacist and access to
prescriptions that their doctor -- not their insurance company --
determines are necessary.
The Administration also objects to creating a new bureaucracy to administer
the new drug benefit and Medicare+Choice. This is inconsistent with the
President's principles of efficient administration of the drug benefit.
The Administration believes that the prescription drug benefit should be
integrated into the Medicare program like all other Medicare benefits. In
addition, provisions in H.R. 4680 related to the Medicare Advisory Board
and its reporting requirements raise constitutional concerns.
H.R. 4680 would affect direct spending; therefore, it is subject to the
pay-as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990.
OMB's estimate of the pay-as-you-go cost of this legislation is under
development. The Congressional Budget Office estimates that H.R. 4680 will
increase direct spending by a total of $39.7 billion over five years.