Medicare Reform and Prescription Drug Benefit

1
Medicare Reform andPrescription Drug Benefit

• 2004 Health Care Forecast Conference
• University of California, Irvine
• February 19, 2004
• Liz Fowler
• Senate Finance Committee

2
2003 Medicare Bill

• Largest expansion of Medicare since 1965
• 400 billion outpatient prescription drug benefit
• Temporary drug discount card (2004-2006)
• Other changes to Medicare benefits
• Medicare reform
• More federal dollars to create/maintain private
  plan options
• Income-related Part B premium
• So-called cost containment provisions
• Provider payment changes (e.g., rural equity)
• Regulatory relief
• E-prescribing
• Hatch-Waxman provisions
• Health Savings Accounts (HSAs)

3
Problems Facing Medicare(re-cap from 2002 Health
Care Forecast Conference)

• Lack of prescription drug coverage
• Retiring baby-boom generation
• Regulatory burdens faced by providers
• Faltering MedicareChoice program
• Other provider payment issues on the horizon
• Many seniors are over-insured
• Wide variation in Medicare spending

4
2003 Medicare Bill -- Best of

• Low-income assistance will cover an estimated 35
  of all Medicare beneficiaries
• Assets test indexed
• Drug benefit and delivery structure can be
  improved in the future
• Pernicious reforms minimized
• Income-related premium IS true reform
• Disease management and quality demonstrations
• You have to start SOMEwhere

5
2003 Medicare Bill -- Worst of

• Uncertainty about drug delivery system and
  stability of drug plan options over time
• Benefit structure is confusing (i.e., 3,000
  doughnut)
• True out-of-pocket discourages alternative
  sources of coverage
• Drug benefit deteriorates over time
• Concern about tight formularies and access to
  appeals
• Concern about state fiscal impact
• Some low-income beneficiaries could be worse off
• Limited cost containment of drug prices (e.g.,
  non-interference provision)
• 14 billion stabilization fund for regional PPOs
• Health Savings Accounts

6
Lessons Learned

• Where theres a will, theres a way
• Process violations are difficult to overcome
• Finding common ground on health care issues is
  challenging
• Compromise spawns complexity, particularly in
  health care
• You can make some of the people happy some of
  the time
• Public input into the legislative process is
  sorely lacking