[Congressional Record Volume 144, Number 141 (Friday, October 9, 1998)]
[Extensions of Remarks]
[Pages E1980-E1982]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            OPTIONS FOR A MEDICARE PRESCRIPTION DRUG BENEFIT

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                       Thursday, October 8, 1998

  Mr. STARK. Mr. Speaker, today, I introduced legislation that would 
provide a prescription drug benefit for Medicare beneficiaries. The 
bill, if enacted, would close the most glaring deficiency in the 
Medicare program. With pharmaceuticals becoming an

[[Page E1981]]

ever-more important element in the treatment of diseases, it is 
essential that we modernize the Medicare program by including a drug 
benefit.
  I think there is almost universal agreement that Medicare should 
cover the cost of prescriptions. The issue is the cost and how to pay 
for it.
  I've introduced this bill in the closing hours of the 105th Congress, 
so that interested parties could think about the issue over the 
adjournment period. I hope that the various stakeholders will comment 
over the winter, so that a new and refined bill can be reintroduced at 
the start of the 106th and have a wide range of support.
  I have left blank in the bill the question of (1) size of the 
deductible, and (2) whether there should be caps on total out-of-pocket 
expense. Where these two numbers are set will determine what the 
program will cost and thus what the increase in Part B premiums will 
be. As we fill in these numbers, seniors and taxpayers will decide 
whether the admitted cost of the program is worth its value.
  There is no free lunch. If the deductible is set high, the cost will 
be low, but it will help many fewer people. If it is a low deductible, 
it will be widely used, and the program's cost will be high. Do we want 
a low-deductible benefit, or do we want a catastrophic coverage benefit 
that protects people against the several thousand dollar-plus diseases? 
This is the heart of the debate, and I hope to hear from the public and 
the industries involved on this key question.
  Following is some data that will give readers a feel for the cost of 
different levels of benefit and the trade-offs involved.

                                               TABLE 1.--PRESCRIPTION DRUG BENEFIT COSTS FOR SMI ENROLLEES
                                                                [In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                         Fiscal Years                             2000      2001      2002      2003      2004      2005      2006      2007      2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rx Deductible = $1,000:
    Medicare Gross Outlays....................................      11.1      18.3      20.8      23.8      26.8      30.2      34.1      38.4      43.3
                                                               -----------------------------------------------------------------------------------------
    SMI Premiums..............................................      -2.9      -4.2      -4.8      -5.4      -6.2      -7.0      -7.9      -8.9     -10.0
        Net Medicare Outlays..................................       8.2      14.1      16.1      18.2      20.8      23.3      26.2      29.6      33.3
    Medicaid Outlays..........................................       0.8       1.2       1.2       1.2       1.3       1.3       1.4       1.4       1.6
    Net Effect on Federal Spending............................       9.1      16.3      17.2      19.4      21.9      24.6      27.8      31.0      34.8
Addendum:
    Increase in Monthly SMI Premium...........................      8.90     10.00     11.20     12.60     14.10     15.70     17.50     19.30     21.40
Rx Deductible = $2,000:
    Medicare Gross Outlays....................................       5.7       9.7      11.6      13.6      15.8      18.6      21.5      25.0      28.9
                                                               -----------------------------------------------------------------------------------------
    8MI Premiums..............................................      -1.4      -2.1      -2.6      -3.0      -3.5      -4.1      -4.9      -6.6      -6.6
        Net Medicare Outlays..................................       4.3       7.8       8.9      10.5      12.3      14.4      16.7      19.3      22.3
    Medicaid Outlays..........................................       1.2       1.6       1.7       1.7       1.8       1.8       1.9       2.0       2.1
    Net Effect on Federal Spending............................       5.5       9.2      10.6      12.2      14.1      16.2      18.6      21.3      24.4
Addendum:
    Increase in Monthly SMI Premium...........................      4.60      5.40      6.30      7.30      8.40      9.70     11.20     12.70    14.40
--------------------------------------------------------------------------------------------------------------------------------------------------------
NOTES: All options would add prescription drug coverage to the SMI benefit package as of January 1, 2000. The Rx benefit would have a separate
  deductible and a 20% coinsurance requirement.
Estimates have not been reviewed and are preliminary.
No account has been taken of administrative costs or price discounts that would affect costs.
It was assumed that Medicaid would cover cost-sharing expenses under the Rx benefit for Medicaid-eligible beneficiaries.


                    TABLE 2.-FEDERAL COST OF MEDICARE DRUG COVERAGE UNDER ALTERNATIVE COST SHARING REQUIREMENTS WITH MEDICAID OFFSETS
                                                            [In billions of dollars] \1\,\2\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Prescription Drug Benefit Cost Sharing
                                    --------------------------------------------------------------------------------------------------------------------
                                     $250 Deductible, 20 Percent Copay, No    $250 Deductible, 20 Percent Copay,     $500 Deductible, 20 Percent Copay,
                                                  Benefit Cap                         $1,500 Benefit Cap                     $1,500 Benefit Cap
                                    --------------------------------------------------------------------------------------------------------------------
                                                    Federal                                Federal                                 Fedeal
                                       Medicare     Medicaid   Net Federal    Medicare     Medicaid   Net Federal    Medicare     Medicaid   Net Federal
                                         Cost       Savings        Cost         Cost       Savings        Cost         Cost       Savings        Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
1999...............................         19.0          2.0         17.0         14.5          1.5         13.0         11.4          1.3         10.1
2000...............................         20.6          2.2         18.4         16.7          1.6         14.1         12.4          1.4         11.0
2001...............................         22.3          2.4         19.9         17.1          1.8         16.3         13.4          1.5         11.9
2002...............................         24.1          2.6         21.5         18.4          1.9         16.5         14.5          1.6         12.9
2003...............................         26.1          2.8         23.3         20.0          2.1         17.9         15.8          1.7         14.1
2004...............................         28.3          3.0         25.3         21.7          2.3         19.4         17.1          1.9         15.2
2005...............................         30.7          3.3         27.4         23.5          2.5         21.0         18.6          2.0         16.6
2006...............................         33.3          3.6         29.7         25.5          2.7         22.8         20.2          2.2         18.0
2007...............................         36.4          3.9         32.5         27.8          2.9         24.9         21.9          2.4         19.5
                                    --------------------------------------------------------------------------------------------------------------------
2008...............................         39.6          4.2         35.4         30.2          3.1         27.1         23.9          2.6         21.3
                                    --------------------------------------------------------------------------------------------------------------------
    Total, 1999-2003...............        112.1         11.9        100.2         85.7          8.9         76.3         67.5          7.5         60.0
      Total, 1999-2006.............        280.4         29.8        250.6        214.4         22.3        192.1        169.2         16.6       160.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Drug benefit costs valued at average acqusition cost.
\2\ Assumes that the deductible and benefit cap are indexed at the same rates as the Medicare Part A hospital deductible over time.
 Source: Lewis Group estimates using the Medicare Benefits Simuilation Model (MBSM).


               TABLE 3.--FEDERAL COST OF AN ILLUSTRATIVE MEDICARE BENEFITS PACKAGE THAT INCLUDES PRESCRIPTION DRUG AND STOP-LOSS COVERAGE
                                                                [In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Prescription Drug Benefit: $500       Stop-Loss Benefit: $5,000 Out-of-     Total Cost of Illustrative Benefits
                                      Deductible, 20 Percent Copay, $1,500           Pocket Stop-Loss Cap                         Package
                                                  Benefit Cap              -----------------------------------------------------------------------------
                                    ---------------------------------------
                                                    Federal                   Medicare     Federal    Net Federal    Medicare     Federal    Net Federal
                                       Medicare     Medicaid   Net Federal      Cost       Medicaid       Cost         Cost       Medicaid       Cost
                                         Cost       Savings        Cost                    Savings                                Savings
--------------------------------------------------------------------------------------------------------------------------------------------------------
1999...............................         11.4          1.3         10.1          5.2          0.7          4.5         16.6          2.0         14.6
2000...............................         12.4          1.4         11.0          5.6          0.8          4.8         18.0          2.2         15.8
2001...............................         13.4          1.5         11.9          6.1          0.9          5.2         19.5          2.4         17.1
2002...............................         14.5          1.6         12.9          6.9          0.9          6.0         21.4          2.5         18.9
2003...............................         15.8          1.7         14.1          7.3          1.0          6.3         23.1          2.7         20.4
2004...............................         17.1          1.9         15.2          7.9          1.1          6.8         25.0          3.0         22.0

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2005...............................         18.6          2.0         16.6          8.7          1.2          7.5         27.3          3.2         24.1
2006...............................         20.2          2.2         18.0          9.4          1.3          8.1         29.6          3.5         26.1
2007...............................         21.9          2.4         19.5          9.9          1.5          8.4         31.8          3.9         27.9
                                    --------------------------------------------------------------------------------------------------------------------
2008...............................         23.9          2.6         21.3         10.5          1.6          8.9         34.4          4.2         30.2
                                    --------------------------------------------------------------------------------------------------------------------
    Total, 1999-2003...............         67.5          7.5         60.0         31.1          4.3         26.8         98.6         11.8         86.8
    total, 1999-2008...............        169.2         18.6        150.6         77.5         11.0         66.5        246.7         29.6       217.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Lewin Group estimates using the Medicare Benefits Simulation Model (MBSM).



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