^{Posted on December 10, 2003}

Impact of the recent medicare legislation- New Mexico Analysis

This alert is from Health Action NM.

THE TRUTH ABOUT THE RECENTLY ENACTED MEDICARE LEGISLATION

The Senior Citizen’s Law office, Inc. and Health Action New Mexico are very concerned about provisions of the recently enacted Medicare Prescription drug bill, which was signed into law by President Bush on December 8, 2003.

The bill is more about destroying the Medicare program than delivering a comprehensive drug benefit to senior and disabled Americans. The legislation was mostly drafted in secret by Rep. Bill Thomas who excluded most Democratic conferees; the bill contains the position of house Republicans on most major issues rather than provisions of the bi-partisan Senate bill.

Everyone agrees that the bill passed because of AARP’s support, despite the opposition of an overwhelming majority of its members. Senator Domenici, Rep. Pearce, and Rep. Heather Wilson voted in favor of the legislation.

Senator Bingaman and Rep. Udall opposed the legislation. Seniors around the country are denouncing AARP and revoking their membership. You can reach AARP at the following e-mail addresses:

wdnovelli@aarp.org, member@aarp.org . You may also want to call your legislators and chastise them or thank them for their votes. Itemized below are the concerns of SCLO and HANM regarding the legislation.

Basic Prescription Drug Coverage: Beginning 2006, a complicated prescription drug benefit will be available though with substantial out-of-pocket costs. Coverage will be available only through insurance companies and HMOs. Though enrollment will be “voluntary,” there will be considerable financial pressure to enroll at once. (It will be costly to enroll at a later time.)

Benefit: Enrollees will pay the following initial costs for the initial benefits described herein. A minimum monthly premium of $35 (premiums may vary), a $250 annual deductible, 25% of costs up to $2,250, 100% of costs up to $5,100 (a gap of $2,850), and 5% of costs above $5,100. (or total out-of-pocket costs of $3,600).

Remember these are the anticipated initial costs and benefits. “Initial’ refers to the fact that these figures will increase each year by at least 10%”. Insurance premiums, which are not set in the bill even for 2006, are projected to rise 65% to $58 a month in 2013.

Enrollees will be required to pay monthly premiums during the period of time that they receive no benefits (the “donut hole”) and must pay the full cost of their medications.

Low-Income Benefit: Imposes an assets test for the low-income benefit and denies low-income dual eligibles (those who receive both Medicare and Medicaid) the ability to continue to get wrap-around assistance through Medicaid (e.g. if a drug is not on the Medicare formulary but is on the state’s Medicaid formulary, a dually eligible enrollee will not be able to access the Medicaid drug). Also, low-ncome beneficiaries will be required to pay a modest co-payment for medications; under Medicaid there is currently no co-payment. In New Mexico, an estimated 33,000 low-income Medicare beneficiaries will be negatively impacted by the legislation.

Income-Relating to the Part B Premium: Eliminates the universal guarantee of Medicare and imposes new bureaucracy and an assets test to qualify for the low-income benefit. The assets test raises privacy concerns for millions of Medicare beneficiaries.

Inflating the Part B Deductible: Allows the Part B deductible to increase at a dramatic rate, at the same time many other added costs are being imposed on Medicare beneficiaries.

Premium Support: Imposes competitive bidding beginning in 2010 in certain areas of the country, including Albuquerque. Not only are there ongoing problems with respect to plans being in and out of the medicare managed care market, benefit changes, and provider changes on an annual and even a semi-annual basis, but it is anticipated that out-of-pocket costs for seniors in pilot programs will be higher than for seniors in non-pilot locations. The irony is that New Mexico is the poorest state in the country and seniors in Albuquerque will be paying higher Medicare costs than elsewhere.

Retiree Coverage: There will still be major drop in retiree coverage, which leads to retirees losing a much stronger benefit for a very pathetic benefit. The Congressional Budget Office estimates that 3.8 million retirees, about one-third of all non-federal retirees who have health insurance provided by their former employers, will have their more generous private coverage reduced or terminated. It is anticipated that 2.7 million retirees will lose their benefits after 2006.

Health Savings Accounts: Gives conservatives one of the main items they want in health care and guarantees there is no further action for years on the uninsured. These tax-sheltered accounts are usable by wealthier and healthier beneficiaries. The HSAs are very problematic from a health policy perspective; their popularity may result in the destruction of the Medicare program.

State Clawback: Imposes an effective “reverse block grant” on states in their Medicaid programs by requiring states to pay the federal government an amount each year based on some determination of their drug costs in a base year. (If the state spends more than the projected amount, then the state must reimburse the federal government the excess amount.) This provision creates major problems for the Medicaid program (e.g., nursing home care) for years to come.

Cost Containment: Creates a budget process beginning in 2010 whereby there is a self-proclaimed “budgetary crisis” in Medicare every single year, thereby threatening Medicare from that date forward.

Fallback: If there is not a private drug plan (PDP) in a region, the fallback is for the federal government to contract with one or more private companies to deliver the drug benefit, rather than the government providing the benefit as originally proposed. The volatility of private companies delivering “benefits” is traditionally a problem.

Private Plan Slush Fund: The bill provides $12 billion to the Secretary in the form of a slush fund to hand out to managed care providers to try to move people out of traditional Medicare. Consequently, private companies will have an unfair advantage over the vastly more popular original Medicare program.

Cost Containment: There is none. The bill specifically precludes the government from negotiating lower prices or discounts with drug manufacturers.

Drug Re-importation: The law restricts the importing of less expensive drugs from Canada, Mexico and other countries.

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Health Action New Mexico
P.O. Box 40119
Albuquerque, NM 87196
(505) 342-8081
info@healthactionnm.org