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THE WHITE HOUSE

Office of the Press Secretary


For Immediate Release July 22, 1999

DISTURBING TRUTHS AND DANGEROUS TRENDS:

                  The Facts About Medicare Beneficiaries 
                      and Prescription Drug Coverage

                         National Economic Council
                          Domestic Policy Council

                             July 22, 1999

Table of Contents

Overview i

Importance of Prescription Drugs to Medicare Beneficiaries 1

Prescription Drug Spending by Medicare Beneficiaries 3

Coverage for Prescription Drugs for Medicare Beneficiaries 4

President's Proposed Prescription Drug Benefit 10

Appendix: Methodology & Endnotes 11

                                OVERVIEW
                DISTURBING TRUTHS AND DANGEROUS TRENDS:

                The Facts About Medicare Beneficiaries 
                    and Prescription Drug Coverage

This report describes the inadequate and unstable nature of the prescription drug coverage currently available to Medicare beneficiaries. Prescription drugs have never been more important, but the people who rely on them most -- the elderly and people with disabilities -- increasingly find themselves uninsured or with coverage that is becoming more expensive and less meaningful. This report shows that the accessing essential prescription drugs is not only a problem for the millions of Medicare beneficiaries without any insurance -- it is an increasing challenge for beneficiaries who have coverage. Key findings of the report include:

             IMPORTANCE OF PRESCRIPTION DRUGS TO  MEDICARE
                             BENEFICIARIES
                     PRESCRIPTION DRUG SPENDING BY
                         MEDICARE BENEFICIARIES
                    COVERAGE FOR PRESCRIPTION DRUGS
                       FOR MEDICARE BENEFICIARIES

RETIREE HEALTH COVERAGE

MEDIGAP PRESCRIPTION DRUG COVERAGE

Inefficient. Because it is sold to individuals, Medigap does not offer beneficiaries the kind of premiums that result from group purchasing. This also adds to the administrative costs per policy, which are typically two to three times more than that of group coverage.

Costs increase with age as well as health inflation. This "attained age" pricing practice causes excessive premiums for those who need it most - the very old. It also disproportionately affects women since they comprise nearly three-fourths of people over age 85.

MEDICARE MANAGED CARE

MEDICAID

BENEFICIARIES LACKING DRUG COVERAGE

PRESIDENT'S PROPOSED PRESCRIPTION DRUG BENEFIT

The President's plan to modernize Medicare would include a new, voluntary Medicare drug benefit. Called Medicare Part D, it would offer all beneficiaries, for the first time, access to affordable, high-quality prescription drug coverage beginning in 2002. This benefit would cost the Federal government about $118 billion from 2000 to 2009. It would be fully offset, primarily through savings and efficiencies in Medicare and, to a small degree, from the surplus amount dedicated to Medicare.

The benefit would be limited to $5,000 in costs ($2,500 in Medicare payments) in 2008. It would phase it a $2,000 for 2002-2003; $3,000 for 2004-2005; $4,000 for 2006-2007; and $5,000 in 2008 (indexed to inflation in subsequent years).

Incentives to develop and retain retiree coverage. Employers that choose to offer or continue retiree drug coverage would be provided a financial incentive to do so.

Methodology. The Actuarial Research Corporation under contract with the Department of Health and Human Services conducted most of the analysis. The basis for the estimates is the Medicare Current Beneficiary Survey (MCBS) for 1995. These data were aged to CY 2000, converted to a point-in-time estimate, and adjusted for the increase in managed care enrollment. This enrollment increase was estimated by moving beneficiaries from retiree health coverage, Medigap and the uninsured to managed care in proportion to their enrollment in those plans.

Endnotes.

Hazzard WR; Blass JP (Editor); Ettinger WH; Halter JB; Ouslander JG. (1998). Principles of Geriatric Medicine and Gerontology. New York: McGraw Hill.

Centers for Disease Control and Prevention, National Center for Health Statistics. (1993). (National High Blood Pressure Education Working Group): Report on primary prevention of hypertension. Archives of Internal Medicine. 153: 186.

Wilson PWF. (1991). Established risk factors and coronary artery disease: The Framingham Study. American Journal of Hypertension. 7: 75.

SHEP Cooperative Research Group. (1991). Prevention of stroke by hypertensive treatment in older patients with isolated systolic hypertension. JAMA, 265: 3255-3264.

Randomized trial of cholesterol lowering in 4444 patients with coronary heart disease: The Scandinavian Simvastatin Survival Study (45). Lancet 1994; 344: 1388-1389.

The beta-blocker heart attack trial: Beta-Blocker Heart Attack Study Group. JAMA. 1981; 246: 2073-2074.

National Health Interview Survey.

Tierney LM; McPhee SJ; Papadakis MA (editors). (1998). Current Medical Diagnosis and Treatment 1998. Appleton and Lange.

Tierney LM, et al.; ibid.

Soumerai SB; Ross-Degnan D; Avorn J; McLaughlin TJ; Choodnovskiy I. (1987). Payment restrictions for prescription drugs under Medicaid: Effects on therapy, cost and equity. The New England Journal of Medicine, 317: 550-556.

Families USA, 1994.

Soumerai SB; Ross-Degnan D; Avorn J; McLaughlin TJ; Choodnovskiy I. (1991). Effects of Medicaid drug-payment limits on admissions to hospitals and nursing homes. The New England Journal of Medicine, 325: 1072-1077.

Bero LA.; Lipton HL; Bird, JA.. (1991). Characterization of Geriatric Drug-Related Hospital Readmissions. Medical Care, 29 (10): 989-1003. Foster Higgins, National Survey of Employer-Sponsored Health Plans, 1998.

Foster Higgins, National Survey of Employer-Sponsored Health Plans, 1996. As reported in Hewitt Associates. (1997). Retiree Health Trends and Implications of Possible Medicare Reforms. Washington, DC: The Kaiser Medicaid Project.