THE WHITE HOUSE

Office of the Press Secretary

                PRESIDENT CLINTON HIGHLIGHTS HIS PLAN TO
                   STRENGTHEN AND MODERNIZE MEDICARE
                          FOR THE 21st CENTURY

Releases New Report That Documents That Three Out of Four Medicare Beneficiaries Lack Decent, Dependable, Private-Sector Coverage

of Prescription Drugs

July 22, 1999

Today, the President met with community representatives in Lansing, Michigan to discuss the future of the Medicare program. At this meeting, he released a new report entitled, "Disturbing Truths and Dangerous Trends: The Facts About Medicare Beneficiaries and Prescription Drug Coverage," which describes the inadequate and unstable nature of the prescription drug coverage currently available to Medicare beneficiaries. The President also underscored the importance of seizing this historic opportunity to strengthen and modernize the Medicare program by making it more competitive and efficient; modernizing and reforming its benefits, including the provision of a long-overdue prescription drug benefit; and making an unprecedented long-term financing commitment to Medicare that would secure Medicare's financing for the next quarter century. Today, the President:

UNVEILED NEW REPORT DOCUMENTING THE DANGEROUS TRENDS IN PRESCRIPTION DRUG COVERAGE FOR 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. Today's report documents that the cost of purchasing essential prescription drugs is not only a problem for the millions of Medicare beneficiaries without any insurance, but is also an increasing challenge for beneficiaries who have coverage. Key findings of the report include:

• THREE OUT OF FOUR MEDICARE BENEFICIARIES LACK decent, dependable, private-sector coverage of prescription drugs.
• Only one-fourth of Medicare beneficiaries has retiree drug coverage, which is the only meaningful form of private coverage.
• Over three-fourths of beneficiaries have no coverage, inadequate Medigap coverage or public coverage for prescription drugs. At least one-third of Medicare beneficiaries have no drug coverage at all. Another 8 percent purchase Medigap with drug coverage -- but this coverage is frequently expensive, inaccessible and inadequate for many Medicare beneficiaries. About 17 percent have coverage through Medicare managed care. Given the projected leveling off of managed care enrollment and actual declines in the scope of managed care drug benefits, this source of coverage is unstable. Drug coverage in managed care can only be assured if it becomes part of Medicare's basic benefits and is explicitly paid for in managed care rates. Medicaid picks up 12 percent of the lowest income and sickest beneficiaries. The remaining 5 percent are in Veterans' and other public programs.
• PRIVATE TRENDS: DECLINE IN COVERAGE AND AFFORDABILITY.
• Firms offering retiree health coverage have declined by 25 percent in the last four years. Retiree health coverage is declining substantially because many firms previously providing it are opting to drop their coverage. The decline was more pronounced among the largest employers (greater than 5,000 employees), over a third of whom dropped coverage in this period.
• Medigap premiums for drugs are high and increase with age. Medigap premiums vary widely throughout the nation but are consistently two to three times higher than the Medicare premium proposed by the President. Moreover, unlike the President's proposal, premiums substantially increase with age as virtually every Medigap plan "age rates" the cost of the premium. This means that just as beneficiaries need prescription drug coverage most and are the least likely to be able to afford it, this drug coverage is being priced out of reach. This will particularly affect women, who make up 73 percent of people over age 85.
• PUBLIC DRUG COVERAGE TRENDS: MANAGED CARE BENEFITS REDUCED.
• The value of Medicare managed care drug benefits is declining. Nearly three-fifths of plans are reporting that they will cap prescription drug benefits below $1,000 in the year 2000. This is part of a troubling trend of plans to severely limit benefits through low caps. In fact, the proportion of plans with $500 or lower benefit caps will increase by over 50 percent between 1998 and 2000.
• Participation by Medicaid eligible populations remains low. Millions of Medicare beneficiaries under 75 percent of poverty (about $6,000 for a single, $8,500 for a couple) are eligible for Medicaid prescription drug coverage, but the participation rate is only 40 percent. This contrasts with an almost 100 percent participation rate in Medicare Part B. Inadequate outreach and welfare stigma contributes to these low participation levels and raise serious questions about the feasibility and advisability of using the Medicaid program to provide needed coverage for a population at higher income levels.
• MILLIONS OF BENEFICIARIES HAVE NO DRUG COVERAGE.
• At least 13 million Medicare beneficiaries have absolutely no prescription drug coverage. The number of the uninsured is not concentrated among the low income. In fact, the income distribution of uninsured Medicare beneficiaries is almost exactly the same for beneficiaries at all income levels.
• More than half of Medicare beneficiaries without drug coverage are middle class. Over 50 percent of Medicare beneficiaries without drug coverage have incomes in excess of 150 percent -- an annual income of approximately $17,000 for couples. This clearly indicates that any prescription drug coverage policy that limits coverage to below 150 percent of poverty, as some in Congress suggest, will leave the vast majority of the Medicare population unprotected.
• PRESCRIPTION DRUG COVERAGE IS GOOD MEDICINE.
• Part of modern medicine. Prescription drugs serve as complements to medical procedures, such as anti-coagulants, used with heart valve replacement surgery; substitutes for surgery, such as lipid lowering drugs that reduce the need for bypass surgery; and new treatments where there previously were none, such as medications used to manage Parkinson's disease. In addition, as our understanding of genetics grows, the possibility for breakthrough pharmaceutical and biotechnology will increase exponentially.
• Medicare beneficiaries are particularly reliant on prescription drugs. Not only do the elderly and people with disabilities have more problems with their health, but these problems tend to include conditions that respond to drug therapy. Not surprisingly, about 85 percent of beneficiaries fill at least one prescription a year for such conditions as osteoporosis, hypertension, myocardial infarction (heart attacks), diabetes, and depression.
• The lack of drug coverage has led to inappropriate use of medications which can result in increased costs and unnecessary institutionalization. Recent research has determined that being uninsured leads to significant declines in the use of necessary medications. The consequence of inappropriate and underutilization of prescription drugs has also been found to double the likelihood that low-income beneficiaries entering nursing homes. One study concluded that drug-related hospitalization accounted for 6.4 percent of all admissions of the over 65 population and estimated that over three-fourths of these admissions could have been avoided with proper use of necessary medications.

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