THE WHITE HOUSE

Office of the Press Secretary

     PRESIDENT UNVEILS IMPROVED MEDICARE PRESCRIPTION DRUG BENEFIT
     Urges Congress to Modernize and Strengthen Medicare This Year

In his weekly radio address, the President will announce that next week he will send the Congress a proposal to strengthen his Medicare prescription drug benefit by: specifying his catastrophic protection benefit; maintaining the beneficiary premium at the same level even with the enhanced benefit; starting the program one year earlier; and providing immediate payments to managed care plans to provide a prescription drug benefit. He will propose to add $58 billion over 10 years to finance these changes. Finally, the President will reiterate his commitment to add $40 billion over 10 years to: increase Medicare health care provider payments; support the Vice President's proposal to take Medicare off budget and use the resulting savings from debt reduction to help extend the life of Medicare to at least 2030; and maintain critical structural reforms that will be needed as the baby boom generation retires.

PRESIDENT UNVEILS ENHANCED PRESCRIPTION DRUG BENEFIT. The President will announce that he is improving his Medicare prescription drug benefit by:

• Specifying that no beneficiary would pay more than $4,000 in out-of-pocket drug costs. The President's plan would limit beneficiary spending on prescription drugs to $4,000 per year in 2002, indexed to drug inflation in subsequent years. This reaffirms the President's commitment to providing true insurance, enabling beneficiaries to afford needed drugs when they have high expenses.
• Limiting premiums to $25 per month even with the benefit improvement. The President's proposal will dedicate a portion of this new investment to maintain the monthly premium at the levels that were in his February proposal, even with the newly specified catastrophic benefit. Thus, premiums for this coverage would start at $25 per month in the first year and would increase as the benefit is phased in.
• Starting the benefit in 2002, not 2003. The President's plan accelerates the implementation of the drug benefit to January 1, 2002. Seniors and people with disabilities need prescription drug coverage as soon as possible and the new resources available will allow for an earlier start-up.
• Paying managed care plans to provide prescription drugs in 2001. To help managed care plans continue to offer prescription drug coverage next year and stabilize the managed care market, the President proposes to increase payments to the Medicare+Choice plans in 2001 to explicitly pay for prescription drug coverage. Plans that provide at least 50 percent coinsurance to $2,000 would be eligible for these subsidies. Under the President's plan, managed care plans would receive direct subsidies for the provision of a prescription drug benefit for the first time in program history. This will increase payments by over $25 billion over 5 years and over $75 billion over 10 years, including $2 billion in 2001.

By adding $58 billion over 10 years ($39 billion over 5 years), the new total cost of the Medicare prescription drug benefit would be about $253 billion over 10 years ($79 billion over 5 years). PRESIDENT'S PLAN - NOT REPUBLICAN PLAN - PROVIDES AN AFFORDABLE, ACCESSSIBLE, MEANINGFUL PRESCRIPTION DRUG BENEFIT.

President's plan is a Medicare benefit - House Republican private plan is not. Under the President's plan, all beneficiaries - including those in areas that are rural or otherwise underserved - would be guaranteed a defined, accessible, stable benefit for the same premium. Medicare would subsidize beneficiaries directly and pay for prescription drug costs like any other Medicare benefit. Plans would not come in and out of different market areas every year, and premiums would not vary from plan to plan and place to place.

In contrast, the House Republican proposal relies on private insurers who themselves say they will not participate in this flawed plan. Medicare would not provide a single dollar of direct premium assistance for middle-class Medicare beneficiaries (any senior with income above $12,600). Instead, Republicans rely on a flawed "trickle-down theory" that would end up subsidizing insurers, not seniors. A rural senior would be at particular risk of facing excessive premiums since insurers would likely face little competition and less incentive to offer affordable coverage.

President's plan has a meaningful benefit - House Republican private plan does not. Under the President's plan, Medicare would guarantee that all participating beneficiaries would pay no deductible, pay 50 percent coinsurance up to a limit, and have their out-of-pocket spending limited to $4,000 annually. In addition, all medically necessary drugs and access to local pharmacies would be ensured - so that seniors would have a choice of pharmacies and needed prescription drugs.

Under the House Republican plan, Medicare beneficiaries would be put at risk. Private insurers would define deductibles, copays and benefit limits, promoting competition on confusion rather than price and quality. Because insurers charge one premium for all enrollees - no matter how sick - they could discourage enrollment by the oldest seniors and most disabled beneficiaries by offering no deductible and low copays, but also a low benefit cap that leaves a large gap in coverage before the stop-loss kicks in. Moreover, private plans could limit access to pharmacists and needed medications. The so-called "choice" under the Republican plan is a false one - there is no assurance that beneficiaries could easily access medically necessary prescriptions and no certainty that they would be able to use their community pharmacist.

President's plan ensures better benefits for lower premiums. Under the President's plan, beneficiaries would pay a lower, stable premium for a better benefit. The premiums would be $25 per month in 2002, $26 per month in 2003 and would have a zero deductible benefit with a $4000 catastrophic stop loss protection benefit.

The House Republican plan would not even provide a benefit in 2002. In 2003, although premiums and benefits would vary from plan to plan, Republicans claim that the premium would average $37 per month - over 40 percent higher than the President's plan premium of $26 per month. This is a difference of over $130 per year. It would be an even higher premium in different parts of the country and it might be for a benefit that has a $250 deductible with a $6,000 catastrophic benefit.

PART OF THE PRESIDENT'S OVERALL MEDICARE PLAN. This improved prescription drug benefit is part of the President's overall plan to strengthen and modernize Medicare. This plan includes:

• Taking the Medicare Trust Fund off-budget. Following the lead of Vice President Gore, the President recently proposed to take the Medicare Hospital Insurance (HI) Trust Fund off-budget -- just like the Social Security Trust Fund. Currently, the surplus in the Medicare Trust Fund is counted towards the on-budget surplus and thus is available to pay for non-Medicare spending. Taking Medicare off-budget ensures that its surplus will be protected for paying down the debt to help strengthen the life of the Medicare program. It also ends the practice of cutting Medicare to meet budget targets or to pay for other spending increases or tax cuts.
• Using the benefit of debt reduction to extend Medicare solvency. The President proposes to dedicate a portion of the on-budget surplus, reflecting interest savings, to help extend the solvency of Medicare to at least 2030.
• Improving health care provider payments. The President has proposed to dedicate $21 billion over 5 years ($40 billion over 10 years) to a provider payment restoration initiative designed to ensure adequate reimbursement to hospitals, rural providers, teaching facilities, nursing homes, home health care agencies, managed care plans, and other providers. The proposal, designed to continue access to high-quality care, clearly illustrates that adequate financing for provider payments need not conflict with necessary funding for a long-overdue, voluntary Medicare prescription drug benefit. It includes $9 billion ($19 billion over 10 years) in specific policies that are primarily designed for immediate payment increases that would start to benefit providers in fiscal year 2001 and delay further Balanced Budget Act (BBA) payment reductions, many of which are scheduled to occur on October 1. It also includes $11 billion ($21 billion over 10 years) in unspecified funding for use in developing additional policies that target and/or permanently correct flawed BBA policies.
• Modifying reform policies. Finally, the savings proposals in the President's reform plan will be adjusted to reflect recent, lower-than-expected Medicare spending. The need for out-year spending constraints appears lower, so all traditional provider payment reductions for '03-08 have been dropped. In addition, the plan no longer includes the repeal of the Balanced Budget Refinement Act managed care risk adjustment policy, the bad debt policy, and the preferred provider organization proposal. These changes reduce net savings by $30 billion over 10 years. The President's plan continues to include policies to produce long-term efficiencies (e.g., the competitive defined benefits proposal), reduce fraud and abuse, and invest in priorities such as eliminating preventive services cost sharing.

PRAISES SENATE ON PROGRESS TOWARDS BIPARTISAN CONSENSUS. The President will highlight the encouraging bipartisan vote this week in the Senate in favor of Senator Robb's amendment to provide a true Medicare prescription drug benefit. He will indicate his hope that the Congress can work together on a bipartisan basis to pass a prescription drug benefit that provides real coverage, not political cover.

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