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April 19, 1999
Dear Representative:
We urge you to oppose high-risk "reform" of the Medicare program that is based on the Breaux-Thomas proposal considered (though not officially recommended) by the National Bipartisan Commission on the Future of Medicare. We believe that this "premium-support" model presents major risks for the Medicare program. We oppose the Breaux-Thomas "premium support" plan for the following reasons:
1. Medicare beneficiaries need a standard benefits package so that they can make informed comparisons among plans.
While the proposal pays lip service to the need for a standard benefits package, the details of the plan undermine the principle of uniformity. Health plans would be able to offer additional benefits, and would be able to vary the copay and deductible levels. Allowing this variation (with no requirements for uniformity) would prevent consumers from making apples-to-apples comparisons among plans. Even slight variation between plans - when multiplied by numerous plans in the marketplace - will serve to confuse consumers. The pathbreaking Congressional reforms of the medigap market, enacted in 1990, recognized the need for consumers to make apples-to-apples comparisons. Without standard benefits packages, the proposed new Medicare system would flunk the "kitchen table test" - in which consumers can make an informed choice after an analysis of policies spread out on their kitchen table.
2. All Medicare beneficiaries need coverage for prescription drugs.
The Breaux-Thomas proposal would provide some drug coverage (with unspecified deductibles, co-pays, maximum benefits, drug restrictions) for those with income up to 135 percent of poverty. The National Association of Insurance Commissioners would be required to include "basic coverage for prescription drugs" in all medigap plans. The traditional fee-for-service Medicare program could offer an unspecified prescription drug benefit. This proposal is inadequate. Only individuals with income below $10,568 and couples with income below $13,334 would be assured coverage, and even for them required co-payments could be burdensome. "Basic" coverage in medigap could continue to require burdensome copays (e.g., 50 percent) and have low coverage limits (e.g., $1,250). There is no assurance that Medicare HMO's will offer comprehensive coverage for prescription drugs. Furthermore, many seniors have income too high for the low-income coverage, but too low to allow them to afford a medigap policy.
3. Medicare beneficiaries need a cap on their out-of-pocket health care spending.
57 percent of people 65 and over pay 10 percent or more of their income out-of-pocket for health care expenditures (including premiums). Medicare beneficiaries need the same kind of protection that many people with employer-based coverage now have: a cap on their out-of-pocket health care spending. This benefit redesign would help reduce the number of underinsured seniors. Like the addition of prescription drugs, it is the type of benefit design recommended by Robert Reischauer and Henry Aaron in their paper supporting a premium support model for Medicare.
4. Congress should lower not increase the age of eligibility for Medicare.
The proposal would increase the age of Medicare eligibility, so that it "conformed to that of Social Security." We are very troubled by this proposal, which would gradually increase the age of eligibility to 67, because it will translate to hundreds of thousands of newly uninsured people, 65 and 66 years old. The proposal provides for "non-subsidized buy-in" at age 65, but with income levels often decreasing (when people retire, either voluntarily or involuntarily), Medicare coverage will remain out-of-reach for many. The proposal does not call for subsidy, or for buy-in before age 65 - two steps that could help to increase coverage at a time when income is decreasing and chronic health conditions are increasing.
5. Consumers need a Medicare system that is accountable to them, not bottom-line profitability of health plans.
The Medicare program has a long history of low administrative costs (between two and three percent per year). While it is certainly the case that the government needs to continue and expand its efforts to cut waste and fraud, there is no guarantee that costs will decrease in the long run by turning Medicare over to the private sector. Not only do private companies put upward pressure on costs because of their marketing costs and profits, but they have a strong incentive to find ways to enroll the healthy, but not the sick. This week, a new GAO study found that nearly half of Medicare HMOs surveyed misstated benefit coverage. Another recent GAO report found that health plans often fail to inform Medicare beneficiaries of their right to appeal benefit denials. Before rapidly increasing the role of private insurance companies in Medicare, Congress must be clear about the need to keep Medicare accountable to the public interest, not the private interest. Allowing plans to vary benefits is just one way that the Breaux-Thomas proposal introduces confusion that is more likely to serve the interests of insurance companies rather than the interests of beneficiaries. As Reischauer and Aaron noted in Health Affairs, strong regulation from Washington is a key ingredient of a successful premium support model. ("The nation should not gamble with health care for the aged and disabled, many of whom are unlikely to be able to do well in an unregulated market.") The poorly defined roll of the Medicare Board offers no assurance that it will meet this need. In fact, it seems designed to undermine a strong federal government regulatory presence.
We urge you to enact legislation that will modernize the Medicare benefit package, strengthen the Medicare program, and build in assurances that Medicare will serve the interests of its millions of beneficiaries, today's and tomorrow's. We believe that the Breaux-Thomas proposal would move Medicare in the wrong direction, and we urge you to oppose it.
Thank you for your consideration.
Sincerely,
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Gail Shearer |
Adrienne Hahn |
