Letter Opposing Tripartisan bill (21st Century Medicare Act)

July 17, 2002

Dear Senator:

We urge you to vote against the so-called Tripartisan bill, the "21st Century Medicare Act," which is expected to be considered as an amendment to S. 812, the "Greater Access to Affordable Pharmaceuticals Act of 2001." This bill is structurally flawed and will not result in the benefits that it purports to provide for Medicare beneficiaries. For the following reasons, this bill will not provide enrollees with necessary relief, and we urge you to oppose it.

· The "Tripartisan" plan has a huge "donut hole"(a gap in coverage) that would leave seniors and the disabled facing large out-of-pocket costs. There would be no benefit for prescription drug expenses between $3,451 and $6,300. A moderate income senior would have to spend $4,700 out-of-pocket, including the premium, before the catastrophic benefit kicked in. The biggest burden would be on those who did not have access to low-income subsidies but lacked the means to pay these large out-of-pocket costs.

· The "Tripartisan" plan does not guarantee premiums for beneficiaries and as a result could leave coverage unaffordable for many. The bill relies on voluntary participation by a reluctant insurance industry and offers no assurances that the premiums will be affordable. We believe that the CBO estimate of a $288 annual yearly premium is unrealistically low, because it is based on unlikely levels of participation.

· The "Tripartisan" plan may lead to a "death spiral" of costs. Under the structure of the plan, many Medicare beneficiaries with low prescription drug spending might opt out of the voluntary program, since those spending less than $826 on drugs annually would actually pay more in premiums, deductibles, and copayments than they would receive in benefits. We know from the experience in the Medigap market (the private insurance market that supplements Medicare) that those less likely to need many prescription drugs opt out of voluntary private insurance coverage, and those needing more medicines opt in. This adverse selection has resulted in premiums that are often higher than maximum drug benefits paid by Medigap policies. It is sure to increase premiums in this plan, potentially making coverage unaffordable for seniors and disabled beneficiaries.

· The "Tripartisan" plan's "guarantee" of at least two drug policies is meaningless since it relies on voluntary insurer participation and lacks any premium level guarantee. While the Secretary of the Department of Health and Human Services could provide limited incentives for insurer participation, the bill does not have a mechanism to require or guarantee insurer participation. Nor does the bill have a fallback federal drug benefit. In other words, there is absolutely no guarantee that Medicare beneficiaries will have a choice of plans at an affordable premium. Even if insurer participation were ensured, the absence of premium guarantees renders this purported "choice of plan" illusory.

We urge you to vote against the "Tripartisan" plan because it is structurally flawed and will not provide the relief so urgently needed by Medicare beneficiaries.

Sincerely,

Gail Shearer
Director, Health Policy Analysis
Consumers Union Washington DC Office

Janell Mayo Duncan
Legislative Counsel

View Files Sorted By Office: Consumers Union OPI, New York - Washington DC Office
West Coast Regional Office - Southwest Regional Office - Consumer Policy Institute

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