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National Alliance on Mental Illness
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June 13, 2003

ACTION LOOMS ON MEDICARE PRESCRIPTION DRUGS LEGISLATION.

Both the House and Senate launched efforts this week to push legislation expanding the Medicare program to add coverage of outpatient prescription drugs. Action on legislatio n to add coverage of prescription drugs to the Medicare program has become an annual ritual in Congress in recent years. Since 1999, these efforts have usually fallen victim to election-year politics and deep partisan divisions in Congress. However, this year there is unprecedented optimism that Congress and the Bush Administration can come to an agreement over critical issues including beneficiary premiums and catastrophic coverage for individuals with high drug costs. Earlier this week, the President called on Congress to complete action on Medicare prescription drug legislation before the July 4th recess. While this is a goal Congress is unlikely to reach, it is expected that a bill will reach the President’s desk by summer’s end.

ACTION REQUESTED

Advocates are urged to contact their members of Congress (both Senators and House members) and urge them to support coverage of outpatient prescription drugs under Medicare. In particular, you should urge support for a Medicare prescription drug legislation that:

  • includes protections for beneficiaries with high catastrophic drug costs,
  • subsidizes the cost of monthly premiums and annual deductibles for low-income beneficiaries,
  • offers coverage for non-elderly Medicare beneficiaries who qualify for SSDI on the same terms and conditions as seniors,
  • prevents Medicare prescription drugs plans from using overly restrictive formularies that use prior authorization and "fail first" requirements to limit access to certain medications, and
  • addresses the discriminatory 50% co-payment requirement for outpatient mental illness treatment services in Medicare and includes a requirement for traditional Medicare and private sector "Medicare Advantage" plans to limit beneficiary co-payments to 20% (the same requirement as currently exists for outpatient services for all other medical conditions).

All members of Congress can be reached by calling the Capitol Switchboard toll free at 1-800-839-5276 or at 202-224-3121 or use NAMI's online advocacy tool to contact your representatives now!

BACKGROUND ON MEDICARE PRESCRIPTION DRUG LEGISLATION

One key factor driving all sides toward an agreement is that the FY 2004 budget resolution – which has already been approved by both the House and Senate – set a maximum ceiling of $400 billion over the next decade for the cost of any new drug benefit in Medicare. This agreement on the overall cost of a new Medicare drug benefit means that more expensive alternative proposals and amendments to enrich the coverage cannot be offered under House and Senate budget rules. At the same time, this $400 billion cost limit means that for many Medicare recipients, the benefits included in any new program are likely to fall far short of actual prescription costs for many beneficiaries. In fact, both the House and Senate bills envision premium costs, deductibles, co-payment requirements and coverage restrictions that are higher than those that currently exist in private sector plans and Medicaid.

It is important to note that while this issue is typically framed in the press and by politicians as "drug coverage for seniors," both the House and Senate bills, as well as the President’s proposal, include drug coverage for non-elderly Medicare beneficiaries. This includes the 6.9 million Social Security Disability Insurance (SSDI) beneficiaries under age 65, 25% of whom qualified for SSDI on the basis of a disabling mental illness.

WHITE HOUSE PROPOSAL TO FOSTER PRIVATE SECTOR ALTERNATIVES TO MEDICARE REJECTED.

Both the House and Senate bills thus far reject President Bush’s plan to provide an enriched drug benefit for Medicare beneficiaries willing to leave the current fee-for-service Medicare program to enroll in privately run Preferred Provider (PPO) plans. The Bush Administration had hoped to use new drug benefits as a means of promoting long-term reforms of the Medicare program – including inducing more beneficiaries to choose private sector plans over the current program. Both Democrats and Republicans appear to have rejected this effort. While both bills do include proposals to expand private sector options, neither provides enhanced drug coverage as an inducement.

SENATE FINANCE COMMITTEE BILL APPROVED.

On June 12, the Senate Finance Committee approved its version of Medicare legislation by a bipartisan 16-5 margin. Despite this strong support, the bill is expected to face resistance from both sides and scores of amendments when it reaches the full Senate. It is likely that some Democrats will oppose the bill on the basis of limited coverage, while some Republicans are already expressing concern that too little is in the bill to promote structural reforms and private competition in Medicare. Under the Senate bill, coverage would go into effect in 2006 on a voluntary basis – beneficiaries with other coverage (including Medicaid) would not be required to participate. In the interim, Medicare beneficiaries would be able to purchase drug discount cards for a "nominal" fee.

Once coverage begins in 2006, Medicare beneficiaries would be able to choose to stay in the traditional Medicare program and purchase "drug only" coverage. These "drug only" plans would be offered on top of the current Medicare program and would be made available in 10 separate geographic regions. At least two of these plans would be available in each region, with fallback plans available if not enough plans elected to bid to serve a specific region.

Beneficiaries choosing a "drug only" plan option would pay a maximum $35 monthly premium and a maximum $275 annual deductible. Low-income beneficiaries (those at 150% of the poverty level and below) would receive subsidies for their premiums based on a sliding scale. Once coverage goes into effect, beneficiaries would have a 50% co-payment requirement, up to a $4,500 limit. Above this $4,500 limit, beneficiaries would have to pay 100% of their drug costs while still having to pay monthly premiums, until reaching a "stop loss" limit of $5,800. Above $5,800, coverage would kick in again with Medicare picking up 90% of out-of-pocket drug costs. This $1,840 gap in coverage (referred to as the "doughnut") has generated enormous controversy. In order to address these concerns, the Finance Committee agreed to protect beneficiaries with incomes below 160% of the poverty level from the coverage gap.

Under the Senate bill, Medicare beneficiaries could also choose a new "Medicare Advantage" option, enrolling in a PPO for both drug coverage and all other health coverage. However, the Senate bill contains none of the benefit enhancements for PPO plans that were proposed by the President – not just enhanced drug benefits, but also preventive care and chronic disease management. As a result, the Congressional Budget Office (CBO) estimates that fewer than 10% of beneficiaries would choose this option and that the administrative costs could actually increase costs over fee-for-service Medicare.

RESTRICTIVE FORMULARIES WOULD BE ALLOWED.

Under the Senate bill, both "drug only" plans and PPO "Medicare Advantage" plans would be allowed to establish formularies according to standards set forth in the legislation. These include standards for an appeals process, access for medications not on the formulary and a requirement for beneficiaries to be represented on "Pharmacy and Therapeutics Committees." However, the bill appears to allow plans to use tools such as "prior authorization" to restrict access to medications not on the formulary. In addition, the bill would permit plans to require an "adverse outcome" with an on-formulary medication before allowing a patient and their doctor to request an off-formulary alternative (commonly referred to as "fail first"). For people with mental illnesses, "adverse outcomes" can be extremely harmful or even catastrophic. Thus, NAMI strongly opposes fail first requirements.

HOUSE ACTION SET FOR NEXT WEEK.

Separate Committees in the House are expected to move Medicare prescription drug legislation next week. Republican leaders have agreed on a single bill that is expected to move quickly to the full House before July 4th. The House bill is very similar to the Senate bill and features coverage offered through "drug only" plans, with a $35 per month premium and a $250 annual deductible. The House bill features slightly more generous coverage on the front end – 80% of a beneficiary’s first $2,000 of costs – but offers much smaller low-income subsidies than the Senate bill. In addition, the coverage gap in the House bill is larger than the Senate – from $2,000, up to $3,700.

Another major difference in the House bill is that coverage above the $3,700 catastrophic limit would be "means tested," meaning that the government’s share would decrease on a sliding scale for beneficiaries with incomes of $60,000 and higher. Finally, the House bill does not authorize the government to set up fallback plans in geographic regions where no plans bid to compete in those regions.

PARITY FOR 50% CO-PAYMENT NOT INCLUDED.

The absence of major structural reform to Medicare in this year’s legislation means that Congress will likely be unable to address parity for current restrictions in the program that apply only to treatment for mental illness. These restrictions include the current 50% co-payment requirement for outpatient mental illness treatment (all other services have a 20% co-payment) and the 190-day lifetime limit on inpatient psychiatric treatment.

Senators Olympia Snowe (R-ME) and John Kerry (D-MA) are expected to offer an amendment to phase-in parity for the 50% outpatient co-pay over a 6-year period. This proposal is estimated to cost as much as $5.9 billion. However, an offsetting cut within Medicare would have to be found in order to fit their proposal within the $400 billion limit set for the entire bill.

As the debate on Medicare reform moves forward this summer, NAMI will continue to advocate for changes to both traditional Medicare, and private sector managed care plans participating in Medicare, to ensure that treatment for mental illness is covered on the same terms and conditions as all other illnesses. This is especially the case for private sector plans where Congress can establish coverage standards for plans without incurring additional outlays to the existing Medicare program.

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