House, Senate Pass Medicare Bills Offering Drug Benefit

Both the House and Senate have approved Medicare bills that call for a prescription drug benefit and a larger role for private health plans in the program. Senate Majority Leader Bill Frist (R-Tenn.) said, "Tonight, we are one step closer to providing real health security for seniors all across the nation." But referring to his chamber''s bill, Rep. John Dingell (D-Mich.) said, "[The bill] destroys Medicare as we know it."

Under both bills, the prescription drug benefit, which would be delivered by private insurance companies and would not take take effect until 2006, contains a large coverage gap some have dubbed the "doughnut hole."

The Senate bill provides for coverage of 50 percent of a beneficiary's drug costs up to $4,500, with a $275 deductible and an estimated $35 monthly premium. After $4,500 has been spent, coverage stops until $5,800 (a 'doughnut hole' of $1,300), at which point catastrophic coverage kicks in and 90 percent of all drug costs are covered from then on.

The House bill provides for coverage of 80 percent up to $2,000, with a $250 deductible and an estimated $35 monthly premium. Once $2,000 has been spent, coverage stops until drug bills reach $4,900 (a doughnut hole of $2,900), at which point catastrophic coverage kicks in and the government covers 100 percent of all costs from then on.

House Democrats offered an alternative measure that would devote more than twice as much money to drug subsidies, but it was defeated.

Medicare beneficiaries and others can enter their annual prescription drug expenses in the Kaiser Network''s Medicare Drug Benefit Calculator to determine their out-of-pocket expenses under the House and Senate Medicare drug benefit proposals.

The House and Senate bills rely on a new, largely untested product to deliver drug coverage to people in traditional Medicare: private stand-alone insurance policies that provide only drug coverage.

Conference committee negotiations, expected to begin after the July 4 recess, could be difficult because the House and Senate bills differ in important ways. For instance, the House bill would eventually require direct competition between traditional Medicare and private health plans, a goal many conservatives favor. Senate Minority Leader Tom Daschle (D-N.D.) warned that the bipartisan agreement in the Senate could "fall apart" if the Senate bill is significantly altered during conference committee.

According to the The Washington Post, both bills would allow U.S.-made drugs to be imported back from Canada, which regulates the prices of prescription drugs, if the Department of Health and Human Services agrees.

Read an article in The New York Times on the Medicare bills. (Articles may be only temporarily available, and free registration required for the Times article.)