Modernizing Medicare: the prescription drug debate. (Washington Insights).

At question is how the drug benefit would be structured, whether companies could "wrap around" coverage as is currently allowable and whether company dollars would count towards any co-pay or deductible offered by Medicare.

Congress will soon begin debating the addition of a prescription drug benefit to the Medicare program to bring the program into the modem medical era. When Congress designed the Medicare program in 1965, prescription drugs did not play large part in the delivery of health care, and the program was designed to pay for hospital and doctor services. Today, prescription drugs play a big role in the management of illnesses, representing 11.4 percent of all health care spending in the U.S. with Medicare beneficiaries accounting for about 43 percent of that spending, according to the Centers of Medicare and Medicaid Services.

The problem is clear, but the politics of the issue are muddy. Earlier this year, the President laid out a set of principles for Congress to follow as it begins its debate over the Medicare drug issue--located on FEI's Web site at www.fei.org/advocacy/download/Medicare_Framework.pdf. Additionally, the President campaigned on this issue during the last election, as have so many candidates and presidents before him, which means the issue will become a political liability if some sort of Medicare prescription drug benefit is not enacted before the end of 2003.

Actually the chances of a Medicare bill passing this year are greater than any year in recent history, though there is much disagreement about its form and cost. While the FY 2004 budget resolution provides for up to $400 billion for a prescription drug benefit, many seniors groups contend that this sum is not enough and that a "real" drug benefit could cost twice that amount.

In the Senate, there is hope. The current Senate Majority Leader, Bill Frist (R-Tenn.), is a cardiac surgeon who is considered to be the Medicare expert in the Senate. Sen. Frist has sponsored Medicare reform legislation in the past and will likely involve himself in this year's debate.

There is much at stake for American businesses that sponsor retiree medical plans or subsidize retiree drug plans. At question is how the drug benefit would be structured, whether companies could "wrap around" coverage as is currently allowable and whether company dollars would count towards any co-pay or deductible offered by Medicare.

Three Key Principles

To engage in this process, FET has become involved in the Employers' Coalition on Medicare, a group of about 60 businesses and other like-minded associations, to provide constructive comment to Congress as it moves through the process of crafting Medicare legislation. The coalition believes that Congress should follow three principles as it begins to debate adding prescription drugs to the Medicare program:

* Reform. A drug benefit should be established in the context of comprehensive reform of the Medicare program. The government, as a large purchaser of health care services, should make fundamental changes to Medicare, starting with three key areas: 1) plan design and delivery; 2) reimbursements and payment to providers; 3) information sharing and disclosure.

* Universal Access. As with all other Medicare benefits, all Medicare beneficiaries should be eligible for drug coverage subsidized by Medicare, regardless of their income level, age, sex, disability or employment status.

* Flexible Options. Medicare should be the primary payer, but allow employers and beneficiaries the option of supplementing Medicare coverage without penalty or additional financial liability. Employers and Medicare beneficiaries should have several options for obtaining affordable health coverage that includes prescription drugs, and should be allowed to fund retiree health care needs on a tax-preferred basis. Different employers and individuals necessarily will elect options that best serve their unique needs and circumstances; no single option or set of options should be mandated for employers or individuals.

FEI will continue to engage in this debate to modernize the Medicare program and put it on sound financial footing, while providing a much needed prescription drug benefit to its beneficiaries.

Bob Shepler is FEI's Director of Federal Affairs. He can be contacted at [e-mail].