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Drug benefits bill hurdle: Firms may drop coverage

From Steve Turnham
CNN Washington Bureau

Sen. Edward Kennedy, left, and Senate Minority Leader Tom Daschle talk about the effort to find compromise on a Medicare prescription drug bill.
Sen. Edward Kennedy, left, and Senate Minority Leader Tom Daschle talk about the effort to find compromise on a Medicare prescription drug bill.

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Prescription Drug Benefits
Government Health Care

WASHINGTON (CNN) -- As House and Senate negotiators craft a compromise Medicare prescription drug benefit they face a difficult and hugely expensive problem: how to stop private employers from dropping drug coverage for their retirees once the government plan begins.

"Twenty to 25 percent of our resources are going to be directed toward making sure companies don't drop programs," said Sen. Charles Grassley, R-Iowa, the lead Senate negotiator on the drug bill.

In dollar figures, that translates to up to $100 billion just to make sure no one loses what they now have.

According to the Congressional Budget Office and the Department of Health and Human Services, an estimated 37 percent of employers now offering drug plans are expected to drop them once the Medicare prescription drug benefit comes on line in 2006.

Devoting so much money simply to maintain existing drug plans may mean that the new Medicare drug benefit will have to be scaled back to fit within its $400 billion budget.

However, negotiators may have little choice.

In a letter to President Bush on Thursday, 41 senators made a list of demands for the bill, including protection for private plans. That number would be enough to block the bill in the Senate, although Democrats said they had not decided whether to filibuster the measure.

Sen. Ben Nelson, D-Nebraska, who did not sign the letter for fear of discouraging compromise, said that if current private coverage is not preserved he would have difficulty voting for the bill.

Nelson said Congress would face an impossible choice.

"All of us here will be forced to chose between ... the haves and the have-nots, those who have coverage as retirees with the benefits being paid by their former employers and want to keep it, and those who don't have the coverage but need it," said Nelson from the Senate floor. "It will be a war between seniors."

Nelson also noted that employer-sponsored health plans are the biggest single source of drug coverage for seniors, covering a third of all current Medicare beneficiaries. But he said only about one in three large firms offer drug coverage, down from nearly 70 percent in 1988.

Grassley said because companies are already dropping drug plans, Democrats who are inclined to vote against a final bill are put in an uncomfortable position.

"Would they not want to pass a bill because companies might do it?" he asked. "Because those same people, when they are dropped, they ought to have something to fall back on. And this Medicare prescription drug program is such a fall-back position."

According to briefing papers detailing the compromise plan, Medicare beneficiaries annually would pay the first $275 of drug costs and a quarter of the costs between $275 and $2,200 dollars.

After that, the patient would pay the entire cost from $2,200 up to about $5,000. At that point, catastrophic care would kick in, providing 95 percent coverage. For this benefit, Medicare recipients would be required to pay a $35 annual premium.

Patients who need it would be required to pay about $3,600 out of their own pockets each year before the catastrophic coverage kicked in. For seniors with major health problems, the benefit could represent a significant savings.

The measure has additional benefits for poorer seniors. Seniors earning less than $12,123 a year would not have to pay the $275 deductible or the monthly premium. Instead they would pay a co-payment of between $2 to $5 for each drug purchase. Those earning between $12,123 and $13,470 a year would also get more generous benefits than wealthier people.

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