Editor's note: The historic legislation passed has lead to a great deal of analysis, some of which we've included. This is an early attempt to help you understand the issues. Some in Congress are also pledging to revisit the bill. We will keep you informed.

Both the houses of the US Congress have given the green light to legislation that calls for the most sweeping Medicare reform since the federal program for the elderly was established in 1965. President Bush, a strong and vocal proponent of the Medicare bill, is expected to sign it into law soon.

The most touted and tangible feature of the legislation is the addition of a prescription drug benefit to the Medicare program, which would be administered by private insurers. Beginning in 2006, beneficiaries will have access to private "drug-only" insurance policies. For an estimated monthly premium of $35 and a $250 deductible, plans will provide coverage of 75% of drug costs between $276 and $2250; there is a gap in coverage - the so-called "hole in the doughnut" - until out-of-pocket costs reach the "catastrophic level" or $3,600 (total drug costs of about $5,100). The plan will cover 95% of costs for most beneficiaries with costs above $3,600. Low income beneficiaries (those with household incomes below approximately $12,000 and couples with total incomes below $16,000, or less than 135% of poverty level in future years), will pay no premiums or deductibles and would have no gap in coverage, but will pay co-pays of $1 for generic medications and $3 for brand-name treatments until costs top $3,600. Seniors with assets of more than $6,000 will not be eligible for aid. The legislation contains no specific price controls for drugs, so it is difficult to project just how much actual savings seniors will realize in the years to come.

The new drug benefit won't start until 2006, but in the interim, a Medicare drug discount card will be available, beginning about six months after the new legislation takes effect. The discount card is expected to offer an average of 13 percent off the cost of prescription drugs. Low-income members will get a subsidy of $600 on the card. (Note that until then most of the pharmaceutical companies already offer such a card for income-eligible Medicare beneficiaries and in New England, Citizen's Health provides a similar benefit for any-one. See www.mghsocialwork.org staff access for more info or contact the CRC.)

The bill has some additional worrisome aspects. Perhaps the most significant is the movement toward privatization of Medicare. Beginning in 2010, the legislation establishes what is called a six-year "demonstration project," in which private insurers can compete head-to-head with Medicare. The concern is that such competition would enable private plans to attract the youngest, healthiest and least expensive seniors, leaving those who are the sickest and most expensive to continue in the traditional Medicare program. With the associated erosion of Medicare's universal risk pool, the costs of Medicare are likely to rise. Those who continue to be covered under traditional Medicare - those who are likely to need coverage the most - may be unable to afford it, and they will be forced into lower-cost private plans that severely restrict choice.*

Other Provisions

• Medicare in 2007 would begin to link premiums under Part B, which covers outpatient services, to the incomes of beneficiaries.
• The bill also reduces payments for drugs currently covered by Medicare under Part B, including drugs dispensed in physicians' offices and to ESRD patients from 95% to 85% of the average wholesale price.
• Employers that currently provide prescription drug coverage to retirees would receive tax-free subsidies valued at as much as $70 billion to continue to provide such coverage after the Medicare prescription drug benefit takes effect.
• Private health plans would receive $12 billion in subsidies as incentive to participate in Medicare.
• Although the bill states that U.S. residents could purchase prescription drugs from Canada, this is only if HHS certifies the safety of the practice, and, the director of HHS has said he would not.
• Congress would have to consider proposals to reduce Medicare expenditures or raise revenues in the event that general revenue accounts for 45% of expenditures (Kaiser Daily Health Policy Report, 11/18)**

Critics Say:

Consumers who choose the new Medicare prescription drug coverage may get discounts of up to 30 percent off retail drug prices, but with the significant trade-off of a restricted choice of medicines... As a result, seniors may be more able to afford the drugs they need, but may be forced to switch to similar but less expensive generic medicines.

Seniors choosing among plans will need to be sure the drugs they need are covered... In addition, they will want to compare premiums and copayments, which will vary from plan to plan. Congress voted for a plan that covers 75 percent of a senior's first $2,250 in drug spending the first year, with a $35-a-month premium and a $250 deductible. But Congress said plans could vary that formula if the overall value remained the same.

"It could be very confusing for consumers...every year when they face the open enrollment period," said Tricia Neuman, di-rector of the Medicare policy pro-ject at Kaiser Family Foundation. "Even if they learn what drugs are covered, there's nothing that requires the formulary [or list of drugs] to remain the same for a year. Yet seniors will be locked into the plan for a year."***

Drug Industry Big Winner

Under the plan, the pharmaceutical industry would "reap a multibillion bonanza in the form of millions of new customers and limits on for-eign competition," according to Long Island Newsday. Of the 40 million Medicare beneficiaries, 10 million currently have no drug coverage; by offering a drug benefit, consumption would increase. The bill is also favorable to the drug industry because it would require a safety certification from HHS before allowing the reimportation of U.S.-made prescription drugs from Canada by U.S residents. HHS Secretary Tommy Thompson has said he is not likely to do so. The bill also would prohibit price controls on the drugs, a move that the industry supports (Toedtman, Long Island Newsday, 11/25).****

Other Remaining Questions

What will be the impact on those currently eligible for both Medicare and Medicaid ( "dual eligibles")? According to one analysis, from the Center for Budget and Policy Priorities:

Most low-income seniors and people with disabilities who qualify for Medicaid would be charged higher co-payments for prescription drugs under the new Medicare drug benefit than they now pay under Medicaid. This could discourage some poor beneficiaries - particularly those who have serious medical conditions and need a large number of prescriptions - from obtaining all of the drugs they need (this report sites research that even the low co-payments included in the bill change the behavior of beneficiaries). Some low-income Medicare beneficiaries could lose access to particular drugs they currently are prescribed through Medicaid if those drugs are not covered under their Medicare drug plan's formulary.*****

What will be the effect on those currently receiving coverage through an employer-sponsored health plan? Subsidies were included to encourage employers to maintain coverage. But it remains to be seen whether the subsidy is effective or if employers will drop coverage for Medicare-eligible employees as some critics warn.

*Adapted from: "From The Desktop of Peter L. Slavin, MD, MGH President, November 2003, Medicare Prescrip-tion Drug Legislation A Mixed Blessing" AND Government Relations Update No. (03-16), Joy Rosen, Partners Government Relations.

**Kaiser Daily Health Policy Report Features Details on Medicare Bill Provisions [Nov 25, 2003] Click here

***From "Choice Of Drugs May Be Limited: Plans Might Opt For Less Expensive Drug"s By Alice Dembner, Boston Globe Staff, 11/26/2003.

****Kaiser Daily Health Policy Report Features Details on Medicare Bill Provisions [Nov 25, 2003] Click here

*****"Medicare Agreement Would Make Substantial Numbers Of Seniors And People with Disabilities Worse Off Than Under Current Law" By Edwin Park and Robert Greenstein, Revised November 21, 2003, from: www.cbpp.org/11-18-03health.htm