Center for American Progress

Medicare Prescription Drug Legislation: Concerns for Rural Beneficiaries

Medicare Prescription Drug Legislation: Concerns for Rural Beneficiaries

Updated November 18, 2003

About 9 million Medicare beneficiaries live in rural America and face special challenges in accessing prescription drugs. Our September study, Medicare Prescription Drug Legislation: What It Means for Rural Beneficiaries, found that, compared to urban beneficiaries, rural beneficiaries have less prescription drug coverage, spend more for needed prescriptions, and rarely have stable access to private health insurance plans who will deliver the drug benefit under the recent proposals. The report suggested policies that would assist this vulnerable group. While some of these proposals appear to have been included in the conference agreement, others apparently were rejected, leaving doubts about whether the legislation fairly and adequately helps rural beneficiaries. Specifically, the emerging conference bill, compared to the Senate-passed legislation, includes:

Larger prescription drug benefit gap: Medicare prescription drug coverage would cut off after spending hits one threshold and begins again when it hits another – creating a benefit gap or donut. The conference bill appears to have a gap of about $2,800, twice as large as the already-troubling gap in the Senate bill. This will affect rural beneficiaries who tend to have higher costs and fewer options for paying for drugs in the gap.

Less assistance for low-income beneficiaries: The conference bill tightens the income and assets tests for extra assistance for low-income seniors. It would also eliminate Federal Medicaid funding to fill in the gaps in the Medicare drug benefit. Both provisions would disproportionately affect rural beneficiaries who are 20 percent more likely to have income below 150 percent of poverty. Up to 1.7 million rural beneficiaries could have their current drug coverage reduced, unless cash-strapped states replace the lost federal funding.

Weakened prescription drug "fall-back": New, untested private insurers would deliver the prescription drug benefit. Acknowledging private insurers’ under-service in rural America , the Senate plan included a fallback that would let Medicare offer a drug benefit in areas where two or more private plans fail to do so. However, the conference bill appears to give rural beneficiaries only one private insurer option if they stay in traditional Medicare, forcing them to consider trading access to their doctor to join a Medicare HMO and gain lower cost sharing for needed drugs.

Harmful premium support demonstration: "Premium support" effectively caps Medicare spending for the traditional program and private plans, shifting greater risk and costs to seniors. The demonstration proposed, which would begin in 2010, would target six sites – including small cities. Given their lower income, rural beneficiaries would be particularly hard pressed to pay more to stay in traditional Medicare.

Inequitable and anti-competitive HMO and PPO payments: The conference agreement builds on the current overpayment to private plans, increasing base rates to well over 20 percent above the cost of the traditional program, and including a $12 billion slush fund to keep private insurers in Medicare. Not only is this anti-competitive and costly, it would require rural seniors to pay for this private system even though most would likely lack access to it.

Arbitrary cap: A last-minute change to the conference agreement would cap the amount of general government funding to Medicare, setting it apart from other programs and setting the stage for cost-cutting measures that could erase recent gains in Medicare reimbursement rates for rural providers, increase beneficiary cost sharing, or otherwise harm the program.

Weakened drug cost containment: Policies to promote access to generic drugs and reimportation of U.S.-made drugs appear to have been watered down in the conference agreement. This hurts not only rural seniors but other rural residents who frequently lack insurance for medications.

Adapted from: JM Lambrew, B Briesacher. ( September 2, 2003 ). Medicare Prescription Drug Legislation: What It Means for Rural Beneficiaries. Center for American Progress. Note: A study from Families USA (May 2003) found a much larger number or rural beneficiaries inNorth Dakota (68,181) andSouth Dakota (85,738).

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