The new Medicare prescription drug benefit, signed into law by President Bush in December 2003 and set to begin in January 2006, is widely acknowledged to be the biggest change in the history of the program. Federal officials have estimated that the new law will cost taxpayers anywhere from $395 billion to $534 billion over the next 10 years. Who ultimately benefits and who pays the costs largely depends on the choices that the administration makes in implementing the new law – particularly in establishing the rules by which private health insurers and drug companies will have to play. On Monday, the Bush administration released its proposed regulations for the program, giving a first indication of how beneficiaries might fare under the new Medicare drug benefit. The signs are not encouraging.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) stacked the deck against taxpayers and beneficiaries, in favor of the pharmaceutical and health insurance industries. For example, the MMA prohibits Medicare from negotiating fair drug prices with drug companies, breaking up the purchasing power of 41 million beneficiaries. And it allows private insurers, together with drug companies, to make many crucial decisions about the drug benefit – including what drugs will be covered, at what cost to beneficiaries. Some of the concerns with the law can only be addressed through new legislation, but the president stated that he will veto legislation that makes major change. That leaves it up to the administration to make the program as strong as possible for seniors. Through skillful exercise of its legal discretion, the administration could begin to level the uneven playing field established in the new law.

A preliminary review of the proposal released on Monday gives little indication that the Bush administration intends to interpret the new law strongly in favor of Medicare beneficiaries. Here are some examples of key areas in which the Bush administration could have chosen to protect seniors and disabled Americans, but did not commit to doing so.

  • Fair drug prices. The MMA is largely silent regarding drug prices, except to prohibit Medicare from negotiating them and to require the private insurers that administer the drug benefit to give their enrollees access to negotiated prices that “take into account” discounts. The administration could require private insurers to pass along to their enrollees all of the price discounts the insurers get from drug companies. The administration could prohibit financial ties between the insurers and drug companies and otherwise create strong sanctions on potential conflicts of interest. And though the MMA prohibits Medicare from “interfering” with negotiations between insurers and drug companies, the administration could actively monitor such negotiations through other federal agencies, such as the Department of Justice or Federal Trade Commission, to ensure fair prices and practices. The Bush administration’s proposal does not adopt these protections.
  • Access to needed drugs. The MMA establishes a broad set of drugs that may be covered, but gives insurers substantial leeway to decide which specific drugs will be included on their approved drug lists (formularies) and at what cost to beneficiaries. The administration could require insurers to make their formulary decisions primarily based on clinical evidence and could impose strict limits on conflicts of interest for those who make formulary decisions. The administration could also ensure that beneficiaries have easy access to appeals, especially when an insurer changes its formulary or cost sharing requirements mid-year. The Bush administration’s proposal does not adopt these protections.
  • Informed choice. The MMA requires insurers to make information available to potential enrollees during open enrollment, but the level of detail and ease of comparison across insurers will be critical to a beneficiary’s ability to make an informed choice. The administration could require insurers to submit price and coverage information in a detailed, standardized format that permits comparison across insurers. This information should include any access restrictions, such as prior authorization requirements and pharmacy network limitations. The administration could then produce consumer-friendly comparisons, including comparisons of formularies, cost-sharing, and potential savings. Instead, the Bush administration’s proposal indicates that beneficiaries will have to rely on the same sort of comparative information that has been used in the current discount card program, which has proven to be confusing and unreliable. Acknowledging this confusion, the administration could provide beneficiaries with extra time to enroll in a drug plan of their choice, without penalty. The Bush administration’s proposal does not do so.
  • Additional beneficiary protections. The MMA allows Medicare to reject plans that are likely to “substantially discourage” the enrollment of certain Medicare beneficiaries. The administration could use this authority to set clear standards to protect the needs of beneficiaries with high drug costs, and prohibit cost-sharing rules that would disproportionately impact such beneficiaries, to ensure they are not discouraged from enrolling. The administration could ensure strong privacy protections to prevent discrimination. The administration could also prohibit certain marketing practices, such as using personal medical information to market a drug plan or paying pharmacists to market plans, and closely review and monitor all marketing materials and methods. The Bush administration’s proposal does not adopt these protections.

In more than one thousand pages of proposed rules, President Bush had an opportunity to demonstrate how he would fulfill his promise to “deliver real savings and better benefits for seniors.” The proposal could have included strong protections to help beneficiaries get the maximum benefit possible under the new law. Instead, the proposal gave little indication of whether or how the administration would exercise its authority on behalf of Medicare beneficiaries. Most of the important decisions were deferred. By failing to address seniors’ concerns clearly and unequivocally, President Bush has once again missed an opportunity to ensure that seniors’ needs will be met.

Terri Shaw is the associate director of domestic policy at the Center for American Progress.

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