News Release
FOR IMMEDIATE RELEASE Monday, July 26, 2004 |
Contact: CMS Public Affairs (202) 690-6145
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HHS Proposes New Rules to Deliver Better Benefits and Savings on Drugs for Medicare Beneficiaries
Public Comment Urged
HHS Secretary Tommy G. Thompson announced today proposed
regulations to deliver on a new law that provides better benefits
-- including prescription drug savings of more than 50 percent for
the average senior without coverage -- and improved access to
health care services through Medicare.
The proposed regulations, which are now available for public
comment, implement the essence of the Medicare Modernization Act
that creates a new voluntary prescription drug benefit under
Medicare, as well as new health plan choices, improved health care
for rural America and improved preventive care benefits.
The new prescription drug benefit will allow all Medicare
beneficiaries to enroll in drug coverage through a prescription
drug plan or Medicare health plan with Medicare paying for 75
percent of the premium. Additional benefits for Medicare
beneficiaries who have limited means will cover, on average, 95
percent of their drug costs. The new benefits also will provide new
protections for retirees who currently receive drug coverage
through their employers or unions. All the new Medicare benefits
are voluntary as seniors can choose to keep their existing
traditional coverage.
“We’re delivering on our promise to America’s
seniors to provide better benefits and real savings on their
prescription drugs,” Secretary Thompson said. “For the
first time, all Medicare beneficiaries will have access to
prescription drug coverage. Seniors currently without coverage
could see their drug costs cut by more than half, with lower-income
seniors getting even greater savings.”
The Medicare prescription drug benefit is a key element of the
Medicare Modernization Act signed into law on Dec. 8, 2003.
The Centers for Medicare & Medicaid Services (CMS) today also
proposed rules to implement another key element of the law:
strengthening and improving the Medicare Advantage program,
including making regional preferred provider organizations (PPOs)
available to all Medicare beneficiaries. These provisions will give
beneficiaries broad and more secure access to
coordinated–care health plans that provide additional
benefits and significantly lower out-of-pocket costs. Though
over 60 million Americans in all 50 states including rural areas
get their health insurance coverage through PPOs today, they have
generally not been available to Medicare beneficiaries. The
proposed rules would also implement new, less costly options for
Medigap coverage.
“As we move closer to providing affordable drug coverage,
access to popular health plans, and more secure retirement
coverage, we need input from the public,” said CMS
Administrator Mark B. McClellan, M.D., Ph.D. “We are
taking special steps to encourage comments and dialogue on these
proposed rules, and implement them together, to assure that the key
elements of the new law work together to give seniors and people
with disabilities the best Medicare possible.”
Medicare beneficiaries will also have access to supplemental
coverage from states, employers, unions and charitable
organizations, and they can use these and other sources of their
existing coverage to add to the Medicare coverage for more
comprehensive assistance.
The rule will go on display today be published in the Federal
Register on Aug. 3, 2004. The comment period on the proposed
regulations lasts 60 days, closing on Oct. 4, 2004. Final
rules are expected to be issued early in 2005. Enrollment for
the new Prescription drug plans will begin in the fall of 2005 for
benefits starting in on Jan. 1, 2006.
Just over 4 million seniors already are saving on their
prescription medicines through Medicare-approved prescription drug
discount card. This transitional benefit, which includes
$1,200 in subsidies over the next 18 months for low-income seniors,
is the first step toward the permanent drug benefit that the new
rules are proposing to implement.
Secretary Thompson said the new regulations are important because
of the improved care and financial savings they provide seniors.
Washington lawmakers have been promising prescription drug coverage
for a decade, but it took President Bush working with Republican
Congressional leaders and bipartisan members of Congress to
actually deliver real savings and better benefits for seniors. The
Secretary said the aggressive timeline for implementing these new
benefits shows the administration is moving forward in providing
this much-needed help as promised and on schedule.
“We’re focused on the hard work of delivering
meaningful savings on prescription drugs for seniors, while some in
this town continue to come up with excuses,” Secretary
Thompson said. “The bottom line is we’re saving seniors
money and we’re strengthening Medicare with better benefits
and more choices.”
The Medicare Prescription Drug Benefit
As described in the proposed regulation, the new prescription drug
benefit will help Medicare beneficiaries lower the prices they are
currently paying for their prescription drugs, make those costs
much more predictable, and provide more choices and greater access
to high quality care. When the regulations are implemented,
Medicare beneficiaries who wish to receive the prescription drug
benefit can choose to enroll either in a Medicare health plan or
prescription drug plan with a monthly premium of around $35.
The drug coverage will be available to enrollees who choose the
traditional, fee-for-service Medicare plan as well as any Medicare
Advantage program.
All beneficiaries, regardless of their income, will receive
significant help with their drug bills and protection from high
drug costs under the new Medicare prescription drug plans.
After a $250 deductible, the standard drug benefit paid by the
federal government in 2006 will be 75 percent of the
drug costs up to an initial coverage limit of $2,250 and 95 percent
of the beneficiary’s drug costs once the beneficiary spends
$3,600 out-of-pocket. There is no annual plan maximum and
that coverage will never run out. On average, the new benefit
will cover about half of beneficiaries’ prescription drug
costs for those currently without coverage.
Comprehensive Help for Beneficiaries with Limited Means
Under the proposed rule, it is estimated that nearly 11 million
beneficiaries with limited means will receive substantial
additional help from Medicare.
About 6.4 million “dual-eligible” low-income
beneficiaries will have no premium or deductible and nominal
co-pays of as little as $1 or $3 per prescription. For these
beneficiaries, the Medicare benefit will pay, on average, 97
percent of their drug costs.
About 3 million Medicare beneficiaries who are not full benefit
dual eligibles, but whose incomes are less than 135 percent of the
federal poverty level ($12,568 for an individual and $16,861 for a
couple in 2004) with limited assets will also pay only a few
dollars per prescription. Medicare will cover 95 percent of
their drug costs on average.
About 1.5 million beneficiaries with incomes less than 150 percent
of the federal poverty level and assets up to $10,000 (or $20,000
if married) in 2006, the Medicare benefit will provide 15 percent
co-pays with a sliding-scale premium, covering on average 85
percent of their drug costs.
The proposed rules make clear that the asset test will only count
liquid assets and real estate holdings other than a
beneficiary’s home or residential farm -- non-liquid assets
like wedding rings, family heirlooms, and burial plots will not be
counted. In addition, the rule outlines new methods for
collaboration with the Social Security Administration, states and
non-governmental organizations that work with Medicare
beneficiaries with limited means to enroll as many eligible
beneficiaries as possible. Altogether, about a third of all
Medicare beneficiaries and about half of minority beneficiaries
will qualify for these very comprehensive benefits, which involve
no gaps in coverage.
“The proposed rules underscore one of the greatest strengths
of this new law -- it provides the greatest help to those most in
need,” Secretary Thompson said. “It is a
tremendous benefit for seniors and those with disabilities who have
limited incomes, so they can cut their medicine bills in half, not
their pills. The proposed rules also outline a
straightforward, common-sense assessment of assets for those
seeking these benefits.”
Negotiating Power to Make Drugs More Affordable
The prescription drug plans and Medicare Advantage program will use
their experience in negotiating discounted prices and managing
prescription drugs costs to ensure that beneficiaries pay the
lowest prices available for the drugs they need. These plans
have demonstrated their ability to pass on lower costs to their
health plan members and many enrollees in public health insurance
plans for many years. The proposed rule outlines a similar
approach for encouraging beneficiaries to get the best discounts on
their drugs -- discounts as good or better than could be achieved
through direct government negotiation, resulting in prices that will be
substantially better than Medicare’s prior experience with
price regulation for drugs covered in Part B -- by using approaches
similar to those used by the federal employees’ plans and by
many other large health care payers.
The proposed rule also describes beneficiary protections intended
to make sure that all beneficiaries have coverage for medically
necessary drugs through nearby pharmacies. Drug plans would
be subject to many of the existing beneficiary protections that are
available in Medicare, as well as some new ones, including
requirements to meet strict pharmacy access standards to give
beneficiaries access to retail pharmacies and needed drugs.
The proposed rule outlines the process for the coverage of drugs
that are not on the formulary when a physician determines that it
would be in the best interest of the patient to have that
drug. Under this process, urgently needed drugs would be
covered while a prompt exception process is concluded.
Plans offering the new Medicare drug benefit will also be required
to offer a program to make sure beneficiaries receive the
appropriate drugs to improve their health outcomes and reduce
adverse drug interactions. The rule describes how the
drug benefit will build on the transparent pricing and coverage
features of the Medicare drug discount card to help make sure that
beneficiaries can get the important, individualized information
they need about a plan’s features.
More Help to Secure Coverage for Retirees
The proposed rule includes tens of billions of dollars in new
federal spending to protect retirees who get prescription drug
coverage through their former employers and unions. Employers
have been dropping this coverage at an alarming rate over the past
10 or 15 years. The new Medicare rule is the first real
effort by the Federal Government to reverse this trend and to
preserve employer-sponsored retiree drug coverage.
The new rule gives employers a menu of options that will enable
them to continue subsidizing drug coverage for their
retirees. One option would provide sponsors of retiree drug
coverage with federal subsidies of 28 percent of incurred allowable
drug costs between $250 and $5,000 in 2006 per qualifying covered
retiree to help the companies maintain prescription drug coverage
for their retirees. But the rule offers employers other ways
to stay in the game. It provides other approaches for
employers to supplement the Medicare drug benefit, to provide more
comprehensive coverage at a lower cost than employers face
today. The additional options are important to help assure
that retirees are better off, because many employers do not
currently contribute enough to the cost of retiree drug coverage to
avoid a “windfall” (that is, a payment to an employer
that exceeds their contribution to the retiree coverage, which will
not be allowed) and because many employers may prefer to provide
“wraparound” coverage, similar to the wraparound
coverage they provide for Part A and Part B Medicare
benefits. Each of these options would result in providing
retirees with more comprehensive coverage at less cost than
employers face today.
“We intend to give employers and unions a set of subsidized
options to help them continue to provide high-quality drug
coverage,” said Dr. McClellan. “The result will
be a significant increase in the total support for retiree
benefits, and we’re seeking input from retirees, employers,
and unions on the best ways to maximize this increase in retiree
coverage.”
More Help for Beneficiaries Receiving State Benefits
The proposed drug benefit will save states $500 million in 2006 and
$8 billion over five years. In addition to providing
significant net savings to states through comprehensive Medicare
coverage for dual-eligible beneficiaries and new Medicare subsidies
for state retiree coverage, the new law and the proposed rules also
allow states the flexibility to “wrap around” the
comprehensive coverage for certain low-income beneficiaries and
count as true out-of-pocket expenses. As a result, State
Pharmacy Assistance Programs (SPAPs) plans will be able to provide
the same or better coverage for the beneficiaries who receive
coverage through state programs now, at a lower cost per
beneficiary for the states because of the availability of the
Medicare drug benefit.
States will be able to restructure existing “Pharmacy
Plus” programs to wrap around the Medicare prescription drug
benefit. States will also be able to receive new assistance
with the costs of drug coverage for their retirees, just like any
other employer offering qualified retiree drug coverage.
Medicare will use the comment process to work closely with all
states, the new “SPAP Commission,” and many other
forums, to ensure that the drug benefit delivers better coverage
and lower costs for beneficiaries based on the individual
circumstances of each state.
More Opportunities for Beneficiaries to Get More Benefits and Save
Money in Medicare Advantage Programs
Beneficiaries who choose to enroll in a Medicare Advantage program
can get their drug benefits as part of their plan, allowing the
plans to better coordinate beneficiaries’ medical care and
drug coverage.
The new rules also create a new competitive bidding system for
paying Medicare Advantage programs, and for the first time provide
support for regional Medicare Advantage preferred provider
organizations as an option for Medicare beneficiaries beginning on
Jan. 1, 2006. These changes are important options for
Medicare beneficiaries without good, inexpensive supplemental
coverage (for examples, from Medicaid or an employer) to get extra
benefits and much lower out-of-pocket costs compared to the
traditional fee-for-service Medicare plan. Recent studies
indicate that beneficiaries in Medicare Advantage program pay about
$700 less on average in out-of-pocket medical costs per year, and
beneficiaries in fair or poor health may pay about $1,900
less. When the new rules and payments are implemented, PPOs
and other lower cost and more comprehensive coverage options will
be much more widely available to Medicare beneficiaries.
PPOs are the most popular health insurance choice for non-Medicare
beneficiaries, including millions of Americans in rural areas, in
part because they offer both low co-payment rates for
“network” services as well as coverage for
non-“network” care from any provider. Unlike the
current Medicare Advantage program, which features local plans that
serve individual counties and groups of counties, the new regional
PPOs will bid to serve an entire region. Following extensive
public input, a market survey and analysis that takes into account
public comments, the Secretary will establish 10 to 50 Medicare
Advantage regions to maximize plan participation.
Under the proposed rules, all of these plans are required to offer
the same benefits as traditional fee-for-service Medicare with
simplified cost-sharing and new protection against catastrophic
costs. They are also expected to offer additional benefits
not available in fee-for-service Medicare, such as
dental or vision services; lower co-payments or other reduced cost
sharing; payment of a beneficiary’s premium for these
supplemental benefits; or lower Medicare Part B premiums and drug
benefit premiums. The new plans may offer a wider range of
doctors and other health care providers than the Medicare
coordinated care plans that are currently available.
The rule also supports the creation of plans to offer health care
services to people with special needs, such as those who are
Medicaid eligible, have severe or disabling chronic conditions, or
live in nursing homes or other long term care institutions.
Public Comment Period Begins Now
CMS and many organizations involved in health care and Medicare
will be hosting meetings all across the country to gather
information and comments beginning July 26 until the comment period
closes on Oct. 4, 2004. CMS will also host a series of
national phone calls for additional comment, input and
information. Comments can also be sent electronically to
www.cms.hhs.gov/regulations/ecomments.
Secretary Thompson urged seniors and other interested parties to
submit constructive recommendations during the comment period so
HHS and CMS can make sure the benefits are provided in the most
effective and efficient way possible.
A fact sheet and other information on this new rule is available at
www.cms.hhs.gov/medicarereform.
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Note: All HHS press releases, fact sheets and other press materials are available at http://www.hhs.gov/news.
Last Revised: July 26, 2004
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