For Immediate Release
March 4, 2003
Framework to Modernize and Improve Medicare Fact Sheet
"Seniors happy with the current Medicare system should be able to
keep their coverage just the way it is. And just like you, the Members
of Congress, members of your staffs, and other federal employees, all
seniors should have the choice of a health care plan that provides
prescription drugs. My budget will commit an additional 400 billion
dollars over the next decade to reform and strengthen Medicare-I urge
the members of this new Congress to act this year."
President George W. Bush, State of the Union, January 2003
I. EXECUTIVE SUMMARY
Since Medicare was enacted in 1965, it has provided health care
security to millions of America's seniors and people with
disabilities. Medicare is the binding commitment of a caring society
to our most vulnerable citizens, and a commitment that America must
always keep.
As successful as the Medicare program has been, it has not always
kept pace with decades of dramatic improvements in health care. As a
result, Medicare beneficiaries today lack many of the choices and
benefits available to millions of other Americans. Medicare still does
not provide an outpatient prescription drug benefit, forcing many
seniors to go without the medicines they need. Medicare does not
provide full coverage for important preventive health care, such as
cancer or diabetes screenings, and it does not offer protection against
uncapped medical costs that can rob seniors of their savings.
Moreover, with health care costs on the rise and the Baby Boom
generation nearing retirement, Medicare faces serious financial
challenges. This will require Medicare to make the best use of today's
modern health care delivery methods to maximize the benefits for
current and future participants while addressing the long-term
sustainability of the program.
President Bush believes our nation has a moral obligation to
fulfill Medicare's promise of health care security for America's
seniors and people with disabilities. To meet this obligation, the
nation must act now to bring Medicare into the 21st Century by
providing more choices and better benefits to every senior in America.
In July 2001, the President outlined the following principles for
Medicare reform:
- All seniors should have the option of a subsidized
prescription drug benefit as part of modernized Medicare.
- Modernized Medicare should provide better coverage for preventive care
and serious illness.
- Beneficiaries should have the option of
keeping the traditional plan with no changes.
- Medicare should
provide better health insurance options, like those available to all
federal employees.
- Medicare legislation should strengthen the
program's long-term financial security.
- The management of the
government Medicare plan should be strengthened so that it can provide
better care for seniors.
- Medicare's regulations and
administrative procedures should be updated and streamlined, while the
instances of fraud and abuse should be reduced.
- Medicare
should encourage high-quality health care for seniors.
The President today is proposing a Framework to Modernize and
Improve Medicare that builds on these principles. He looks forward to
working with Congress on legislation this year to bring more choices
and better benefits to Medicare. The President has committed up to
$400 billion over the next ten years in his FY 2004 budget to pay for
modernizing and improving Medicare.
The President's framework will give all Medicare beneficiaries
access to:
- Prescription drug coverage that enables seniors to get the
medicines they need, without the government dictating their
drug choices.
- Choice of an individual health care plan that
best fits their needs-just like Members of Congress and other
federal employees enjoy today.
- Choice of the doctor, hospital,
or place they want for the treatment and care they need.
- Full coverage for disease prevention such as screenings for cancer,
diabetes and osteoporosis.
- Protection from high out-of-pocket costs that threaten to rob seniors of their savings.
The President will make sure that low-income seniors receive
additional financial assistance so they will not have to pay more to
receive better benefits than they currently do under Medicare.
For too long, political pressures have kept our nation from
bringing the benefits of modern health care to Medicare. The President
is calling upon members of both political parties to work together with
him to pass legislation this year.
More Choices - Including the Choice to Stay in Traditional Medicare
The President believes Medicare beneficiaries should be given more
choices in how they receive their heath care-and these choices should
be strictly voluntary.
Those seniors who are happy with their current coverage in
traditional Medicare will be able to keep that coverage and receive
help with the high costs of prescription drugs. Traditional Medicare
will continue to be there for those who want it with help for
prescription drugs.
But seniors who want more choices and better benefits-including a
prescription drug benefit, full coverage of preventive care and limits
on high out-of-pocket costs-will be able to select options providing
these additional benefits as well. Seniors will have the right to
select the health plan that fits their needs best-rather than a
one-size-fits-all government plan.
Better Benefits-Including Prescription Drug Coverage
Option 1-Traditional Medicare
Those who are satisfied with the current Medicare system will
continue receiving their care as they do today with help for the high
costs of prescription drugs. These beneficiaries will gain access to
discounted drugs through a prescription drug discount card-estimated to
achieve savings of 10-25% on the cost of prescription drugs-as well as
coverage to protect them against high out-of-pocket prescription drug
expenses. These new benefits will be provided at no additional
premium.
Option 2-Enhanced Medicare
Enhanced Medicare will give seniors the same types of choices that
are available to members of Congress and other federal employees. In
every area of the country, Medicare beneficiaries will have multiple
health plans from which to choose. These plans will offer prescription
drug benefits, full coverage of preventive benefits, protection against
high out-of-pocket drug costs, and cost sharing that does not penalize
participants who need the most medical care. Again, the decision to
choose Enhanced Medicare will be entirely up to each senior, and
participants will be able to choose any doctor or any hospital they
want for the treatment and care they need.
The President's framework will ensure that the benefits offered
under Enhanced Medicare are sufficiently attractive to seniors,
relative to traditional Medicare, to guarantee that Enhanced Medicare
is a viable system.
Option 3-Medicare Advantage
Seniors will also have the option of enrolling in low-cost and
high-coverage managed care plans, similar to those available today
under Medicare. Medicare Advantage will include plans that offer a
subsidized drug benefit, and all plans will be able to offer extra
benefits, as many private plans do today.
Immediate Discounts for all Seniors
To ensure that seniors are provided help as soon as possible, the
President will ask Congress to immediately provide all seniors with a
drug discount card that is estimated to achieve savings of 10 to 25
percent on the cost of prescription drugs by pooling the buying power
of Medicare participants.
Additional Help for Low-Income Seniors
Under the President's framework, low-income Medicare beneficiaries
will get prescription drug coverage without paying additional premiums
and will receive additional assistance with their cost-sharing. The
President will ask Congress to provide low-income seniors immediately
with a prescription drug discount card, as well as a $600 annual
subsidy for drug coverage, which will continue for low-income seniors
who stay in traditional Medicare. This subsidy can be added to their
discount card at the point of sale, or alternatively paid to existing
Medicare Choice health plans that enroll low-income seniors and provide
them with prescription drug coverage.
II. A FRAMEWORK TO MODERNIZE AND IMPROVE MEDICARE
Background
Since Medicare was enacted in 1965, it has provided health care
security to millions of America's seniors and people with
disabilities. The program was established using the most current
insurance models of its day and has proven successful in extending
coverage to some of society's most vulnerable members. Today, Medicare
provides health care coverage for 40 million Americans. Enrollment is
expected to reach 77 million by 2031, when the Baby Boom generation is
fully enrolled.
As successful as Medicare has been, it has not kept pace with
decades of dramatic improvements in health care delivery. As a result,
Medicare today does not provide the benefits and choices that are
available to many other Americans. The program lacks an outpatient
prescription drug benefit, full coverage of many preventive benefits,
and protection from high out-of-pocket costs.
Medicare's current hospital coverage illustrates the need to update
the program. Instead of providing more coverage for patients when they
get sick and go into the hospital, Medicare actually requires them to
pay more when they need to stay longer in a hospital. This is just the
opposite of what Americans in most private health plans experience
today.
Current Medicare and Sample Federal Employee Cost-Sharing
Requirements for Inpatient Hospital Care
|
Participant Pays |
Hospital Stay |
Current Medicare |
Standard Blue Cross/Blue Shield Plan for Federal Employees |
Days 1-60 |
$840 per admission |
$100 co-payment per admission |
Days 61-90 |
$210 per day |
$0 per day |
Days 91-150 |
$420 per day |
$0 per |
Day Over 150 Days |
All Costs |
$0 per day |
Many participants in Medicare bolster their Medicare coverage with
supplemental policies (Medigap) or retiree health insurance. Some
seniors-those with the lowest incomes-are eligible for coverage from
Medicaid. But many seniors do not have access to affordable
supplemental assistance, leaving them vulnerable to the high costs of
serious illness.
Twenty-four percent of Medicare participants lack any drug
coverage, millions more have very limited drug coverage, and many
cannot afford the drugs they need to maintain their health and prevent
serious illness (see below).
Absent substantial reform of the Medicare
program, the situation is certain to worsen. Premiums for Medigap
plans, particularly those with drug coverage, have increased
considerably over the past three years and are often unaffordable for
participants of modest means. At the same time, employers find it
increasingly difficult to fund retiree health care, and many have
reduced or eliminated these benefits.
To ensure that Medicare provides a secure health care future for
today's seniors and future retirees, the nation must act now to
modernize and improve the program. The President has committed up to
$400 billion over the next ten years to pay for modernizing Medicare,
and looks forward to working with Congress to develop and pass
legislation this year.
President Bush's framework will give all Medicare beneficiaries
access to:
- Prescription drug coverage that enables seniors to get the
medicines they need, without the government dictating their
drug choices.
- Choice of an individual health care plan that
best fits their needs-just like Members of Congress and other
federal employees enjoy.
- Choice of the doctor, hospital, or
place they want for the treatment and care they need.
- Full coverage for disease prevention such as screenings for
cancer, diabetes and osteoporosis.
- Protection from high out-of-pocket costs that threaten to rob seniors of their savings.
More Choices-Including the Choice to Stay in Traditional Medicare
A key part of modernizing and improving Medicare is adding
flexibility to the program so that Medicare participants have the right
to more choices in how they receive their care-including the choice of
staying exactly where they are today.
Those who have coverage they value in traditional Medicare will be
able to keep that coverage and receive help paying for the high cost of
prescription drugs. Traditional Medicare will continue to be there for
those who want it with help for prescription drug costs.
But seniors who want to have more choices and better
benefits-including a comprehensive prescription drug benefit, full
coverage of preventive care and limits on high out-of-pocket costs-will
have that choice as well. They will be able to enjoy the same types of
choices that members of Congress and other federal employees do.
If Congress passes legislation this year, then these choices will
be available beginning January 1, 2006. In the meantime, to give
seniors more immediate help with prescription drugs, the President is
proposing to make a prescription drug discount card available to all
seniors and to provide an additional $600 subsidy to low-income
participants for their prescription drug costs.
Better Benefits-Including Prescription Drug Coverage
Option 1-Traditional Medicare
Seniors currently enrolled in traditional Medicare could continue
receiving their care as they do today through the current benefit
structure with additional help for the high cost of prescription
drugs. Part B premiums for participants in traditional Medicare would
not be affected by the creation of Enhanced Medicare.
Additionally, beneficiaries remaining in traditional Medicare will
be able to receive coverage to protect them against high out-of-pocket
prescription drug expenses, at no additional premium. They can also
choose to receive a drug discount card like all seniors.
Participants who are satisfied with their current coverage could
also continue receiving coverage from supplemental sources, including
former employers, Medigap or Medicaid. The President's framework will
add two new Medigap plans to the existing ten standardized plans.
These new plans will include prescription drug assistance, additional
protection against high out-of-pocket costs, and would reduce, but not
eliminate, deductibles and co-payments.
Option 2-Enhanced Medicare
Under Enhanced Medicare, seniors will receive a choice of plans
similar to those offered to federal employees and members of Congress
through the Federal Employees Health Benefit Plan (FEHBP). The choice
of plans would be available to all seniors regardless of where they
live. Enhanced Medicare will offer benefits described below and
standard drug coverage (or an equivalent benefit package). As with
traditional Medicare, the federal government will pay for most of the
cost of coverage under Enhanced Medicare, with participants paying a
smaller share. Beneficiaries who enroll in an average priced plan in
their region would pay a premium for the medical portion of their
coverage equal to the Part B premium.
Under Enhanced Medicare, seniors will be able to choose any doctor,
any hospital, in any place for the treatment and care they need.
Additionally, Enhanced Medicare plans will offer seniors the option of
further limiting their out-of-pocket costs through supplemental
coverage.
Enhanced Medicare will include the following benefits:
- Prescription Drug Coverage: Under Enhanced Medicare, plans
will offer a subsidized prescription drug benefit with a
monthly premium, an annual deductible, coverage of prescription
drug costs and protections for those who have high drug costs.
Low-income seniors will receive this drug coverage for no
additional premium and will receive additional subsidies to
limit their copayments.
To provide an array of choices in benefit design and to encourage
plan innovation, plans will be free to structure their offerings
differently, provided the benefit meets a basic federal standard.
Further, plans will be required to show that any changes they make to
the standard benefit package are not meant to attract only healthy
enrollees or discourage the sick or people with disabilities from
joining.
- Full Coverage of Preventive Benefits: Currently, Medicare
covers certain preventive services only after the Part B
deductible is met. In addition, many preventive services
require co-insurance. Enhanced Medicare plans will provide
full coverage of preventive services. Full coverage will
remove the financial barriers for low-income seniors, who are
less likely to seek preventive treatment, such as prostate
cancer screenings and mammographies.
-
Protection from High Out-of-Pocket Costs: Traditional Medicare
does not protect patients from uncapped costs. Enhanced
Medicare will eliminate the lifetime limit for inpatient
hospital care and protect against high medical bills for
hospitalizations. In Enhanced Medicare, participants with very
high out-of-pocket costs will face no additional cost sharing.
Traditional Medicare does not limit these costs.
-
Fairer Cost Sharing: Currently, traditional Medicare penalizes
its sickest participants by requiring them to pay more when
they need to stay longer in a hospital. At the same time,
Medicare requires cost-sharing for some services, but not for
others. For example, patients pay 20 percent or more when they
visit their doctor or a hospital outpatient department, but
those needing home health care pay nothing out-of-pocket.
Under Enhanced Medicare, participants will have a single deductible
for medical services, like that in most private insurance plans, to
provide better protection from high expenses for all types of health
care. The single deductible will replace the separate Part A and Part
B deductibles. Additionally, after a lower deductible, participants
would pay nothing for their first two inpatient hospital admissions in
a year and a reasonable copay for any subsequent admission. These
changes will provide better protection for participants who need the
most medical care. Further, Enhanced Medicare will have sensible
cost-sharing requirements on all other services, including limits on
out-of-network cost sharing.
Assistance for Low-Income Seniors in Enhanced Medicare
Under Enhanced Medicare, low-income participants who are not
eligible for Medicaid will receive financial assistance with
out-of-pocket prescription drug costs. Lowest income participants will
pay no drug premiums or deductibles and will pay only nominal cost
sharing, regardless of their level of out-of-pocket spending. States
would determine eligibility for low-income assistance.
Administration of Enhanced Medicare
Enhanced Medicare will be administered by a new Medicare Center for
Beneficiary Choices (MCBC) under the Department of Health and Human
Services.
The MCBC will designate large, multi-state Medicare regions. In
each region, seniors and people with disabilities will have several
Enhanced Medicare options. The chart below illustrates one way in
which these large, multi-state regions might be structured.
Plans will submit bids to the MCBC for the opportunity to serve one
or more of the Medicare regions, and plans will have to accept any
Medicare participant wishing to enroll regardless of whether the
beneficiary lives in a rural or remote area. This approach minimizes
risk selection and guarantees access for all seniors to these plans, as
is the case with the Federal Employees Health Benefit Program.
Option 3-Medicare Advantage
In addition to Enhanced Medicare, seniors will have the option of
enrolling in the same type of low-cost and high-coverage managed care
plans that are available today under Medicare. Currently 5 million
Medicare participants choose to get their benefits and receive
additional services from such plans. These plans often offer broader
coverage at a lower cost than the combination of Medicare and Medigap
plans that many seniors choose.
Under the newly created Medicare Advantage program, plans in
competitive markets will bid to provide participants with Medicare's
enhanced basic benefit package. Participants who select more efficient
plans will benefit from savings, and some participants in the most
efficient plans could pay no premium at all and potentially qualify for
a rebate on their premium.
Advantage plans will continue to be a good choice for participants
willing to accept a more selective provider panel in exchange for lower
cost sharing and extra benefits. Creating a system in which different
types of delivery systems compete for participants' business will
result in a marketplace where plans in each system will have strong
incentives to provide the most efficient and highest quality care.
Efficient plans will be able to offer extra benefits and/or reduced
cost sharing.
Advantage Plans will also be able to offer a benefits package
without drugs for those participants who are satisfied with drug
coverage they already have. Just as in Enhanced Medicare, low-income
seniors will pay no additional cost for a drug benefit offered through
Medicare Advantage plans. Other enrollees will pay a monthly premium
to pay for their share of the prescription drug benefit costs.
Immediate Discounts for all Seniors
A Medicare-endorsed prescription drug discount card will provide an
opportunity for all seniors to get discounted drugs as Medicare
transitions to a modernized system. All participants, for a nominal
enrollment fee (waived for low-income seniors), will be able to join a
discount card plan. The card will let them pool their buying power
with that of other participants to obtain manufacturers' discounts,
with savings from 10 to 25 percent. No longer will uninsured seniors
face the highest retail prices of any group. In addition, drug card
sponsors, which could include Pharmacy Benefit Managers and other
entities, will publish comparative information on drug prices to help
seniors make smart buying choices.
Additional Help for Low-income seniors
Under the President's framework, low-income seniors who enroll in
Enhanced Medicare will get prescription drug coverage without paying
additional premiums and will receive additional assistance with their
cost-sharing for prescription drugs. Like all seniors, they will be
eligible to receive immediately a Medicare drug discount card, at no
cost, which would provide them with estimated savings of 10 to 25
percent on the price of prescription drugs. In addition, low-income
seniors will receive an added subsidy of $600 annually to pay for
prescription drugs. The subsidy will be added to their discount card
and work like other federal electronic benefit transfer programs, with
the card providing the subsidy at the point of sale. The subsidy could
alternatively be paid to existing Medicare+Choice plans that enroll
low-income seniors and provide them with prescription drug coverage.
SUMMARY
The President's framework for Medicare will provide more choices
and better benefits for all seniors. If legislation is passed in 2003,
then beginning next year, seniors will have the following benefits:
In 2004:
All seniors will receive access to discounted drugs
(discount of 10-25%) through Medicare-endorsed prescription drug
discount cards.
All low-income seniors will have access to drug discounts through
the card, and an additional $600 per year to assist in purchasing
prescription drugs.
In 2006:
Seniors will have the option of staying in
Traditional Medicare and receiving a prescription drug discount card,
coupled with coverage that would protect them against high
out-of-pocket costs for their prescription medicines.
All seniors will have access to at least three new Enhanced
Medicare plans that offer:
- comprehensive prescription drug coverage;
- full coverage of preventive care; and
- protection against high out-of-pocket
medical costs.
Seniors will still have the option of choosing a Medicare Advantage
plan that will offer prescription drug coverage and other benefits in a
managed care setting.
Conclusion: Medicare for Today and Tomorrow
President Bush is committed to ensuring that Medicare will always
be there for seniors and people with disabilities. His ideas for
modernizing and improving Medicare build on the strengths and successes
of the current system, while guaranteeing that all seniors will have
access to a prescription drug benefit and other benefits Medicare does
not offer today. Under the President's framework for Medicare, seniors
will have the right to the same type of health care benefits enjoyed by
members of Congress and other employees of the federal government.
Low-income seniors will not pay more for additional benefits.
To improve, Medicare must have the benefit of modern health care
delivery systems and methods that have proven successful in the private
sector. The President's initiative will introduce private sector
innovation and competition to the Medicare system to help keep costs
reasonable, ensure high quality care and begin to address Medicare's
long-term financial challenges.
While Medicare must be modernized and improved to meet the needs of
its current participants, the program must also be made sustainable for
future generations. Given the financial challenges Medicare faces in
the future, changes to the Medicare program we make today must not
exceed our nation's means to deliver them tomorrow.
Seniors have waited too long for a modernized Medicare with a
prescription drug benefit. It is time for members of both political
parties to work together to pass legislation this year that will
modernize and improve Medicare for seniors today and tomorrow.
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