WASHINGTON — The Senate launched a new era in health care for the nation’s seniors and disabled Tuesday, approving legislation that will create a long-sought Medicare prescription drug benefit while giving private insurance companies billions of dollars to lure beneficiaries away from the traditional program and into managed care plans.
The 54-44 vote Tuesday followed the House’s 220-215 vote taken before dawn Saturday. The 10-year, $400 billion Medicare reform bill now goes to President Bush, who said Tuesday he will sign it into law. Bush first promised a prescription drug benefit in his 2000 campaign.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 will set in motion the most sweeping changes to the nation’s health care system since Medicare was established in 1965 as the bedrock of President Johnson’s Great Society programs.
The bill’s reach is likely to extend far beyond the 40 million seniors and disabled people now on Medicare to include Americans of all ages who interact with the nation’s health care system. Provisions making it somewhat easier for generic drugs to get to market could lower drug prices, while the absence of language legalizing the import of U.S.-made drugs from other countries ensures that Americans will continue to pay the highest drug prices in the world.
Within hours of a 54-44 Senate vote, Senate Democratic leader Tom Daschle introduced legislation to repeal several of the bill’s most controversial provisions and to allow the importation of lower-priced prescription drugs from Canada and Western Europe. "This debate is not over, it’s just beginning," said the South Dakota Democrat.
The expansion of health care savings accounts that would generate tax-free earnings could mean more employers will move away from traditional benefits packages to high-deductible, catastrophic health coverage.
The complexity of the 681-page, $395 billion measure — and the two-year delay in implementing the new drug coverage — have made it subject to competing claims and uncertain estimates.
The bill will for the first time offer subsidies for outpatient prescription drugs to anyone on Medicare who wants them. Starting in 2006, patients could get the new coverage by buying a separate private insurance policy for drugs or by joining a preferred provider organization, a health maintenance organization or another type of private health plan that also provided the rest of their care.
In either case, the coverage will require patients to pay a monthly premium averaging $35 the first year and an annual $250 deductible. The government will pay three-fourths of drug expenditures up to $2,250. At that point, the coverage will stop, except for a relatively small number of people with "catastrophic" drug expenses who have paid at least $3,600 a year from their own pockets. At that point, the government will pay 95 percent of the rest of their drug costs for the year.
It remains uncertain whether private insurers will offer separate drug coverage.
Before the drug coverage begins, federal officials will temporarily coordinate a network of drug discount cards, to become available next spring, that Medicare patients can buy from companies that manage pharmaceutical benefits.
The legislation was an attempt to balance competing interests in a Congress sharply divided along party lines. On one side, the measure includes a costly new prescription drug benefit for Medicare beneficiaries, with subsidies for low-income seniors and billions of dollars to discourage corporations from dropping existing coverage for their retirees. Also included is $25 billion in additional funding for rural hospitals and other health care providers.
At the same time, the bill reflects the eagerness of many conservatives to give seniors the option of private insurance coverage, a step they argued could lead to more modern and efficient health care coverage. Still other changes are aimed primarily at controlling costs.
For the first time, seniors earning more than $80,000 a year would be required to pay higher premiums than other beneficiaries for their Part B Medicare coverage. Part B covers doctor visits and other out-of-hospital services.
Another provision would increase the annual deductible for Part B coverage from $100 to $110 in 2005, and tie future increases to the growth in overall nonhospital spending under Medicare. The deductible has not changed since 1991.
One change requires the president to recommend changes in the program if spending exceeds predetermined levels. The legislation includes rules designed to guarantee votes on the House floor on alternatives as diverse as cutting benefits or raising taxes. The same rules are designed to prod the Senate to act, but do not guarantee a vote.
The bill’s most controversial feature would begin a limited program of competition beginning in 2010 between traditional Medicare and the new private plans. Conservatives who support the provision argue it would help hold down costs. Democratic critics, backed by estimates produced by the Medicare program’s actuaries, argue it would lead to increased premiums for seniors who remain in the traditional benefit program.
Some of the Republicans who voted for the bill sought assurances in advance from the administration that cities in their states would not be chosen for the competition.
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