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President Clinton and Senate Democrats Unified in Vision for New Medicare Prescription Drug Benefit

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The Briefing Room

Office of the Press Secretary

For Immediate Release March 9, 2000


President Clinton today will receive and endorse a set of "Prescription Drug Principles" from Senate Democratic Leader Tom Daschle, which will be used by the Senate Democratic Caucus to evaluate any Medicare prescription drug benefit proposal developed in Congress. These principles affirm that drug benefits targeted only to low-income Americans through block grants, or primarily to high-income beneficiaries through tax incentives, would be unworkable and unacceptable. The "Prescription Drug Principles" state that any drug benefit should be: voluntary; accessible to all beneficiaries; designed to provide meaningful protection and bargaining power for seniors; affordable for all beneficiaries and for the program; administered using competitive purchasing techniques; and consistent with broader Medicare reform. Senator Daschle will inform the President that the Administration’s proposal meets all these principles and that he will work to ensure that any plan emerging from Congress will be guided by them.

MILLIONS OF MEDICARE BENEFICIARIES NEED PRESCRIPTION DRUG COVERAGE. Approximately three out of five Medicare beneficiaries lack decent, dependable prescription drug coverage.

Millions of beneficiaries have no prescription drug coverage and millions more are at risk of losing coverage. Thirteen million Medicare beneficiaries have no prescription drug coverage. Millions more are at risk of losing coverage or have inadequate, expensive benefits. Nearly half of rural beneficiaries, and a disproportionate number of seniors over 85, do not have prescription drug coverage.

Current drug coverage is unstable and declining. Only about one in four beneficiaries has retiree health insurance -- and the proportion of firms offering such coverage has dropped 25 percent in the last four years. Even fewer beneficiaries have Medigap insurance for prescription drugs. This coverage is often expensive, and many insurers "age rate" (increase premiums as people get older), making it more expensive when seniors can least afford it.

Most seniors are middle-income and would not benefit from a low-income prescription drug benefit. About 15.6 million, or 49 percent, of all elderly Americans have incomes between $15,000 and $50,000. And over half of beneficiaries without drug coverage have incomes above 150 percent of poverty ($12,750 for a single earner, $15,000 for a couple). Thus, a benefit targeted to the low-income will simply not help most seniors.

Only about half of all seniors have high enough income to benefit from a tax scheme. Not only is it impossible to target needy Medicare beneficiaries through a tax deduction, but studies have repeatedly concluded that the tax code is an extremely expensive and inefficient way to expand insurance coverage for anyone, let alone seniors.

SENATE DEMOCRATS AGREE ON PRINCIPLES FOR A NEW MEDICARE PRESCRIPTION DRUG BENEFIT. Today, Senator Daschle and the Senate Democratic Caucus released a set of "Prescription Drug Principles" that will guide the current Congressional debate over the provision of a new Medicare prescription drug benefit to millions of seniors. These principles state that any new benefit should be:

Voluntary. Medicare beneficiaries who now have dependable, affordable coverage should have the option of keeping that coverage.

Accessible to all beneficiaries. All seniors and individuals with disabilities, including those in traditional Medicare, should have access to a reliable benefit.

Designed to give beneficiaries meaningful protection and bargaining power. A Medicare drug benefit should help seniors and the disabled with the high cost of prescription drugs and protect against excessive out-of-pocket costs. It should give beneficiaries bargaining power they lack today and include a defined benefit assuring access to medically necessary drugs.

Affordable to all beneficiaries and the program. Medicare should contribute enough towards the prescription drug premium to make it affordable for all beneficiaries. While subsidies should be provided to all to assure the benefit is affordable, low-income beneficiaries should receive extra help with the cost of premiums and cost sharing.

Administered using private sector entities and competitive purchasing techniques. Discounts should be achieved through competition, not regulation or price controls, and should mirror practices employed by private insurers in delivering prescription drugs. Private organizations should negotiate prices with drug manufacturers and handle the day-to-day administrative responsibilities of the benefit.

Consistent with broader reform. The addition of a Medicare drug benefit should be considered as part of an overall plan to strengthen and modernize Medicare. Medicare will face the same demographic strain as Social Security when the baby boom generation retires. Improving benefits is only one step in preparing Medicare for this new century’s challenges.

PRESIDENT URGES CONGRESS TO ACT NOW. The President will urge Congress to act this year to strengthen and improve Medicare. His FY 2001 budget includes a comprehensive plan that makes Medicare more competitive and efficient and dedicates part of the surplus to improve Medicare solvency and to add a long-overdue prescription drug benefit. This plan:

Establishes a new voluntary Medicare drug benefit that is affordable – to all beneficiaries and to the program. The benefit, at $160 billion over 10 years, would be:

Accessible and voluntary. Optional for all beneficiaries. Provides financial incentives for employers to develop and retain their retiree health coverage.

Affordable for beneficiaries and the program. Premiums of $26 per month in the first year with lower or no premiums for low-income beneficiaries. Provides privately-negotiated discounts, gained by pooling beneficiaries’ purchasing power, for all drug expenses. Has no deductible and pays for half of each beneficiary’s drug costs from the first prescription filled each year up to $5,000 in spending when fully phased in.

Competitively and efficiently administered. Competitively selects private benefit manager to deliver benefit to enrollees in traditional program. No price controls, no new bureaucracy. Integrated into current eligibility and enrollment systems.

High-quality and provide necessary medications. Private entities that use formularies must ensure access to medications off formulary if physician deems medically necessary. Requires use of state-of-the-art quality improvement tools.

Creates a Medicare reserve fund to add protections for catastrophic drug costs. To build on the President’s prescription drug benefit, the budget also includes a reserve fund of $35 billion, available to offer protections for beneficiaries with extremely high drug spending. This reserve will permit the Administration to work in collaboration with Congress to design such an enhanced prescription drug benefit. If no consensus emerges, the reserve would be used for debt reduction.

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