White House Unveils Medicare Reform Proposal

President Seeks To Add Outpatient Prescription Drug Benefit

As is being widely reported in the press, President Clinton put forward a new Medicare reform plan that includes a new voluntary outpatient prescription drug benefit. The proposal would extend the life of the Medicare Part A trust fund to 2027, 12 years beyond its current expected solvency. This would occur largely through directing 15% of anticipated federal budget surpluses over the next 15 years (about $794 billion) and making other changes to create greater efficiencies to shore up Medicare.

For non-elderly adults with disabilities (including severe mental illnesses) who are Medicare eligible, the proposal contains few changes to the basic structure of the program. Under current law, SSDI beneficiaries, 1.3 million of whom have a severe mental illness, are eligible for Medicare after a two-year waiting period. For example, a proposal considered by the bipartisan Medicare Reform Commission earlier this year to shift all SSDI beneficiaries into the Medicaid program was not included in the President’s plan.

The President’s plan leaves unchanged the existing mental illness treatment benefit – a benefit that NAMI has argued for many years is outdated and discriminatory: 50% copayments for outpatient visits, 190-day lifetime limit on inpatient services at most specialty hospitals, a limited Medicare partial hospitalization benefit that excludes assertive community treatment and psychosocial rehabilitation services, etc. However, most SSDI beneficiaries would receive new options for managed care plans outside of the basic fee-for-service Medicare program (such managed care plans are free to establish their own mental illness benefits).

Beyond the prescription drug benefit initiative, the President’s plan does include provisions intended to “modernize” the benefit structure of Medicare. Most of the changes to the basic Medicare benefit relate to expanding preventive care and clinical laboratory services. The current $100 deductible for outpatient hospital services, doctors visits and laboratory services (fixed at that level since 1991) would be increased to reflect annual increases in consumer prices (as opposed to medical inflation which is typically higher).

New Medicare Prescription Drug Benefit Proposed

As NAMI members know first-hand, perhaps the largest gap in Medicare is the lack of an outpatient prescription drug benefit. The specifics of the new optional drug benefit (known as Part D) are as follows:

1) Premiums -- would start at $24 per month and rise to $44 per month within 6 years,

2) Limitations -- Medicare would pay half of the cost of prescriptions, up to an overall cost limit of $1,000 in beneficiary expenses per year at the start of the program, rising gradually to $2,500 over 6 years (this limit would apply regardless of an individual’s overall drug expenses),

3) Deductibles -- There would be no deductible requirement before coverage kicked in,

4) Low-income exemption – beneficiaries with incomes below 135% of poverty (roughly $11,000 for an individual, $17,000 for a family), would not have to pay premiums or cost sharing, those with incomes between 135% and 150% of poverty would receive premium assistance,

In releasing the President’s proposal, Administration officials acknowledged that the main objective of the new drug benefit plan is to provide a tangible benefit to a large number of people, rather than helping a small number of Medicare beneficiaries with high drug expenses. For example, there is no limit on how much an individual would have to pay out-of-pocket for medications. Likewise, the benefit would begin immediately, regardless of an individual’s expenses. White House officials note that the plan is intended to keep premiums low so that large numbers of healthy Medicare beneficiaries will sign up for the program.

An examination of the costs of several key psychiatric medications indicates that while many Medicare beneficiaries would be helped in meeting the high costs associated with their drugs, substantial gaps in coverage would likely persist if the President’s plan were to pass Congress. Average annual costs figures for major medications include: clozaril ($3,804), paxil ($711), prozac ($808), risperidone ($2,986), zoloft ($852), and zyprexa ($3,888).