Fixing Medicare

Congress has passed the biggest changes in Medicare since the health-insurance program for the nation's elderly was created. President Bush stands ready to sign the bill as one of the cornerstones of accomplishment in his first term in the White House.

Many senior citizens may be scratching their heads, wondering what the much-ballyhooed Medicare bill will mean for them. Like any piece of major legislation -- this bill is more than 900 pages long -- the details often contain surprises that didn't get much attention during the months of debate.

What got the most attention was the addition of a plan to give Americans on Medicare some economic relief from the cost of prescription drugs. Older citizens are eager to see how that works and if it is something they should use. What they know now is that the full prescription plan doesn't begin for two years and that prescription discount cards will be available -- for a fee -- sometime next year.

The bill made some other significant changes as well, although many Medicare participants may not see any direct impact on their coverage. For example, the massive bill introduces a sliding scale for premiums for high-income Medicare participants. The bill also gives private insurers a new role in providing some of the drug coverage under Medicare rather than putting all of the burden on taxpayers. It establishes health-related tax savings accounts. And it increases Medicare payments to rural hospitals.

What already has caused a great deal of concern among many legislators from both political parties are some of the things the new Medicare bill does not do.

The bill does not address the high prices Americans pay for their drugs. U.S. pharmaceutical companies provide most of the research and development for new drugs. Those companies recoup their costs in the prices they set for the new drugs. Americans pay a disproportionately higher share through higher prices than users of the same drug in other parts of the world where government price controls are in place.

The bill includes a prohibition that keeps the federal government from using its buying clout to negotiate lower prices for the drugs doctors prescribe to their patients. Proponents of letting the government cut deals with pharmaceutical companies for Medicare recipients say the savings would amount to billions of dollars a year, both for out-of-pocket expenses and for the portion of drug costs that will be reimbursed by the government when the new bill's prescription plan begins in 2006. Opponents of price negotiation by the government say it would amount to little more than federal price fixing.

In addition, the new bill does nothing to address the concerns millions of elderly Americans have about paying more for drugs that are available in other countries at significantly lower prices. These individuals, who rely on high-cost drugs, can't understand why the federal government isn't interested in allowing them to purchase -- legally -- drugs at lower prices from Canada and elsewhere. Nor do they understand why the federal government won't permit pharmacies to purchase drugs manufactured in the United States but sold at lower prices in other countries for resale to their customers here.

Many, but not all, Medicare participants -- those who spend thousands of dollars a year on prescriptions -- will get considerable financial relief under the new bill, but they will not get free drugs. The bill creates a system of shared financial responsibility for drugs, a component that helps make drug users better-informed consumers.

And the bill doesn't force anyone to participate in drug coverage that they don't want or that would cost more in upfront premiums than they spend on drugs over a year's time.

It will take months, if not years, for elderly Americans to fully understand what the new Medicare bill does -- or doesn't do -- for them. There is likely to be pressure for more changes as they become more informed.