Six Questions About The New Medicare Bill

"Mark my words," Senator Max Baucus, one of the Democratic drafters of the legislation, said last week of the historic Medicare-reform bill, "seniors will see that the benefits of this bill are extraordinary." Perhaps, but here are six issues that could generate debate when the elderly begin living under the plan.

1 How generous is the drug plan?

It isn't as generous as what Senators and members of Congress give themselves under their federal program and what most employers offer their workers. That is largely because the bill drafters had only $400 billion to work with over 10 years under the federal budget cap that Congress set back in February. Here is how it will work for senior citizens who sign up: beginning in 2006, they will be required to pay a $35 monthly premium and a $250 yearly deductible. The program will then cover 75% of drug costs up to a maximum of $2,250. At that point, because of the budget restriction, a gap in coverage (known in Washington as a "doughnut hole") occurs. The next $2,850 in prescription-drug bills must be paid out of pocket. But once out-of-pocket expenses reach $3,600, the catastrophic provision kicks in, and Medicare pays 95% of any remaining costs (see chart above).

And here's another problem: the $35 monthly premium figure is just a guess at this point. Since private insurers will administer the drug benefit, some senior citizens might have to pay a higher premium, depending on what part of the country they live in or the insurer they use. In addition, there is no guarantee that the particular prescription drug a person needs will be covered. That will be up to the insurance firms, and it could vary from company to company.

2 Does the bill really modernize Medicare?

Not if you mean reinventing the way health care is delivered to older people. But it does help bring it into the 21st century by emphasizing preventive care and encouraging the use of the latest technology. Medicare will pay for the initial physicals when seniors join the program and will cover heart-disease and diabetes screenings to catch problems before they become expensive. It will also provide incentives for reducing medical errors, notably by supporting electronic-prescription programs to cut down on mistakes resulting from bad handwriting and by encouraging doctors to share patient information via computer programs.

3 Will private competition for seniors be a good thing?

In theory, yes. Pressure must be applied to the overall Medicare program to bring down its costs. "Everybody 64 and younger is in some kind of HMO or managed-care network," says Gail Wilensky, who ran Medicare and Medicaid in the first Bush Administration. There's no reason to exempt seniors. The bill will set up a test program to have Medicare compete with private insurers in six metropolitan areas beginning in 2010. Republicans say seniors can opt to stay with Medicare, but Democrats complain that private firms will have the unfair advantage of a $12 billion subsidy and will be able to enroll healthier people, leaving Medicare stuck with the sicker and more expensive ones. They say that could drive up premium costs for people who remain in Medicare.

4 Will drug prices go down?