Obamacare and Medicare Drug Coverage Premiums

HEALTH BILL WILL HIKE MEDICARE DRUG COVERAGE PREMIUMS 20 PERCENT, SAYS CBO

Tell Congress No Government-Run Health Insurance

Alert: If the health-care reform bill under consideration in the House of Representatives becomes law, seniors will pay Medicare prescription drug program premiums that are 20-percent higher than they would be under current law, says the Congressional Budget Office.

The increase in premiums will start with an average 5-percent hike in 2011 and reach 20 percent by 2019.

The CBO estimated the increase in premiums in response to an inquiry from Rep. Dave Camp (R.-Mich.), the ranking Republican on the House Ways and Means Committee, who wanted to know how changes to the Medicare system that are incorporated into the House version of the health-care reform bill would impact the premiums paid by seniors for their prescription drug benefit mknown as Medicare Part D.

"Overall, CBO estimates that enacting the proposed changes would lead to an average increase in premiums for Part D beneficiaries, above those under current law, of about 5 percent by 2011," CBO Director Douglas Elmendorf said to Camp in a letter. "That effect would rise over time and reach about 20 percent in 2019."

The increase in premiums would be tied to increased coverage that closes the so-called doughnut hole in current Medicare prescription drug coverage.

The doughnut hole works like this: Once a senior's total drugs costs--what Medicare pays, plus the deductible and co-payments--exceed a certain amount ($2,700 in 2009), Medicare will cover no more of the person's drug costs that year until the person spends a certain amount out of his or her own pocket ($4,350 in 2009). When a senior reaches the upper threshold of the doughnut hole, catastrophic drug coverage kicks in automatically and Medicare pays 95 percent of the person's additional drug costs for the remainder of the year.

Under the health care bill in the House of Representatives, H.R. 3200, the doughnut hole would be phased out by 2022, when Medicare Part D would cover prescription drug purchases within the window it does not cover as of now.

"Beyond the 10-year budget window, the premiums would increase slightly more until the doughnut hole was eliminated in 2022, beyond that point, enrollees premiums would grow along with the cost for covered drugs," says CBO.

The change in the rules would have a varying net financial impact on individual seniors, depending on the volume of their prescription drug use.

"Of course, the effect of total spending would vary among beneficiaries: Those who ended up purchasing a relatively small amount of drugs in a year would pay more in additional premiums than they would gain from lower cost sharing, while those who purchased a relatively large amount of drugs in a year would gain more from lower cost sharing than they would pay in higher premiums,' says CBO.

About 3.8 million seniors were subject to the doughnut hole in 2007, according to the Center for Medicare and Medicaid Services (CMS).

Rep. Camp argues that most seniors would suffer a net financial loss under the change envisioned in the health-care bill.

Among Medicare Part D beneficiaries, he said in a statement citing data from CMS, 10.9 percent would save money under the Democratic health bill, while about 76 percent would pay more.

"Health care reform should make health care more affordable, not more expensive," said Camp. "Clearly, it is time to scrap this bill and start over with open, bipartisan talks."

However, Robert Kocher of the President's National Economic Council said in a recent White House video that prescription drugs will become less expensive.

"You will have lower drug costs," Kocher said. "Right now in the Medicare program, when you reach the point at which Part D can't cover a drug, you have to pay full price. Under insurance reform, you will pay lower prices for those pills you take."

However, CBO said in its letter to Rep. Camp that the new rules would cause drug manufacturers to increase prices on new breakthrough drugs.

"Drug manufacturers would be constrained from increasing prices for existing drugs but could offset the rebates they would be required to pay for full-benefit dual-eligible individuals by charging higher prices for new drugs particularly for breakthrough drugs (the first drugs that use new mechanisms to treat illnesses)," said CBO. (CNSNews)

A Case Study in ObamaCare

From the Wall Street Journal:

How Washington Rations
ObamaCare omen: a case study in 'cost-control.'

Try to follow this logic: Last week the Medicare trustees reported that the program has an "unfunded liability" of nearly $38 trillion -- which is the amount of benefits promised but not covered by taxes over the next 75 years. So Democrats have decided that the way to close this gap is to create a new "universal" health insurance entitlement for the middle class.

Such thinking may be a non sequitur, but it will have drastic effects on the health care of all Americans -- and as it happens, this future is playing out in miniature in Medicare right now. Desperate to prevent medical costs from engulfing the federal budget, the program's central planners decided last week to deny payment for a new version of one of life's most unpleasant routine procedures, the colonoscopy. This is a preview of how health care will be rationed when Democrats get their way.

At issue are "virtual colonoscopies," or CT scans of the abdomen. Colon cancer is the second leading cause of U.S. cancer death but one of the most preventable. Found early, the cure rate is 93%, but only 8% at later stages. Virtual colonoscopies are likely to boost screenings because they are quicker, more comfortable and significantly cheaper than the standard "optical" procedure, which involves anesthesia and threading an endoscope through the lower intestine.

Virtual colonoscopies are endorsed by the American Cancer Society and covered by a growing number of private insurers including Cigna and UnitedHealthcare. The problem for Medicare is that if cancerous lesions are found using a scan, then patients must follow up with a traditional colonoscopy anyway. Costs would be lower if everyone simply took the invasive route, where doctors can remove polyps on the spot. As Medicare noted in its ruling, "If there is a relatively high referral rate [for traditional colonoscopy], the utility of an intermediate test such as CT colonography is limited." In other words, duplication would be too pricey.

This is precisely the sort of complexity that the Democrats would prefer to ignore as they try to restructure health care. Led by budget chief Peter Orszag, the White House believes that comparative effectiveness research, which examines clinical evidence to determine what "works best," will let them cut wasteful or ineffective treatments and thus contain health spending.

The problem is that what "works best" isn't the same for everyone. While not painless or risk free, virtual colonoscopy might be better for some patients -- especially among seniors who are infirm or because the presence of other diseases puts them at risk for complications. Ideally doctors would decide with their patients. But Medicare instead made the hard-and-fast choice that it was cheaper to cut it off for all beneficiaries. If some patients are worse off, well, too bad.

Medicare is already the country's largest purchaser of health care. Private carriers generally adopt its rates and policies, and the virtual colonoscopy decision may run this technology out of the marketplace. Now multiply that by the new "public option" that Democrats favor, which would transfer millions of patients to a new insurance program managed by the federal government. Washington's utilitarian judgments about costs would reshape the practice of medicine.

Initially, the open-ended style of American care will barely be touched, if only for political self-preservation. Health planners will adjust at the margins, as with virtual colonoscopy. But scarcity forces choices. As the Medicare trustees note in their report, the tax increases necessary to fund merely the current benefit schedule for the elderly would cripple the economy. The far more expensive public option will not turn into a pumpkin when cost savings do not materialize. At that point, government will clamp down with price controls in the form of lines and rock-bottom reimbursement rates.

Mr. Orszag says that a federal health board will make these Solomonic decisions, which is only true until the lobbies get to Congress and the White House. With virtual colonoscopy, radiologists and gastroenterologists are feuding over which group should get paid for colon cancer screening. Companies like General Electric and Seimens that make CT technology are pressuring Medicare administrators too. More than 50 Congressmen are demanding that the decision be overturned.

All this is merely a preview of the life-and-death decisions that will be determined by politics once government finances substantially more health care than the 46% it already does. Anyone who buys Democratic claims about "choice" and "affordability" will be in for a very rude awakening.