Subsidies to Hispanic Poor Pose a Hurdle to Compromise on Medicare Bill

WASHINGTON, July 21, 2004, (NYTimes) — The House and the Senate have huge differences over how to treat poor people in legislation adding prescription drugs to Medicare, and lawmakers say those differences have unexpectedly become a major obstacle to agreement on a compromise bill.

Both bills provide extra assistance to low-income people who are elderly or disabled. The assistance appears to be much more extensive in the Senate bill, which provides larger subsidies to many low-income people.

But the Senate bill would deny Medicare drug coverage to six million low-income Medicare beneficiaries who also qualify for Medicaid. They could still receive drug coverage under Medicaid. But advocates for low-income people say that sets an undesirable precedent, as Medicare has always been available to all elderly people.

Moreover, they say, it could be risky for the elderly if states later cut drug benefits or eligibility to rein in costs in Medicaid, the federal program that insures poor people under formulas established by the states.

Ronald F. Pollack, executive director of Families USA, a consumer group, said: "The subsidies for low-income seniors are vastly superior in the Senate bill. They truly help make drugs affordable. The House bill provides much less assistance to low-income people."

Under the Senate bill, Mr. Pollack said, an elderly person with income less than the official poverty level, $8,980 a year, would need to spend just $75 to obtain prescription drugs worth $3,000. But under the House bill, he said, that person would have to spend about $1,100.

Conservatives agree that the Senate subsidies are generous — too generous, they say.

The Senate bill provides "too much of a subsidy to too many people," said Senator Rick Santorum, Republican of Pennsylvania.

Another Republican, Don Nickles of Oklahoma, chairman of the Senate Budget Committee, said, "The subsidies are so generous that drug utilization will soar, and costs could explode."

The House bill adheres to the principle that Medicare benefits should be universally available to people in the Medicare program. The very first section of the Senate bill departs from that principle. It says that Medicare's new drug benefits shall be available to anyone on Medicare "other than a dual eligible individual" who qualifies for both Medicare and Medicaid.

Senator John D. Rockefeller IV, Democrat of West Virginia, said that provision of the Senate bill undermined a basic tenet of Medicare.

"For the first time in the history of the program," Mr. Rockefeller said, "the legislation would prohibit some Medicare beneficiaries from receiving a Medicare benefit." Those beneficiaries include "the poorest of the poor, the oldest of the old and the sickest of the sick," he said.

Senator Edward M. Kennedy, Democrat of Massachusetts, said: "One of the great strengths of Medicare is that it is for everyone. Rich and poor alike contribute to the system. Rich and poor alike benefit from it."

The chief architect of the Senate bill, Charles E. Grassley, Republican of Iowa, defended the exclusion of Medicaid recipients, noting that they already had drug benefits under Medicaid.

"The intent of this legislation is to provide prescription drug coverage to senior citizens who have no drug coverage whatsoever," Mr. Grassley said.

Dolores Flores, 68, of Houston is just the type of person who might be helped by the legislation pending in Congress. She has too much money for Medicaid, but not enough to afford all the drugs she needs.

Ms. Flores said she lived on a Social Security check of $1,069 a month, but had withdrawn thousands of dollars from her individual retirement account to pay for prescriptions to treat arthritis, allergies, depression and other conditions.

"My doctor wrote a prescription for Fosamax, for osteoporosis, but I never took it because I couldn't afford it," Ms. Flores said. "There's no way I could pay $70 a month for that drug. If I had to pay for all the things I should be taking, it would easily cost $300 a month."

Medicare is financed entirely by the federal government. Medicaid is financed jointly by the federal government and the states. States are not required to cover prescription drugs under Medicaid, but all have chosen to do so.

Governors want Medicare — the federal government — to pick up the state share of Medicaid drug costs, which have been growing by more than 15 percent a year.

"That is our top priority," said Matt D. Salo, director of health legislation at the National Governors Association. "The federal government should be responsible for the drug costs of people eligible for both Medicaid and Medicare. Those six million people account for nearly half of all Medicaid drug spending — $16 billion of the $33 billion last year."

The federal government would gradually assume the state share of those drug costs under the House bill, but not under the Senate bill.

State officials and consumer advocates say that some low-income people could fare worse under the Senate bill than under current law.

"The Senate bill would leave millions of the frailest, sickest seniors dependent on state Medicaid coverage, which is being scaled back because of the worsening state budget crisis," Mr. Salo said.

State Medicaid programs generally must cover elderly and disabled people with incomes up to a certain level, now $6,620 a year, or 74 percent of the federal poverty level, for an individual.

But about 20 states have ceilings higher than that, and under the Senate bill, Mr. Pollack said, "it's conceivable that some of those states will reduce their income eligibility standards so that fewer seniors qualify for Medicaid."

The structure of drug benefits under the House and Senate bills is generally similar. Medicare beneficiaries would have to pay premiums, estimated at $35 a month, and a deductible, $275 a year under the Senate bill and $250 under the House version.

The House and the Senate would both eliminate the premium and the deductible for people with incomes less than 135 percent of the poverty level.

Under the Senate bill, Medicare would pay most of the cost of each prescription filled by a low-income beneficiary.

By contrast, under the House bill, most low-income elderly people would face a large gap in coverage. Unless they qualified for Medicaid, they would not receive any federal aid in meeting drug costs over $2,000 a year until they had spent $3,500 of their own money on prescription drugs — 39 percent of total income for a person at the poverty level.

The House bill also includes stricter limits on assets for low-income people seeking extra assistance with their drug costs. The Senate bill would allow people to certify, under penalty of perjury, that their assets were below the limit. The House bill has no such provision, so states could use the standard applications for public benefits.

Senator Jeff Bingaman, Democrat of New Mexico, said: "These forms are so complex that they would discourage many low-income individuals from even applying for assistance. One needs a lawyer and an accountant to get through the applications, which require low-income people to itemize up to 20 different types of assets, including life insurance policies, burial plots, vehicles and livestock."