Retirement Insights

By Karen Gilgoff

Congress is debating a dangerous bill. Cloaked in the promise of prescription drug coverage for seniors, it would actually change the basic structure of Medicare itself. In fact, it would eventually destroy this popular program.

 Recently passed by the House of Representatives, the bill is currently being combined with the Senate's prescription drug measure. The Senate bill is weak, but not nearly as catastrophic as the House version. If its provisions end up in final legislation, AFSCME will urge every member of Congress to vote "No."

Here's why AFSCME strongly opposes this legislation:

It's a blueprint for voucherization. Medicare now offers a "defined benefit" — a guaranteed package that seniors can depend on. Under the House bill, rather than providing a reliable benefits package, the government would merely pay a portion of health care premiums. Seniors would get vouchers — for an amount based on the average cost of all health plans — to buy their own insurance.

Vouchers would undermine traditional Medicare. Younger, healthier seniors would try to save money by opting for cheaper, bare-bones HMOs. Older seniors, especially those with health problems, would probably stay in traditional Medicare, where 89 percent of all seniors are today and where they can choose any doctor or hospital. By serving chiefly the sick, Medicare's future costs would rise compared to HMOs, and its premiums and co-pays would eventually become unaffordable for most seniors.

That would leave them completely at the mercy of restrictive managed-care plans, which can raise premiums, cut benefits and cancel coverage without notice. In fact, more than two million seniors have been dropped by such plans in the last five years.

Retirees could lose employer-paid coverage. Many employers on the verge of eliminating expensive retiree-health coverage have waited to see if Congress would pass a drug bill to help them meet their rising costs. Unfortunately, the employer subsidies in the bill are so low that the Congressional Budget Office says over 30 percent of retirees will lose their coverage as employers terminate plans. Even more will continue to see cost shifting by employers in the form of higher premiums and co-payments.

Benefits would be determined by income. Under Medicare's first-ever income test, seniors with above-average incomes would have to pay far more of their own prescription-drug costs than other seniors. That's a bad idea because Medicare has always been a universal program entitling everyone to the same benefits. Means testing would destroy the basic nature of Medicare and make it more like welfare.

The drug benefit is weak. While private insurers would be able to structure their own benefit schedules, the House bill suggests that yearly drug benefits feature a $35 monthly premium, a $250 deductible and senior co-pays of 20 percent for drug purchases between $250 and $2,000. For purchases between $2,001 and $4,900, there's a big gap in coverage — known as the "doughnut hole" — where seniors pay 100 percent of all costs. After reaching $4,900, they would be fully covered for additional drugs.

For seniors with average drug bills, the benefit is a virtual pass-through, with so-called beneficiaries spending as much out of pocket as they'll get back in benefits. Seniors whose drug expenditures exceed $2,001 will still have to pay premiums every month, even though they'll get no benefits while in the doughnut hole.

The coverage, which won't even take effect until 2006, is confusing as well as limited. Seniors will be forced to navigate this "now you see it/now you don't" benefits package, along with a whole new world of unreliable private plans.

"AFSCME is asking every one of our members — working and retired — to call their U.S. representative and their two senators immediately to protest this catastrophic legislation," says AFSCME President McEntee. "Tell them too many retirees may lose employer-paid health coverage under this seniors' drug bill. If the final bill contains the House measures to privatize and voucherize Medicare, tell your lawmakers to vote a resounding 'No.'"

WHAT YOU CAN DO

Read AFSCME's CyberActivist Alert, Stop Congress from Privatizing Medicare!, and write, phone, or e-mail your Congressional representatives on this issue.