New Medicare Law Threatens Access to Services

Legislation: S. 1992 The Medicare Mental Health Modernization Act of 2003 Medicare Mental Health Co-Payment Equity Act Families USA Center on Budget and Policy Priorities Get Involved... Support the Bazelon Center. Your tax-deductible donation helps the Bazelon Center keep you informed on important developments in mental health law and policy. Not a Subscriber? Sign up now to receive action alerts and updates from the Bazelon Center.

January 12, 2004—The Medicare law recently signed by the President (The Medicare Prescription Drug, Improvement and Modernization Act of 2003, Public Law 108-173) may pose problems for seniors and individuals with disabilities who qualify for Medicare through the Social Security Disability Insurance (SSDI) program. Medicare is the primary health coverage for some five million non-elderly adults who receive SSDI—more than one fourth disabled by a mental illness.

Many Face More Limited Drug Coverage

The new law encourages Medicare privatization by offering significant financial incentives for private plans to participate. Analysts fear that these incentives could undermine the traditional Medicare program while providing little in the way of meaningful drug benefits.

The law creates a new drug benefit with a $35 monthly premium and $250 annual deductible. Although low-income Medicare recipients will not have to pay either, all who enroll in this benefit still must pay 25% of drug costs (Medicare pays the rest) until they have paid $2,250 during the year. Once they have paid $2,250, federal coverage stops until a beneficiary's out-of-pocket expense reaches $3,600 that year. Then the beneficiary pays only 5% and Medicare pays the rest.

This gap in coverage (called by some a “doughnut hole”) does not apply to beneficiaries with income below 150% of the federal poverty level. For more information on how much consumers will pay, see Families USA's chart.

The law also prevents Medicare recipients from purchasing additional drug coverage through MediGap plans, which many now use. It also encourages shifting of beneficiaries into health maintenance organizations (HMOs), which may offer less or less stable coverage.

Although the law does not take effect until 2006, beginning in June 2004 a discount card will be available, enabling any Medicare recipient to save up to 25% on prescriptions. An annual enrollment fee up to $30 may be required. The government will pay this fee for certain low-income recipients, who will also be eligible for a subsidy of up to $600.

Some Medicaid Recipients May Face New Limits

Under the new law, people who receive both Medicare and Medicaid (dual eligibles) would get all their prescription drugs through the new Medicare drug benefit. They may have more limited access to medications than they have had through Medicaid, because the new benefit allows formularies that cover only a limited number of medications in a class of drugs. Medicaid coverage is generally more comprehensive.

Dually eligible recipients will, however, get a Medicare-premium subsidy and be protected from the high cost-sharing and deductibles that other Medicare beneficiaries will face.

Many questions remain about how the law will actually affect low-income beneficiaries and individuals with disabilities. Analysts fear that recipients will now face high out-of-pocket costs and that the law's lack of cost-containment measures may stretch an already tight federal budget.

More information is available in a December 8 article by the Center on Budget and Policy Priorities, “The Troubling Medicare Legislation.”

Health Savings Accounts Are Problematic

The new Medicare law also includes an unrelated provision for “health savings accounts”—tax-advantaged accounts that can help people with high-deductible, catastrophic health insurance pay out-of-pocket medical expenses. Money set aside in these accounts is tax-free if used for medical expenses. This could have a profound effect on employer-based coverage by steering financially able and healthier individuals out of traditional insurance plans. Those left in the plans would then likely face steep premium increases or be left without coverage.

Mental Health Coverage Is Discriminatory

The new law also ignores needed changes to update Medicare’s mental health benefit. Currently, it is easier to use Medicare to pay for institutional services than to pay for outpatient and rehabilitative services. Medicare also unfairly requires a 50% co-payment for treatment of mental disorders, rather than the 20% co-payment required for other outpatient services.

Legislative Fixes Proposed

Medicare Amendments Introduced

• Senator Edward Kennedy (D-MA) introduced legislation (S. 1992) prior to Congress' adjournment that would make sweeping changes to the new Medicare law, including repeal of the health savings accounts provision and the restriction on MediGap coverage of prescription drugs.

Improvement of Mental Health Coverage

Bills to improve mental health coverage are before both the House and the Senate.

• The Medicare Mental Health Modernization Act of 2003 (S. 646, H.R. 1340) would provide comprehensive changes to the mental health benefit in Medicare. Senator Jon Corzine (D-NJ) and Representative Pete Stark (D-CA) introduced the legislation.
• Senator Olympia Snowe (R-ME) and Representative Ted Strickland (D-OH) are sponsoring legislation that would provide parity in the mental health outpatient co-payment with co-payment for other outpatient services (Medicare Mental Health Co-Payment Equity Act, S. 853, H.R. 2787).

What You Can Do

Lawmakers need to hear from you! Contact your Senators and Representative and urge them to:

• Co-sponsor S. 1992 to repeal many of the most harmful elements of the new Medicare law, including restrictions on MediGap coverage and provisions that could lead to premium increases for people with employer-based insurance coverage.
• Support The Medicare Mental Health Modernization Act of 2003 and The Medicare Mental Health Co-Payment Equity Act to end discriminatory co-payment requirements and reduce Medicare's bias toward institutional services over outpatient and rehabilitative services.

Contacting Lawmakers

• Phone: Call your Senators and Representative via the Capitol switchboard at 202-224-3121.
• Write a letter to: The Honorable (first and last name) U.S. House of Representatives, Washington DC 20515 OR U.S. Senate, Washington DC 20510
• Email: Send a clear, concise message to your member of Congress via www.congress.org. Most congressional offices will not respond to email from people outside of their districts, so make sure you introduce yourself as a constituent. Remember to include your full name, mailing address and zip code.