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MARCH 4, 2003
11:42 AM
CONTACT:  Public Citizen

President Bush’s Prescription Drug Proposal Betrays Senior Citizens and People With Disabilities ;
Medicare Privatization Plan Is Little Changed from Earlier, Deeply Flawed Proposal and Far Inferior to Proposal by House Democrats
WASHINGTON - March 4 - The Medicare proposal announced by President Bush today betrays seniors and people with disabilities by forcing them to join unreliable private insurance plans in order to get significant coverage for the high cost of prescription drugs. The White House plan, announced during a speech to the American Medical Association, is also far inferior to the bill by House Democrats, also introduced today, to add a drug benefit to Medicare.

"What is surprising about this new proposal is how little it differs from the administration plan that was leaked to the press in January and summarily rejected by members of the presidentís own party," said Frank Clemente, director of Public Citizenís Congress Watch. "This administration continues to have its sights set on destroying traditional Medicare. Its proposal would lure beneficiaries into unreliable private plans. Those who stay in traditional Medicare would be punished with much more meager coverage."

The presidentís proposal would establish two classes of Medicare beneficiaries. Those willing to give up free choice of doctor and the reliability of traditional Medicare by joining private insurance plans would be eligible for more generous prescription drug coverage. Those opting to stay in traditional Medicare would get a discount card promising unknown discounts, but no coverage for the high cost of prescription drugs until they had spent thousands of dollars out-of-pocket. By contrast, the House Democratsí plan would make much more generous coverage available equally to those in traditional Medicare, which covers the vast majority of beneficiaries (89 percent), as well as those in private insurance plans.

The presidentís proposal would waste taxpayer money because it relies on inefficient private plans to offer coverage for prescription drugs, whereas the Democratsí plan would use taxpayer money more wisely by relying on the much more efficient Medicare program to offer drug coverage. Government auditors have found that private plans spend far more on administrative costs than Medicare. HMOs have administrative costs of approximately 15 percent and indemnity insurers have administrative costs of 20 percent. In contrast, Medicare spends just 2 percent on administrative costs.

Also, turning Medicare over to private insurance companies would mean unreliable coverage. Since 1999, 2.4 million beneficiaries have had to scramble to find new coverage when their HMO dropped out of the Medicare+Choice program. And in much of the country, particularly rural areas, there are no viable HMOs for beneficiaries to use. In contrast, by making coverage available through the traditional Medicare program, the House Democrats have proposed prescription drug coverage that seniors and people with disabilities would be able to rely on. In more than 30 years in operation, the Medicare program has never dropped a beneficiary from coverage.


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