Principles for Reforming Medicare and Adding a Prescription Drug Benefit

April 23, 2003

All employers and all employees fund the Medicare program through payroll and income taxes. We have a common interest in ensuring the viability of the program for current and future beneficiaries.

The Employers' Coalition on Medicare (ECOM) believes the Medicare program must be reformed and modernized, with any new benefits extended to all beneficiaries without additional mandates on employers. 

Besides putting Medicare on a sound financial footing, it must also be modernized with emphasis on quality care, including a prescription drug benefit, preventive care, and disease management.  Any Medicare reforms should not discriminate against employers who provide retiree health coverage, nor their current employees and retirees.  No additional mandates should be imposed on employers providing health coverage.

ECOM believes any changes to Medicare must:

1.  Be Linked to Reform:  A drug benefit should be established in the context of comprehensive reform of the Medicare program.  The government, as a large purchaser of health care services, should make fundamental changes to Medicare, starting with the three key areas:  (1) plan design and delivery; (2) reimbursements and payment to providers; and (3) information sharing and disclosure.

Plan Design and Delivery

  • Include a prescription drug benefit in the Medicare program. 
  • Permit a choice of health plan options (including traditional fee-for-service and other private plans options) from which Medicare beneficiaries may obtain drug coverage, similar to those available to other Americans in the private market and those provided under the Federal Employee Health Benefits Program that is now available to federal government employees and members of Congress. 
  • Provide disease management programs and case management for high risk and chronic conditions. 
  • Provide wellness management and disease prevention programs. 
  • Expand use of Centers of Excellence for high-risk, complex procedures.

Reimbursement/Payment to Providers

  • Give beneficiaries financial incentives to use health care services from health care providers that consistently meet performance and quality standards based on evidence-based medicine. 
  • Encourage CMS to develop and utilize a consistent set of evidence-based, best practice standards for excellence to drive improvement and reimbursement strategies to improve quality, safety and value. 
  • Provide market-based and adequate reimbursement for Medicare beneficiaries and providers, including payment to private plans and suppliers, rather than continuing to rely on government-administered pricing. 
  • Information Sharing and Disclosure to Promote Quality and Protect Patients 
  • Provide beneficiaries with access to user-friendly performance information on safety, timeliness, effectiveness, efficiency, equity, and patient-centered care at both plan and provider level with appropriate legal limitations to avoid penalizing plans and providers that disclose information according to the National Quality Forum (NQF) or other similar standard setting organizations. 
  • Promote medical error reduction initiatives and safety process improvements.

2.  Provide Universal Access to Prescription Drugs:  All Medicare beneficiaries should be eligible for drug coverage subsidized by Medicare.

  • Current Medicare beneficiaries should be able to receive a prescription drug benefit through the traditional Medicare program. 
  • As with all other benefits provided under the Medicare program, prescription drugs should be offered to all beneficiaries who qualify for the Medicare program, regardless of their income, age, sex, disability or employment status, and employers should be able to coordinate with the drug benefit the same way they do with all other Medicare benefits. 
  • Medicare prescription drug coverage should be privately administered, including for those who remain enrolled in the traditional fee-for-service Medicare program. 
  • Medicare prescription drug coverage should be affordable to taxpayers and beneficiaries, and provide a meaningful, high-quality benefit that covers more than catastrophic expenses. 
  • A Medicare prescription drug benefit provided to Medicare-eligible beneficiaries  who are covered under an employer-sponsored plan should not be less than that provided to any other Medicare beneficiary. 
  • Incentives should be available to encourage beneficiaries to obtain coverage through various Medicare private health plans options (including fee for service plans) that contract with CMS to provide the full range of Medicare-covered benefits.  These incentives could include either providing a more extensive drug benefit as well as other benefits, or lower out-of-pocket costs or premiums.

3.  Provide Flexible Options:  Medicare should be primary, but allow employers and beneficiaries the option to supplement Medicare coverage without penalty or additional financial liability.  Employers and Medicare beneficiaries should have several options for obtaining affordable health coverage that includes prescription drugs, and be allowed to fund retiree health care needs on a tax-preferred basis.  Different employers and individuals necessarily will elect options that best serve their unique needs and circumstances; no single option or set of options should be mandated for employers or individuals. Flexibility for employers and individuals, at a minimum, should include the following:

  • Employers should be able to elect to supplement any health coverage, including prescription drug coverage that their Medicare-eligible beneficiaries obtain through either the traditional Medicare Program or through a private health plan option. 
  • Employers should be able to elect to subsidize the premiums for any coverage, including prescription drug coverage, that their Medicare-eligible beneficiaries obtain through either the traditional Medicare Program or through a private health plan option. 
  • Employers should be able to elect to serve as the primary source of coverage for the prescription drug needs of their Medicare-eligible  beneficiaries and receive reimbursement from Medicare in an amount equivalent to what it would cost Medicare to provide the Medicare level of benefit.  This would apply when the employer provides at least the same level of coverage as would otherwise be available by those who elect to enroll in a Medicare traditional or private health plan option. 
  • Individuals should be able to purchase high quality health care coverage, including prescription drugs, through individual market (non-group) Medicare supplemental ("Medigap") insurance plans. 
  • Employers voluntarily provide health care coverage, and the government should not mandate a "maintenance of effort" by those companies that currently offer health benefits to retirees; nor should the government require companies to provide "seamless coverage" that would direct that Medicare-eligible beneficiaries are  entitled to remain enrolled in the same health benefits plan they had as active employees. 
  • The government should not take away an employer’s ability to modify its retiree health plans as allowed under current law, and employers should continue to be able to determine the appropriate level and form of coverage they provide.

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