Severely Shorts Needed Investment for Prescription Drugs. The House Republicans have put up $320 billion over 10 years for a prescription drug benefit. It:

• Covers only 20 percent of Medicare beneficiaries’ spending. The Republicans’ $320 billion drug allocation represents one fifth of the Congressional Budget Office (CBO) projections of drug spending for Medicare beneficiaries ($1.559 trillion for ’05-12).

• Far less than what Republicans are willing to spend to extend their tax cut. Instead of adequately financing a drug benefit, the House Republicans have proposed $373 billion to pay for the final two years of last year’s tax cut. In 2012 alone, the tax cut would cost $229 billion, which is more than three times the amount that the Republicans are willing to dedicate for prescription drugs in that year.

Provides Wholly Inadequate Benefit That Fails to Meet Seniors’ Needs. The underfunded House Republican bill had a complicated, gap-ridden benefit design that provides absolutely no coverage for thousands of dollars of drug expenses. This "donut hole" approach to coverage camouflages how Republicans are reducing Medicare’s investment by cost shifting to beneficiaries.

• For most seniors, the more you spend, the less you get. The vast majority of beneficiaries will pay higher coinsurance as their drug spending increases. After the deductible, coinsurance rises from 20 percent for the first $1,000 to 50 percent from $1,000 to $2,000 to 100 percent for all remaining drug costs up to the stop-loss. More than seven out of ten beneficiaries will not hit the $3,700 catastrophic stop-loss benefit.

• Nearly half of Medicare beneficiaries will receive no drug coverage for part of the year. About 19 million Medicare beneficiaries have drug spending that falls into the coverage gap, meaning that Medicare would stop paying part way through the year, even through seniors continue to pay premiums.

• No guarantee of access to needed drugs and local pharmacies. The funding constraint means that cost savings will be wrung out of the system by limiting access, both to drugs that doctors prescribe and pharmacies that best serve seniors and people with disabilities.

No Guarantee of Affordable Monthly Premiums. Unlike the Democratic plan, the Republicans’ prescription drug premium is not capped, guaranteed, or affordable. Insurers will set it and it will vary from plan to plan and place to place. The premium under the Republican benefit will average at least $33 – over 32 percent higher than the premium in the Democratic plan. As a consequence, seniors may be forced into HMOs because premiums for drug-only insurance plans are priced out of reach.

Uses Flawed Private Insurance Model That Holds Seniors and Medicare Hostage. The Republican plan rejects the prevailing private-sector approach and instead creates a new private insurance market to offer drug-only coverage.

• Insurers’ concerns threaten to hold Medicare hostage. Representatives of the insurance industry – including the former head of the Health Insurance Association of America – have repeatedly stated that they do not want to provide a drug-only insurance product. The Republican bill allows Medicare to pay private insurers an extra amount to come in to underserved areas, but this could lead to plans demanding more money in return for participation.

• Same uncertainty that plagues Medicare managed care. Even if insurers do offer coverage, they will likely come in and out of the market, move to profitable market areas, and modify their premiums from year to year based on experience – creating the same uncertainty that dogs Medicare managed care today.

Includes "Withering on the Vine" Reforms. The Republicans’ bill is largely devoted to promoting privatization of Medicare: expanding Medicare medical savings accounts, providing financial incentives to join HMOs, and creating a new bureaucracy to promote private plans. This is the same old Republican "withering on the vine" Medicare reform privatization strategy that has been consistently rejected.