The President's Medicare Proposal and the PDS Plan

When President Bush announced his Framework for Medicare reform in early March, many elements of the Turner/Antos Prescription Drug Security (PDS) plan were included in it. There also are important differences, and we describe both here.



  • To provide immediate relief for low-income seniors, the White House would provide $600 a year to help them pay for prescription drugs. This is the amount and the mechanism that we developed to provide direct subsidies to low- and moderate-income seniors to help with their routine drug purchases.

    The president’s proposal of direct subsidies to individuals is a vast improvement over the earlier White House plan to provide block grants to the states – which surely would have consigned more people to the Medicaid drug ghetto, with its price controls and restrictions on use.


  • Like the PDS plan, the president’s $600 subsidy could be deposited to a card account, or it could go to a health plan of the beneficiary’s choosing as an added incentive for the health plan to provide prescription drug coverage.

    Under the president’s proposal, however, the $600 would be deposited to a free-standing “Medicare drug discount card.”

    Under the PDS plan, the card is an integral part of a larger drug plan. Competing drug plans would offer a range of services, including insurance protection, consultation, and information as well as competitively-negotiated discounts on drugs. The PDS card would work like a debit card and would be a vehicle for the $600 annual subsidy, but it also would allow drug plans to track expenditures toward triggers for catastrophic coverage and allow access to the other services that the drug plans would offer.


  • As we recommended, a new agency modeled after the Office of Personnel Management that runs the Federal Employees Health Benefits Program would be created to run the modernized Medicare program. The White House calls the new agency the Medicare Center for Beneficiary Choices.

    Unfortunately, the White House recommends that it be a part of the existing Centers for Medicare and Medicaid Services.

    We believe that an agency charged with protecting the rights of consumers and negotiating with health plans on prices and benefits must be located outside CMS and therefore recommend that OPM take over the duties of running this program.


  • Most important, both the White House framework and our PDS plan are designed to build an infrastructure for a competitive Medicare program and to provide incentives for consumers to make wise decisions about their use of health care resources.

A key difference between the president’s proposal for a low-income drug benefit and the PDS plan is catastrophic coverage. Our plan offers the coverage as an integrated part of the drug benefit; the president’s does not.

When Congress tackles the thorny issue of catastrophic coverage, we hope that they will look to the PDS model for a structure of incentives that will allow private, competing plans to participate rather than having government take over this part of the benefit. We believe this approach would be an open invitation to price controls.

We consider educating members about this crucial issue one of our most important jobs this year.

For more information, please contact:
Joseph Antos, American Enterprise Institute, (202) 862-5938; jantos@aei.org
Grace-Marie Turner, Galen Institute, (703) 299-8900; gracemarie@galen.org


Click here for PowerPoint slides of the Prescription Drug Security plan.


Click here for a Washington Post article on the Prescription Drug Security plan.

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When President Bush announced his Framework for Medicare reform in early March, many elements of the Turner/Antos Prescription Drug Security (PDS) plan were included in it. There also are important differences, and we describe both here.



  • To provide immediate relief for low-income seniors, the White House would provide $600 a year to help them pay for prescription drugs. This is the amount and the mechanism that we developed to provide direct subsidies to low- and moderate-income seniors to help with their routine drug purchases.

    The president’s proposal of direct subsidies to individuals is a vast improvement over the earlier White House plan to provide block grants to the states – which surely would have consigned more people to the Medicaid drug ghetto, with its price controls and restrictions on use.


  • Like the PDS plan, the president’s $600 subsidy could be deposited to a card account, or it could go to a health plan of the beneficiary’s choosing as an added incentive for the health plan to provide prescription drug coverage.

    Under the president’s proposal, however, the $600 would be deposited to a free-standing “Medicare drug discount card.”

    Under the PDS plan, the card is an integral part of a larger drug plan. Competing drug plans would offer a range of services, including insurance protection, consultation, and information as well as competitively-negotiated discounts on drugs. The PDS card would work like a debit card and would be a vehicle for the $600 annual subsidy, but it also would allow drug plans to track expenditures toward triggers for catastrophic coverage and allow access to the other services that the drug plans would offer.


  • As we recommended, a new agency modeled after the Office of Personnel Management that runs the Federal Employees Health Benefits Program would be created to run the modernized Medicare program. The White House calls the new agency the Medicare Center for Beneficiary Choices.

    Unfortunately, the White House recommends that it be a part of the existing Centers for Medicare and Medicaid Services.

    We believe that an agency charged with protecting the rights of consumers and negotiating with health plans on prices and benefits must be located outside CMS and therefore recommend that OPM take over the duties of running this program.


  • Most important, both the White House framework and our PDS plan are designed to build an infrastructure for a competitive Medicare program and to provide incentives for consumers to make wise decisions about their use of health care resources.

A key difference between the president’s proposal for a low-income drug benefit and the PDS plan is catastrophic coverage. Our plan offers the coverage as an integrated part of the drug benefit; the president’s does not.

When Congress tackles the thorny issue of catastrophic coverage, we hope that they will look to the PDS model for a structure of incentives that will allow private, competing plans to participate rather than having government take over this part of the benefit. We believe this approach would be an open invitation to price controls.

We consider educating members about this crucial issue one of our most important jobs this year.

For more information, please contact:
Joseph Antos, American Enterprise Institute, (202) 862-5938; jantos@aei.org
Grace-Marie Turner, Galen Institute, (703) 299-8900; gracemarie@galen.org


Click here for PowerPoint slides of the Prescription Drug Security plan.


Click here for a Washington Post article on the Prescription Drug Security plan.

SHARE THIS ARTICLE

About the author