Lawmakers, Policy Analysts Consider Potential Effects of Proposed Medicare Prescription Drug Benefit
As the conference committee tasked with reconciling the House and Senate Medicare bills (HR 1 and S 1) continues its work, lawmakers and policy analysts are taking a closer look at negotiators' tentative agreement on a drug benefit, the Newark Star-Ledger reports (Cohen, Newark Star-Ledger, 11/2). Under the agreement, the federal government would pay 75% of beneficiaries' drug costs up to $2,200 per person per year. Beneficiaries would pay a $275 deductible and average monthly premiums of $35. Beneficiaries whose drug costs exceed the $2,200 annual cap would pay out of pocket for their drug costs from that point until about $3,600, when catastrophic coverage would begin. After that point, beneficiaries would have to pay 5% of the cost of each prescription or a copayment of $5 to $10 for each prescription. Beneficiaries with incomes below 135% of the poverty level would not have to pay the premiums or deductible but would contribute a $2 copay for each generic drug and $5 for each brand-name drug until their overall drug costs reached $5,000. Medicare would fully cover drug costs after that point. Beneficiaries with incomes between 135% and 150% of the federal poverty level would pay a $50 deductible, reduced premiums based on a sliding scale related to income and 15% of the cost of each prescription until their out of-pocket costs reach $3,600. Beneficiaries with assets of more than $10,000 would not be eligible for subsidies, regardless of their income level (California Healthline, 10/27). Beneficiaries would be encouraged to sign up for the drug benefit during the initial enrollment period; those who sign up late would incur financial penalties. Tricia Newman, a Kaiser Family Foundation vice president and director of its Medicare Policy Project, said that early enrollment is necessary to generate funds from healthy seniors to help offset costs of those with large drug expenses.
According to the Star-Ledger, the proposed benefit "would fall far short of paying for all the projected prescription drug needs of the nation's 40 million Medicare beneficiaries over the next decade." Congress has budgeted $400 billion over 10 years to pay for the drug benefit, less than 25% of the $1.8 trillion in anticipated drug costs for Medicare beneficiaries over the next 10 years, according to the Congressional Budget Office. The effect of the proposed drug benefit will differ according to beneficiaries' income, availability of other drug coverage and annual drug costs, the Star-Ledger reports. For example, seniors with $2,000 per year in drug costs would save $873.75 under the plan, while the 11% of Medicare beneficiaries with $5,000 in annual drug expenses would save $1,023.75. Barbara Kennelly, president of the National Committee to Preserve Social Security and Medicare, said, "I've been out meeting with seniors in North Dakota, Kansas, Mississippi and New York, and the general consensus is they are underwhelmed by the benefit. They are skeptical if this is a good thing or not." Robert Hayes, president of the not-for-profit advocacy group Medicare Rights Center, said, "The good news about the bill is that if you are very poor or if you face immense drug expenses, you'll feel real relief. But so much money has been taken off the table because of the tax cuts and the budget deficit that it was preordained to be, at best, a meager benefit for millions of people" (Newark Star-Ledger, 11/2). According to President Bush, the drug benefit would cut prescription drug bills by 50%, and CMS Administrator Tom Scully has said that the proposed drug benefit would give "a 'spectacular health benefit' to an older person whose annual income does not exceed $13,500," according to the AP/Birmingham News. John Rother, an analyst for the AARP, said that the drug benefit would be a "very important social achievement to be able to take care of people at 150% of poverty and below." Other health policy experts contend that the proposed benefit is "too generous" for wealthier beneficiaries and would raise costs for some beneficiaries whose annual drug costs are low, the AP/Birmingham News reports (Sherman, AP/Birmingham News, 11/2).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.