Is the new Medicare prescription drug benefit really good for seniors?
By Scott Wright | March 29, 2004 | The Post | Cherokee County, AL
The consensus among Alabama's federal representation concerning the Medicare Prescription Drug Improvement and Modernization Act of 2003 is basically this: the law has flaws but is an improvement over what existed previously -- which was nothing.
"The legislation does not contain some of the features I would have liked," said Rep. Mike Rogers, R-Saks. "But this new law is an excellent start and for the first time ever entitles Alabama seniors a voluntary prescription drug benefit under Medicare that will help many seniors save hundreds, if not thousands, of dollars every year."
Alabama's U.S. Senate delegation echoed similar sentiments about the new law.
"It's not perfect," said Sen. Jeff Sessions, R-Mobile. "But there is ... logic to it and it's a benefit. This law provides significant relief for low-income seniors."
"I supported the Medicare Prescription Drug and Modernization Act," said Sen. Richard Shelby. "I believe this is a good first step ... However, legislation of this magnitude cannot solve every problem that seniors face."
But the plan that receives praise from lawmakers as honest-to-goodness "better than nothing" is complicated to decipher. Millions of seniors nationwide will have to determine if the new benefit, called Medicare Part D, is a viable, money-saving option for their particular medical situation -- a determination that will depend primarily on two factors: income and annual drug expenditures.
"Low-income seniors, in particular, benefit under this new program," said Rogers.
Basically, seniors older than 65 who spend more than a certain amount per year on prescription drugs will likely benefit from the new law. On the other hand, seniors with lower annual medication bills may decide membership in the voluntary plan will cost more than they currently pay for prescriptions. A good rule of thumb, according to literature sent to Alabama agents by Constitution Life Insurance Company, is that anyone who spends less than $810 annually for prescriptions would end up paying more by signing up for the new drug benefit.
Here's how the new Medicare prescription drug benefit is expected to work when it goes into effect on Jan. 1, 2006 (total payments in parenthesis):
_ Part D participants will pay $35-a-month premiums as well as the first $250 in annual drug costs ($670).
_ Medicare will cover 75 percent of costs between $251 and $2,250 -- 25 percent equals $499.75, for a total payout of $1,169.75 ($670.00 plus $499.75).
_ Coverage then stops until a participant's lay out reaches $5,100 -- the "doughnut hole" -- after which Medicare covers 95 percent of all costs.
The doughnut hole
Alabama's federal legislators claim the so-called "doughnut hole" was a necessary complication, created in order to reduce the overall cost of the plan while providing coverage to seniors who spend the most on prescription medication. None, however, would deny that the gap further complicates an already complex situation.
"A good argument can be made that the doughnut hole needs work," Sessions said.
The doughnut hole -- the span of drug expenses where Medicare contributes nothing -- will affect millions of people. It begins at very close to the $2,322 that the average Medicare beneficiary paid in 2003 for prescription drugs, according to a 2003 report by the Kaiser Family Foundation. Medicare drug insurance would kick in again for only a relatively small slice of seniors. Experts have estimated that substantially fewer than 10 percent of seniors nationwide would have drug expenses so high that they would qualify for Medicare's "catastrophic" coverage for costs above $5,100.
With anticipated drug price increases taken into consideration, experts figure most seniors will spend more for drugs in 2007, with the program fully in effect, than in 2003 -- one reason why lawmakers stress that Part D, which is voluntary, may not be for everyone.
"We are very concerned about the doughnut hole," said Cherokee County AARP Chapter President Helen Jones. "It seems unfair ... We feel that the federal government should contract with pharmaceutical companies for lower drugs" instead of saving money by limiting the amount of coverage.
The doughnut hole will not apply to seniors enrolled in both Medicare and Medicaid. They will pay no premium, no deductible and have no gap in coverage. The same exception applies to seniors who fall below a certain percentage of the poverty level, defined as individuals with incomes of $13,000 ($17,618 for couples) and assets of less than $6,000 ($9,000 for couples). People who meet the poverty requirements will pay no premium or deductible and have no gap in coverage; they will pay $2 for generics, $5 for brand names and nothing above the catastrophic limit.
Sessions said around 267,000 Alabamians meet those criteria.
"Senior citizens whose income is in this category will have virtually all their drugs paid for," he said. "The doughnut hole does not apply to them."
Without the complicated gap in coverage, many lawmakers who voted for the bill insist the Medicare overhaul would have been too expensive. Sessions said he was not prepared to spend more than $400 billion on the bill.
"We had budgeted $400 billion over 10 years, and I advertised that we would support that level of spending," Sessions said. "I would not have supported the bill the first time around" if the estimate had been any higher, he added.
Unfortunately, cost estimates have risen dramatically since the bill was signed into law by President Bush on Dec. 8. Medicare official Robert Foster told USA Today that late last year, when Democrats in the House of Representatives asked him to recalculate the cost of the bill, he came up with a 10-year figure of $500 billion to $600 billion. Foster said Medicare head Tom Scully got hold of the new estimate and ordered him not to reveal the numbers to Democrats, who were generally opposed to the bill. An investigation is underway to determine if any House rules were violated.
Rogers insinuated that bipartisanship played a role in the higher cost estimate.
"My understanding of the bill's 10-year, $395 billion cost comes from the non-partisan Congressional Budget Office (CBO)," he said. "In February 2004, CBO Director Douglas Holtz-Eakin re-affirmed the original $395 billion cost, saying 'that amount is identical to CBO's scoring of the bill when passed.'"
If Foster's estimates had been announced, they would have confirmed Democrats' complaints that the legislation was far too expensive. Opponents -- and even supporters like Sessions -- say the bill would never have passed without changes if Foster's figures had been made public before the House and Senate voted.
Health consultant and former insurance executive Robert Laszewski accused Republicans of ignoring higher projections because of their eagerness to give seniors prescription drug coverage in an election year.
"Everyone inside the Beltway -- Republicans, Democrats, liberals and conservatives -- all knew the $400 billion was a very low, low side of what this was really going to cost," Laszewski told USA Today earlier this month.
Current polls show a majority of seniors doubt the law, while Democrats and other opponents point to the new cost estimates and claim the bill protects the profits of drug manufacturers and health insurers at the expense of seniors. Democrats and Republicans are split over whether the drug plan is a positive step or a real disaster.
GOP lawmakers Shelby, Sessions and Rogers are accentuating the law's positives in an effort to beat back the negative messages being sent back home to Alabama.
"Beginning in 2006, all 720,462 Medicare beneficiaries living in Alabama will be eligible to get prescription drug coverage through a Medicare-approved plan," said Shelby, citing information he received from the Department of Health and Human Services. "In exchange for a monthly premium of $35, seniors who are now paying full retail price for drugs will be able to cut their drug costs roughly in half."
"Congress had a choice," said Rogers. "It could either provide Alabama seniors relief from the skyrocketing drug prices now, or continue to do nothing while seniors suffered under the unreasonable and unfair burden of high drug costs. I am proud to say that I cast my vote in favor of providing relief now."
Rogers and Sessions also pointed out that other provisions in the law will pour millions into Alabama hospitals, facilities which for decades have been reimbursed at a lower rate for providing equal services than hospitals in wealthier states.
"Of that $400 billion, $40 billion is for hospital relief," said Sessions, who championed that cause in the Senate. "Alabama hospitals will receive a big portion of that because of the way we were unfairly treated by the reimbursement formula, which was based on statewide average income. We're going to get about $1 billion over 10 years -- almost $1 million per year per hospital -- to help build additions, increase wages and improve services."
"I voted for the bill because it provides relief to seniors ... and because the bill provides unparalleled improvements for Alabama's doctors and rural hospitals, including $126 million for the Third District," Rogers said.
AARP, which supported the legislation, is encouraging its 35 million members to support Part D while the group's leaders try to persuade legislators to make improvements in the law.
"Our national leadership will be lobbying for changes to the Part D Medicare prescription drug benefit," said Jones. "They hope to be able to get some changes prior to 2006. They are quite aware of the pitfalls, but feel the law is a beginning."
"We don't think it's a bad bill," AARP spokeswoman Kristin Sloan told Fox News earlier this month. "We think it is a foundation we can build on."
"We would like to encourage our representatives in Washington to review the plan and make the necessary changes," Jones said. "Remove the doughnut hole, lower prescription drug prices and ... negotiate lower prices with the drug companies."
Jones said she'd like to see the government agree to allow drug imports from Canada if they won't consider negotiations with the pharmaceutical industry, but Shelby said he doesn't believe the benefits of imports outweigh the risks.
"I continue to have concerns about the possible risks drug importation may pose on the quality and authenticity of prescription drugs in America," Shelby said. "I will only support imports from Canada when the safety and health standards of these drugs can be guaranteed."
In the meantime
To fill the coverage void until Part D begins, an interim plan designed to help seniors save on the cost of drugs starts up in June and is as confounding to some seniors as its more expensive big brother.
Beginning May 3, seniors on Medicare can purchase a Discount Drug Card for $30. The card is expected to provide savings of 15-25 percent on certain drugs at designated participating network drug store outlets.
"Low income seniors, in particular, especially benefit under this new program, "Rogers said. "With the drug discount card, seniors with incomes of less than $12,900 for an individual and $16,600 for a couple will receive a $600 cash subsidy in 2004, and in 2005, on top of the discount the card offers."
The federal government estimates that about 7 million low-income seniors will be eligible for the subsidies in 2004-05. The money -- $600 for the last six months of '04 and an additional $600 for all of '05 -- will come in the form of a credit embedded in the card, similar to a pre-paid phone card. Unused funds from 2004 may be rolled over to 2005 except when the beneficiary voluntarily opts out of the approved Medicare card program. Seniors who already have drug coverage through Medicaid, a current or former employer, or military or veteran's benefits will not be eligible to apply for the discount drug card. However, enrollees in any state pharmacy assistance program remain eligible.
More than 100 companies -- including United HealthCare, which manages the AARP pharmacy service -- have already applied to sponsor Medicare-approved discount drug cards. All of the cards will be discontinued on Dec. 31, 2005, a Saturday.
The following day, Sunday dinner plans will include an overflowing bowl of alphabet soup for millions when the prescription drug benefit goes into effect. Seniors on Supplement plans H, I and J who wish to add plan D must switch to Supplement plan A, B, C, or G. (The switch must be made by between Nov. 15, 2005 and May 15, 2006.) Anyone afraid this stew might run short on consonants will be glad to know that Medicare plans K and L -- higher deductible programs designed to compete directly with managed care programs -- also begin the same day. Coverage under Medicare Parts A and B remain unchanged.
"Most members do not understand (Medicare's) explanations" of the changes, said Jones. "Our local chapter has had speakers come to try and explain them all."
Seniors aren't the only ones who find this phonetic flood somewhat confusing. Shelby confirmed that the federal government is prepared for an inundation of questions concerning the new Medicare law.
"This legislation provides the most significant reform to the Medicare system since its inception," said Shelby. "While that is beneficial, it can sometimes be extremely difficult to sift through the provisions and determine the impact these changes will have on each individual. I encourage Alabamians to contact Medicare either by visiting www.medicare.gov or calling 1-800-MEDICARE to have their questions answered."
'see also:
Fighting Meningitis
Interest Stories - Helping the 3rd World: Fighting Meningitis, a Third World MenaceBig Pharma's greed can't stop man making meningitis vaccine for Africa
Waiting for the Bus
Interest Stories - Ablism: Waiting for the Bus, Treatment of the DisabledDisabled riders routinely ignored insulted & endangered by bus drivers
2004 News
Breaking News Items - Personal Injury Attorney in the newsOur personal injury attorney firm, major newsmaker on a national level
