New prescription drug benefit cuts out some elderly

WASHINGTON -- For older Americans wondering how much help they would get from a Medicare prescription drug benefit, the answer depends on their income and annual pharmacy bills. And, it seems, on who's asked.

President Bush says the proposal being negotiated in Congress would cut those bills in half.

Tom Scully, the top Medicare official, says the legislation would give "a spectacular health benefit" to an older person whose annual income does not exceed $13,500.

John Rother, an analyst for AARP, said enacting the drug benefit would be a "very important social achievement to be able to take care of people at 150 percent of poverty and below."

But some Democrats and other health-care analysts say the plan that congressional negotiators have tentatively agreed to offers little to people whose income barely exceeds the limit to receive government subsidies.

"It's a crummy deal and they're pretty needy too," said Marilyn Moon, a health-care analyst with the American Institutes for Research.

Some critics say that the $400 billion set aside for the plan over 10 years is not enough. Indeed, any bill that emerges from Congress is certain to have a sizable gap in coverage in which Medicare beneficiaries with up to $400 in monthly drug bills would receive little help.

Others make the case that the plan is too generous to people who do not need help paying their bills.

"Having middle-income workers subsidizing drug costs for wealthy seniors ... makes no sense to us and is one of the worst features of this legislation," the conservative National Taxpayers Union said.

Further, there is the argument that 11 million to 13 million older Americans with low annual drug costs would spend more with a Medicare drug benefit. "People are expecting a benefit, but it's not a typical benefit," said Richard Kirsch, executive director of Citizen Action New York.

Voluntary use

Participation in the drug plan would be voluntary, but probably would be accompanied by financial penalties for people who sign up after the initial enrollment period.

The drug benefit would come at little cost to the roughly one-third of Medicare beneficiaries whose income is no more than 135 percent of the federal poverty level, $12,123 in 2003.

They would pay only a small share of drug costs --$2 or $5 per prescription -- with no premium, no deductible and no gap in coverage. The subsidy would be reduced at slightly higher incomes and end at 150 percent of poverty.

"It's going to have a significant impact on poor people," said Scully, administrator of the agency that runs Medicare, the government health insurance program for 40 million older and disabled Americans.

Lawmakers working on a final bill are likely to impose a test that would disqualify low-income older people with more than $6,000 in assets from receiving subsidized coverage. Studies suggest several million people could be excluded.

Participants in the negotiations said lawmakers have agreed on a plan that would charge an annual premium of $420 and require participants to pay for the first $275 in drug costs. After that, Medicare beneficiaries would pay 25 percent of costs between $275 and $2,200.

But after $2,200 in drug bills, Medicare would pay nothing until the beneficiary had spent $3,600 out of pocket. That would come after roughly $5,000 in drug bills.

Above that amount, the beneficiary would pay roughly 5 percent of drug costs, or a co-payment of $2 for generic prescriptions and $5 for brand-name drugs.

Bush said last week that someone with $200 in monthly drug bills would save $1,700 a year, while someone with $800 in monthly bills would save $5,900 on drug costs each year.

Bush failed to include the $420 premium in the calculation and assumed that older American who are now without drug coverage -- and therefore probably paying retail prices -- would receive a discounted price negotiated by their new drug plan.

A White House official said it is valid to calculate the savings either with or without the cost of the premium.

Either way, health-care analyst Moon said, such a drug benefit would be of little help to the 6 million to 7 million older people whose incomes exceed subsidy level, but who still make less than $18,000 a year. This group also is least likely to have drug coverage today.

Those without a drug plan who struggle to pay large drug bills would be no more likely to be able to afford their prescription drugs with a Medicare drug benefit, she said.

Gail Shearer, a health care expert with Consumers Union, said an overlooked issue is that the benefit "grows skimpier over time."

Given the rate of growth in drug prices, the benefit under consideration would be worth less when it would take effect, three years from now, she said.

"The average Medicare beneficiary is going to be deeply disappointed," Shearer said.