Whose Benefit?
Dee Mahan is deputy director of health policy for Families USA, a national nonprofit, nonpartisan organization dedicated to the achievement of high-quality, affordable health care for all Americans.
In December 2003, President Bush signed into law sweeping changes to Medicare that, among other things, added a long-overdue prescription drug benefit to the program. At first blush, that sounds like a good thing"and Gallup polls showed that in December 2003, 52 percent of all adults and 46 percent of people over 65, who would be covered by Medicare, were in favor of the drug benefit.
But as more people learn the details of the complex, convoluted legislation, support has waned. New poll results published in USA Today on March 31, 2004 show that only 36 percent of those over 65 support the drug benefit as it stands. Half of those surveyed think the new law won't help, or will even hurt, seniors who have problems affording the medicines they need. What is it that people are learning? They are learning that the drug benefit is expensive, not comprehensive and is a huge boon to the pharmaceutical industry and other special interests"at the expense of those who rely on Medicare.
Most of all, seniors are confused. The information they have received has been scant and incomplete. The benefit is complicated, and multiple programs"a discount card first, an insurance benefit second"fuel confusion. To answer some of the most pressing questions concerning the new Medicare prescription drug law and how it will affect seniors, Families USA"the national organization for health care consumers"has launched a public awareness campaign called the Medicare Road Show. The Road Show will visit more than 20 cities across the country between March and May. The centerpiece of the campaign is an educational video hosted by legendary newsman Walter Cronkite.
From what we have seen and heard at the several events conducted to date, it is clear that seniors don't understand the law that has been passed or the choices they will have to make. When they learn the details of the benefit they have waited so many years for, they are understandably angry. Angry that they won't have real protection from rising drug prices, that they will still face potentially ruinous drug expenses, and that special interests have received so much. The new drug bill will provide much-needed help to some low-income seniors with no drug coverage, provided they meet the strict asset test required to qualify for added help. But many of the lowest-income seniors, those in Medicaid, will find that they must pay more for each prescription than they do now. And for most in Medicare, it is far less than fulfilling the promise of real prescription drug coverage.
The new benefit still leaves seniors and others in Medicare vulnerable for significant drug costs. Seniors must first pay an estimated $420 in annual insurance premiums to get the benefit. The amount is just an estimate, because the drug benefit will be available only through private insurance companies, and those companies will set the premiums. After the premium, seniors will have to pay all of the first $250 in drug costs and 25 percent of costs of the next $2,000 in prescriptions. But once drug expenses reach $2,250, coverage stops. Seniors will have to pay all of the next $2,850 in drug expenses themselves. This gap in coverage has been euphemistically called "the doughnut hole." Only after someone in Medicare spends $3,600 just on prescription drugs will he or she qualify for catastrophic coverage. That's when Medicare again starts helping with drug expenses, providing comprehensive coverage. But that catastrophic coverage is only for the rest of the year. Every year, someone in Medicare will face a new annual deductible and a new coverage gap. If you qualified for catastrophic coverage in one year, you have to spend enough the next year to qualify all over again.
That's only part of the bad news. Every year, what seniors have to pay"the deductible, the coverage gap, the spending required to qualify for the comprehensive catastrophic benefit"will increase. That's because under the new law, what seniors have to pay themselves for their prescription drugs will increase in step with increases in Medicare's spending on the drug benefit. By 2013, the government projects that the annual deductible will have increased to $445 and someone in Medicare will have to spend $6,400 of their own money on prescription drugs to qualify for catastrophic coverage for that year.
Seniors' financial burden will increase so dramatically because of projected increases in Medicare's drug spending. Why will Medicare's spending rise so much? Because of a huge omission in the law that is nothing short of a gift to the pharmaceutical industry: the law forbids the government from using the bargaining power of Medicare to negotiate large discounts on drug prices. The government negotiates now on behalf of the Veterans Administration and the Department of Defense; large employers negotiate on behalf of their employees; other countries negotiate drug prices on behalf of their citizens. But under the new law, all price negotiations are left to the private plans that will provide the benefit. These individual plans, lacking the collective clout of the Medicare program, will not be able to get the same low prices the government could.
The Bush addministration has hailed this benefit as giving seniors a choice, similar to the choice members of Congress and federal employees have. Yes, seniors will have the complicated and difficult choice of picking a private plan to sign up for"and plan selection will be important, because plans can limit coverage to drugs on their approved drug list, or formulary. But the basic benefit described here is far less comprehensive than the drug benefits offered to federal employees. And between now and 2006, the only thing seniors will get is the option to purchase a card that will give unspecified discounts on select drugs. Not so different from drug-discount cards available now"and not so good for seniors.
More information on Families USA's Medicare Road Show, the new Medicare law and the Road Show video can be found at www.familiesusa.org.
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Published: Apr 07 2004
