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New Medicare Drug Benefit Will Help Some More Than Others

  • November 26th, 2004

A new report on the effects of the upcoming Medicare drug benefit predicts that the low-income Medicare population will reap large savings, but that other Medicare beneficiaries will continue to have high drug costs in spite of the drug coverage, and one-quarter of beneficiaries will actually pay more for drugs than they did before.

Medicare beneficiaries who have incomes of less than 150 percent of the poverty level and few assets are eligible for federal subsidies to help them cover their drug costs. These low-income individuals -- an estimated 8.7 million people -- are projected to pay 83 percent less for prescription drugs in 2006, when the drug benefit takes effect, than they would have spent if the Medicare drug law had not been enacted, according to the new report, released by the Kaiser Family Foundation.

The report also projects that about 20.3 million beneficiaries who do not receive subsidies will spend an average of 28 percent less on prescription drugs. About one in four beneficiaries, or 7.4 million people, are expected to have higher out-of-pocket spending, without taking into account the premium costs for the new coverage.

Medicare recipients who opt for the new Medicare drug benefit will pay premiums projected to average $35 a month. After meeting a $250 deductible, the beneficiary will pay 25 percent of drug costs up to $2,250, with Medicare footing the bill for the other 75 percent. Coverage will then stop completely until drug expenses reach $5,100 -- and consumers have spent another $2,850 of their own money -- after which Medicare will pay about 95 percent of costs. The $2,850 coverage gap is the notorious "doughnut hole," into which 6.9 million people are projected to fall, according to Kaiser.

Meanwhile, according to an article in the Christian Science Monitor, many doubt that the elderly, poor, and disabled will be up to the task of picking from the complicated array of options offered under the new drug benefit.

For more on the Kaiser report, go to: www.kff.org/medicare/med112204pkg.cfm

To read the Christian Science Monitor article, go to: www.csmonitor.com/2004/1117/p11s01-ussc.html. (Article may no longer be available.)

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Last Modified: 11/26/2004

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