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The New Medicare Bill: Winners and Losers

  • November 25th, 2003

Some stand to gain and others will lose as a result of the new Medicare bill that just passed Congress.

Winners:

Medicare beneficiaries whose drug costs are over $810 a year. Those with high drug costs who cannot get drugs more cheaply through a discount drug plan or from Canada will receive modest assistance, provided the prescriptions they take are covered under the program and they can afford the premiums and deductible, which have not yet been determined. For example, an individual with $3,160 in total drug expenses in 2006, when the new benefit will take effect, will save about $1,000 under the program.

Managed care companies. Private health plans will receive $12 billion in subsidies over 10 years to help them compete with traditional Medicare.

Drug companies. They will be protected by law from the government forcing them to reduce prices, and the bill restricts the importation of cheaper drugs from abroad. The Health Reform Program of Boston University estimates that 61 percent of the bill's prescription drug subsidy will go to increase drug company profits -- $139 billion over eight years.

Rural hospitals and doctors. They will receive increased Medicare payments amounting to $25 billion over 10 years.

AARP. The association will reap millions in insurance revenues from the bill through royalties from policies marketed to its members, according to two Harvard Medical School researchers. The researchers estimate that AARP's profits will be at least $1.56 billion over 10 years. AARP supported the Medicare bill and spent $7 million on a media blitz to secure passage. The association had "a blow-out party" to celebrate, said chief executive William D. Novelli.

Losers:

Medicaid recipients. More than six million elderly persons will lose the drug coverage they now get under Medicaid and will be covered instead under the new Medicare drug program. They will get help with premium, deductible and coinsurance, but a "substantial" portion, according to the Center on Budget and Policy Priorities, will be worse off either because their co-payments will rise or because a drug they take will not be covered by Medicare.

Millions of retirees who currently have drug coverage. The Congressional Budget Office predicts that 3.8 million retirees who have drug coverage from a former employer will have that coverage reduced or eliminated.

Older, frailer and poorer Medicare beneficiaries. In the six cities where traditional Medicare will be forced to compete with private health plans, the private plans may refuse such patients. After the private plans "cherry pick" the healthier patients, the costs of the traditional Medicare program in these cities will likely go up and beneficiaries' premiums will be forced by law to rise. Some beneficiaries may suddenly find they cannot afford Medicare.

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Last Modified: 11/25/2003

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