Medicare Prescription Drug Benefit


In March 2003, President George W. Bush proposed a new framework to modernize and improve Medicare to Congress. Eight months later, on December 8, President Bush signed the Medicare Modernization Act of 2003.

Designed to help seniors pay prescription drug bills, the president hailed his reforms, but a growing number of critics are finding fault with the new benefit. The basic question remains: will the Bush Administration drug benefit help seniors pay for their medicine?

Medicare is a federal government program that provides health insurance for seniors aged 65 and above, as well as people with disabilities and those with permanent kidney failure. The original Medicare plan only covers prescription drugs in a few cases, like certain cancer medicines.

Medicare should not be confused with Medicaid, which provides medical assistance to low-income people. Medicare provides medical assistance to seniors and people with certain disabilities, while Medicaid provides medical assistance based on income level.

President Bush and his administration think the new prescription drug program is the greatest improvement to Medicare in forty years. “As the result of the new law,” the official government handbook Medicare and You 2004 states, “Medicare is making some of the most significant improvements to the program since its inception in 1965.”

Medicare approved drug discount cards will be available starting May 2004 for seniors not enrolled in Medicaid. The enrollment period lasts through Dec. 31, 2005.

Medicare will contract with private companies to offer the new discount cards. A discount card with the Medicare seal of approval can help you save 10 percent to 25 percent on prescription drugs. Despite the savings, many observers don’t share the Bush Administration’s enthusiasm for how the new benefit is structured.

William McNary, Co-Director of Citizen Action Illinois, is one of the skeptics. McNary claims that the new benefit will actually make it harder for low-income seniors and people with disabilities to get the medicine they need.

“On December 8, 2003 President Bush signed a new law he claims will help seniors with their prescription drug bills,” McNary said. “A close look at the stage that day showed who really stands to benefit: drug companies and HMOs.

“Standing with the president were not seniors, but politicians who had taken in some $14 million in contributions from healthcare and insurance corporations. The audience was chock full of lobbyists and drug and HMO industry faces,” McNary said.

The Bush prescription program will not substantially lower the cost of drugs, says McNary. “The new law prohibits Medicare from using the buying power of 40 million people on Medicare to negotiate the lower prescription prices for seniors. The new law sets Medicare up to pay whatever drug companies want to charge for prescriptions that are going up three times the rate of inflation,” he said.

Another person against the new prescription drug law is 9th Congressional District representative, Janice D. Schakowsky. Schakowsky wasn’t available for comments but her press secretary Nadeam Elshami said that Schakowsky “was opposed to the new Medicare law on prescription drugs. She voted against it.”

In a Feb. 4 press release, Schakowsky and her colleagues, Representatives Marion Berry (D-AK), Tom Allen (D-ME) and others announced plans to introduce legislation that would lower drug prices for seniors and people with disabilities. In the press release, Schakowsky said “Under the legislation, the Medicare plan will be able to obtain lower drug prices because it can use its bargaining power to negotiate for discounts.”

I also interviewed Steve Pittman, Executive Director of the Illinois Alliance for Retired Americans. They also oppose the Medicare prescription drug law.

    Residents’ Journal:: What is the Illinois Alliance of Retired Americans?
    Steve Pittman: We are a senior advocacy group. We have about ninety clubs throughout the state. They are senior retiree clubs that are union-based, community-based and church-based groups. We are the successor organization to the Illinois State Council of Senior Citizens, which has been around 34 years. We work on a variety of issues concerning the seniors. Most recently we have been focusing on prescription drugs at the state and federal level.
    RJ: What don’t you like about the new law?
    SP: There’s a lot. It falls under two categories: one has to do with the prescription drug benefit itself, which we think is too small. Millions of seniors are going to end up paying more for their prescription drugs if they sign up for this program than they do now. There’s a huge coverage gap in the bill. You have to pay the monthly premium of $35 or you don’t get any benefits. The way the benefits work, everybody will pay the monthly premium, $35, in 2006 when this new law starts and that’s $420 a year. There’s a $250 deductible, so you pay the first $250 out of your pocket. From that point, until you reach the coverage gap at $2,250, you pay 25 percent and the drug plan will pay 75 percent. But, once you hit $2,250 you have to pay 100 percent of all of your drug costs plus pay the monthly premium until your drug cost gets up to $5,100. At that point you pay 5 percent and Medicare pays 95 percent and it starts over every year. It’s not a one time deal. Every year you have to go through that cycle. About half of our seniors will be in that coverage gap some point during the year. Another major problem with the benefit is all these numbers are indexed to the inflation of drug spending. So in 2006, when it starts, the premium will be $35. In 2010 the premium is going to be $51 a month, the deductible goes from $250 to $366 and the gap instead of starting at $2,250 will start at $3,294. But you have to have expenses of $7,467 before you get out of the gap.
    And there are other problem areas with the bill, things that have nothing to do with providing prescription drugs. Benefits will be offered through private plans, insurance companies, HMOs, and pharmacy benefit management companies. The bill also creates a private plan that will be subsidized by tax dollars to compete with Medicare. It also prohibits any Medicare negotiation for lower drug prices and it doesn’t allow for re-importation of prescription drugs from other countries. So it doesn’t do anything to hold down the cost of drugs, which is the real problem.
    RJ: There was a discussion about the importation of drugs from Canada. Is that still being discussed?
    SP: The bill says they are not allowed unless the Secretary of Health and Human Services, who currently is Tommy Thompson, allows them. Thompson has essentially said ‘Over my dead body’ [to re-importation]. There has been a bill passed in the house that will allow importation and there are several bills in the senate but that’s an issue that’s still up in the air.”
    RJ: What about the discount card? Will it help or save seniors any money?
    SP: For some it might … [Low income seniors] would get, if they sign up for the card, a $600 subsidy. It’s paid for with medical funds. Illinois is one of the few states that has gotten a waiver from the Federal Government to use some Medicaid funds to provide prescription drug coverage to seniors at higher income levels. That’s the Illinois Senior Care Program. In the Illinois Senior Care, you can have an income up to 200 percent of the poverty level.
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