15 Reasons Why the 2003 Medicare Law Fails Seniors
Alliance for Retired Americans, April 2004, www.retiredamericans.org
It is more about dismantling the Medicare program than providing a prescription drug benefit.
Background: The addition of a prescription drug benefit to Medicare accounts for 181 pages of the legislation; the remaining 500 pages of the law includes the measures to reform Medicare.
It is not part of any other insurance plan and creates a gap in benefit coverage.
Background: Beneficiaries will pay a monthly premium of $35 as well as a $250 deductible. The benefit will cover 75 percent of drug costs up to $2,250. While continuing to pay premiums, beneficiaries will pay 100 percent of drug costs between $2,250 and $5,100, after which the plan will kick in again and cover 95 percent of costs. Nearly one-half of Medicare beneficiaries will fall into the coverage gap or “donut hole” and will not have any assistance with their drug costs for at least part of the year.
The prescription drug benefit will be unaffordable for most seniors, particularly in future years.
Background: The Congressional Budget Office projects that after one year, the $250 deductible and the $2,250-5,100 gap both will jump 10 percent. By 2013, the eighth year of the program, the deductible and gap are projected to grow by 78 percent; seniors will pay a $445 deductible and those with the largest drug bills will be entirely responsible for more than $5,000 in drug costs.
The law does not provide the drug choices beneficiaries want.
Background: The expanded “choice” in the law will result in a great deal of confusion. For example, beneficiaries who use several medications will have to
research and compare drug plans to find the one that will cover most of their medications. Each plan will have its own list of drugs, or formulary, which is approved for use or payment. Plans are required to have two drugs per class
but not all drugs in that class, are free to design restrictive preferred drugs lists and may change these lists after a beneficiary has enrolled.
The complexity and lack of information place beneficiaries at a severe disadvantage in choosing a plan.
Background: Beneficiaries will need to research extensively to determine which plan is best for them. Nearly a quarter of Medicare beneficiaries have health problems such as hearing or cognitive impairments that make it difficult for them to make decisions. Yet the law does not allow beneficiaries to access the preferred drugs lists of the competing prescription drug plans before
enrollment. Also, the law does not provide additional monies for independent resources such as the State Health Insurance Programs (SHIPs) to provide information on the new law.
The law provides greater benefits to providers, private insurers and drug companies than it does to beneficiaries.
Background: Most health legislation usually includes increased
payments for providers such as doctors and hospitals. Remarkably, this legislation contains sizeable financial gains for private insurers and pharmaceutical companies. It is estimated that pharmaceutical companies will reap additional profits estimated at $139 billion over 10 years. In contrast, the typical Medicare beneficiary will receive approximately an $800 a year drug benefit. The law substantially increases subsidies to managed care plans. Starting in 2004, two years before the prescription drug benefit begin, managed care plans will receive $20 billion in subsidies. By 2006, the plans will be paid as much as 25 percent more than the traditional fee-for-service Medicare pays for each enrollee.
The protections and benefits for low-income individuals will likely be less than they currently have.
Background: For those who fall below 100 to 135 percent of the Federal Poverty Level (FPL), Medicare will pay the premiums and deductibles. These low-income beneficiaries will be responsible for co-payments between $1-2 for generics and $3-5 for brand drugs. However, co-pay amounts are projected to increase by about 10 percent per year, according the Congressional Budget Office (CBO).
In contrast, CBO projects Social Security checks will increase about 2.5 percent per year. The law also includes a restrictive assets test of $6,000 for individuals and $9,000 for couples. The assets test excludes a house and car but could include savings and personal property. It is estimated that the assets tests will eliminate 2.8 million low-income individuals from assistance.
Low-income individuals who are currently covered under both Medicare and Medicaid (called “dual eligibles”) will likely have to pay more for their drugs or lose access to coverage for drugs they need. The law prohibits Medicaid from supplementing (“wrapping around”) the Medicare drug benefit. Medicaid generally covers all drugs that a beneficiary receives. Under the new law, plans will be able to limit coverage to two drugs per therapeutic class.
Consequently, low-income individuals who typically live on very fixed incomes will find that the co-pays will increase at a pace that will become increasingly unaffordable and those who currently have Medicaid coverage will have less assistance than they have now. Overall, 6.4 million low-income seniors will be harmed by the Medicare Act.
The law does nothing to control prescription drug price inflation.
Background: The legislation explicitly prohibits the federal government from using its purchasing power on behalf of 40 million beneficiaries to bargain with drug companies. Drug companies lobbied for this because they prefer to deal with dozens of small plans than a single federal agency. Thus, Medicare must pay whatever drug companies want to charge. The pharmaceutical industry
consistently collects after-tax median profits from revenues at a percentage higher than any other industry and five times the profit level for the other fortune
500 companies combined.
The law would also continue the ban on reimporting safe, affordable drugs from countries such as Canada by requiring safety certification from the Secretary of Health and Human Services, which HHS has refused to do.
The federal government is prohibited from negotiating for lower prices under the new law.
Background: (same as background above – #*8)
Medicare beneficiaries will be penalized for each year they do not join a private plan.
Background: The Act imposes an unfair penalty on beneficiaries who do not sign up for the drug benefit by increasing the premium amount one percent per month for each month an individual without coverage delays enrollment. Thus, if individuals with low drug costs decide they don’t want to pay the premium for a service they won’t use and then two years later have high drug costs and join, the premiums will be 24 percent higher for the rest of their lives. This penalty is especially unfair because there will likely be a great deal of confusion during the early years of the new program.
Beneficiaries will no longer be able to buy Medigap policies that provide prescription drug benefits.
Background: Most beneficiaries enroll in Medigap plans because they need prescription drug coverage. The law prohibits the sale of any Medigap policy that would help pay for drug co-payments and deductibles when the new drug benefit becomes available.
It undermines Medicares universality by requiring wealthier beneficiaries to pay more for the first time in Medicares history.
Background: Medicare has been a successful program because of its universality. Individuals with incomes above $80,000 and couples with incomes above $160,000 will pay more of their Medicare Part B premiums. If upper income individuals have to pay more for Part B, they may choose not to participate, and Medicare may become a program for lower and middle income seniors only. Additionally, there is no guarantee that the upper income limit will not be brought down in future years when Medicare needs additional monies.
Millions of retirees with employer-provided health coverage will likely lose their coverage.
Background: The Congressional Budget Office projects that 2.7 million retirees will lose the drug coverage they currently receive through former employers who will drop such coverage when the drug benefit becomes available, even with employer subsidies.
There is no guarantee the interim drug discount card will deliver the promised savings.
Background: The drug discount cards, which will become available in May or June 2004, will cost $30 a year. It is estimated that savings will be only about 10-15 percent, approximately the same or even less than discount cards currently in use. Some low-income beneficiaries will have credit for $600 worth of drugs but will still pay 5-10 percent of the costs of each drug they buy.
Medicaid beneficiaries will not receive the $600 subsidy. Medicare beneficiaries can use only one of the discount cards at a time and must use the card they select for at least one year. The law does not set any rules about the base prices from which these discounts will occur.
Beneficiaries in rural areas will have limited options with higher costs.
Background: The law provides fallback Medicare coverage, only if there is less than two prescription drug plans available in a region. Beneficiaries, particularly in rural areas, are likely to have a choice between one high-priced, drug-only plan and one preferred provider organization, which restricts choice of doctor and imposes high costs for out-of-network care.