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25% Could Spend More With Medicare Drug Benefit

Low-Income Seniors Expected to Reap Biggest Benefits, Report Shows

WebMD Health News

Nov. 22, 2004 -- A new report shows that one in four seniors could actually pay more for their drugs when the 2006 Medicare prescription drug benefit goes into effect.

Approximately 7 million of the 29 million Medicare beneficiaries expected to enroll in the program's prescription drug plan are likely to pay more with the benefit in 2006 than they pay in 2005 without it. The increase is projected to average $492 in additional costs. It is largely due to a coverage gap that cuts off government subsidies if patients' drug costs rise above $2,250 in a year. The subsidies don't kick in again until patients' costs reach $5,100 in a year.

But the same report, published by the Henry J. Kaiser Family, shows that the Medicare prescription plan will reduce out-of-pocket costs for as many as two-thirds of all who sign up. The drug plan is likely to be a financial boon for 8.7 million low-income seniors who qualify for additional assistance with their drug costs.

But analysts warn that consumers' costs could go up even more after 2006 as prescription drug costs continue an expected rise. That could mean an erosion in overall benefits as deductibles and premiums go up.

"[The year] 2006 is about as good as it gets. From then on it will deteriorate in time," says Barbara Kennelly, a former Democratic member of Congress who is now president of the National Committee to Preserve Social Security and Medicare.

Medicare officials, eager to defend the plan, took issue with many of the report's conclusions.

Program chief Mark B. McClellan, MD, argued that the Kaiser analysis ignored money that states and employers may provide to fill in holes in federal coverage, thus cutting beneficiaries' costs overall. He also stressed that coverage benefits most patients in the long term even if they don't see savings in 2006.

"You miss some of the important value of having drug insurance," he said.

Medicare Coverage Gaps

The Medicare Modernization Act calls for the program to pay 75% of participating seniors' prescription drug costs up to $2,250 after a $250 deductible -- starting in 2006 - with an average $35 per month premium. Beneficiaries are responsible for all of their costs between $2,250 and $5,100, with the plan paying 95% of costs beyond that top threshold.

As many as one-quarter of the 20.3 million seniors who will be using the benefit without low-income assistance are expected to have drug costs high enough to push them into that coverage gap. The gap is now known popularly as Medicare's "doughnut hole," says Tricia Neuman, a Kaiser Foundation vice president who co-authored the report.

Meanwhile, an estimated 8.7 million seniors below 150% of the federal poverty line are set to receive assistance with deductibles and premiums in addition to richer benefits that will greatly reduce costs, according to the report, based on cost figures from the Congressional Budget Office.

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