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Study Warns of High Rx Costs in Medicare

But Medicare Spokesman Says Estimate of Seniors Facing High Expenses is 'Wrong'

WebMD Health News

July 12, 2005 -- Nearly 6.5 million seniors with high prescription drug costs will still be responsible for thousands of dollars of expenses even after Medicare's drug benefit begins in January, a study released Tuesday warns.

The analysis concludes that gaps in Medicare's drug benefit -- known as Part D -- will leave many beneficiaries responsible for high expenses the program is intended to prevent. Medicare officials dispute the study, saying it grossly overestimates the number of seniors who will be faced with high drug bills.

The benefit pays for 75% of seniors' drug costs after they pay a $250 deductible and about $35 per month in premiums. Coverage stops completely at $2,250 in personal spending and then kicks in again after $5,100 in costs, after which the program pays 95% of all drug bills.

As many as 15 million low-income beneficiaries will be eligible for more benefits that cover most premiums and close the coverage gap, often referred to as Medicare's "doughnut hole." Several million more seniors who receive coverage through current or former employers also have more comprehensive coverage.

But as many as 16 million middle- and higher-income seniors are expected to rely on Medicare as their sole source of drug coverage. Forty percent of them, or 6.4 million, are expected to reach the program's $2,250 coverage limit, beyond which they will be forced to pay all of their costs, says the study, which appears in the July/August issue of the journal Health Affairs.

Going Over the Limit

Beneficiaries who exceed the limit will face an average of $11,000 in drug costs during the three years between 2006 and 2008. Another 2.4 million seniors who spend $5,100 or more on prescriptions will still have to pay an average of $12,300 out of pocket during the same time.

"That group is really going to confront some high costs," Dennis G. Shea, PhD, one of the study's authors, tells WebMD.

"People think Medicare covers everything, and a lot of times their expectations are going to come up short, says Shea, chair of the department of health policy and administration at Pennsylvania State University.

Congress enacted the Medicare's premiums and its "doughnut hole" as a way to hold down the overall cost of the drug benefit, which is already slated to top $750 billion over 10 years.

Medicare spokesman Gary Karr called the study's estimate on the number of seniors expected to pay high personal costs "drastically wrong."

Karr placed the actual number of beneficiaries who will confront the coverage gap at around 4 million.

"Right now Medicare is paying nothing for those folks, not a dime. Now they're going to be getting significant new help," he says.

Shea says that beneficiaries at risk of reaching the coverage gap should be warned to set aside money to cover out-of-pocket costs and that researchers and physicians should be on the lookout for seniors who skip medications because of the cost.

Policy makers "are going to have to watch closely to see if this is really the benefit that's right for older people," he says.

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