Health reform losers, winners

Low-income seniors fare well in Medicare bill

Drug firms would see sales rise

Retirees with coverage at greatest risk of cuts

November 27, 2003|By Julie Hirschfeld Davis | Julie Hirschfeld Davis,SUN NATIONAL STAFF

WASHINGTON - The $400 billion drug benefit Congress voted to add to Medicare is a brand-new entitlement for 40 million elderly and disabled people. But while some will do better with the new coverage, others will not. And some will likely do worse.

Drug companies and providers, insurers and doctors and hospitals that treat Medicare patients stand to reap a windfall. But there are pluses and minuses for those players, too. Politically, as well, the measure will yield winners and losers.

Still, the long-term impact probably won't be known for years.

Under the legislation, seniors could choose to stay in the traditional Medicare program or join a private health plan. Either way, private companies would begin offering the drug benefit in 2006.

In the meantime, in 2004 and 2005, seniors could obtain a discount card costing about $30. It would let them buy drugs at between 10 percent and 25 percent off the retail price.

Starting in 2006, Medicare beneficiaries would get a drug benefit for a monthly premium of about $35, or $420 a year. After paying a $250 deductible, they would have 75 percent of their prescription costs covered by the government, up to $2,250.

They would then have to pay for all their own medicines until those costs reached $5,100. Beyond that point, the government would offer a "catastrophic" drug benefit, paying 95 percent of a recipient's drug expenses.

Here's how various groups stand to win or lose:

In general, low-income seniors would fare well under the plan. They would pay little or no premium or deductible for their coverage and only modest co-payments for drugs.

Individuals earning $8,980 or couples earning $12,120 or below would pay co-payments of $1 for generic medicines and $3 for brand-name drugs.

Seniors who earn up to $12,123 ($16,362 for a couple) would pay $2 or $5 for each drug.

For slightly higher-income elderly and disabled people, who earn up to $13,470 for an individual or $18,180 for a couple, there would be a modest premium and a $50 deductible. They would have to pay 15 percent of their drugs costs.

But the new law will not be an unqualified victory for those groups. To qualify for the largest subsidies, some of them must meet an "assets test" to show they own little property.

To qualify, those earning $8,980 ($12,120 for a couple) could have assets of no more than $6,000 for one person or $9,000 for a couple. Those earning $12,123 ($16,362 for a couple) would face limits of $10,000 in assets for an individual or $20,000 for a couple.

Very low-income senior citizens and disabled

Up to 6 million of the lowest-income seniors (about 76,000 of them in Maryland), many of whom receive health and drug coverage through Medicaid, could lose out. Many state Medicaid plans pay 100 percent of seniors' drug costs or charge $1 for prescriptions. So even the modest co-pays in the new plan would impose an added cost.

These seniors might also face more limited drug choices under a privately offered Medicare drug benefit that steers patients to specific brands or kinds of medicines than under Medicaid, which covers any drug.

Middle-income senior citizens and disabled

Those with inordinately high drug costs would do better under the bill than would those with modest medicine expenses. That's because the catastrophic benefit, which kicks in once drug costs exceed $5,100, covers all but 5 percent of a senior's prescription costs.

Those with more modest prescription costs might do no better than under the current system. A senior would have to have $810 in drug costs before his or her benefits under the new plan would equal expenditures. The Henry J. Kaiser Family Foundation, a health policy research group, estimates that 41 percent of seniors have drug costs of less than $1,000.

Seniors whose drug expenses are neither extraordinarily high nor low will see a substantial benefit up to the $2,250 limit. But after that, in what critics have decried as the "doughnut hole," they will have to pay 100 percent of their drug costs until they reach $5,100. An estimated 197,500 Marylanders will fall into that gap, and 20,000 of those will never reach the catastrophic level where the government steps back in.

Wealthy seniors

Starting in 2007, the bill would for the first time impose a "means test" in Medicare: Those who earn more than $80,000 would pay a higher premium for doctor visits and outpatient services. Three percent to 5 percent of beneficiaries - 38,000 in Maryland - would be subject to the test and would pay a higher premium. The premiums could range from $85 to $272.

Seniors in riskier health plans with deductibles of $1,000 or more would receive tax breaks for health care spending. They could open tax-free "health savings accounts," to which employers and family members could also contribute tax-free to their medical costs.

Senior citizens with retiree health coverage

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