Medicare Prescription Drug Plan 2003

Sen. Chuck Grassley (R) of Iowa, Chairman of the Finance Committee presented the committee's plan for addition of a drug benefit for Medicare recipients to the Senate today. Relief from high prescription drug prices for seniors has been debated for years, but it appears that the legislation being introduced this year has a good chance of passage. President Bush will most likely sign the bill and has asked that the bill be on his desk by the July 4th recess, according to a report in the Washington Times.

This bill represents a compromise from the original proposal that provided for higher drug benefits as incentive to move away from traditional Medicare into a privatized managed care version.

The Benefit
The Senate Plan proposes to cover 50% of the first $4500 in drug costs after the deductible of $275 dollars is met. Once out of pocket drug expenses of $3700 are incurred additional costs are covered at 90%. For example:

• If you have prescription drug expenses of $4500, you will pay a deductible of $275, plus your share of the drug costs at 50% ($2113) for a total of $2388.
• If your drug costs go over $4500 you will bear the full cost for the next $1400 in costs for a total of $3700 in out of pocket costs.
• Once you have met the total out of pocket costs your drugs are once again covered but at higher 90 % coverage.

These out of pocket costs do not include a monthly premium, proposed to be $35.00 ($420 per year) for the first year. Under the Senate plan this bill would not go into effect until 2006.

The Cost
Stuart M. Butler, Ph.D. of the Heritage Foundation writes that "congressional supporters of that bill state it will cost $400 billion over the next 10 years", but believes the cost will be much higher. The first wave of Baby Boomers will roll into Medicare within the next 15 years significantly increasing health care costs. With this country looking at massive deficits from the tax cuts this may prove to be unaffordable.

Many seniors may also find their health care costs going up due to this benefit. Those who presently have (or are expecting to get) prescription drug coverage as a retirement benefit may find those benefits reduced or suspended by former employers trying to shift retirement plan expenses to the taxpayer. Additionally it is expected that Medicare beneficiaries paying higher proportion of physician's fees and higher deductibles for hospital care will offset some of the costs of the drug plan.

Will It Help?
That is a question that everyone will have to decide for themselves. Look carefully at your own situation and decide if these plans will benefit you. Be sure to take into consideration future health needs. Can you afford to lose your employer sponsored coverage? If you don't like the answer let your elected representatives know.