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Study: Medicare Drug Plan Will Most Aid the Poor

But plan is far from perfect for everyone, report finds

MONDAY, Nov. 22, 2004 (HealthDay News) -- One part of the new Medicare drug plan passed by Congress earlier this year could live up to its advance clippings and save people a lot of money. But some people could end up spending more than $750 out-of-pocket even after they participate in the program.

A report by the Kaiser Family Foundation, an independent organization that analyzes government and private health programs, concludes that low-income Medicare beneficiaries who sign up for the new Part D drug plans will pay significantly less for prescription drugs in 2006 than they would have without the plan.

An estimated 8.7 million people would reap this benefit and incur savings of 83 percent, foundation experts say. But the plan isn't perfect, they add. The report also projected that 6.9 million people -- most of whose annual incomes exceed $14,300 but still fall under the low-income category -- would fall into a "doughnut hole," meaning they could have total drug costs exceeding the initial benefit limit of $2,250 and will have out-of-pocket costs in excess of $750 in 2006.

A much larger in-between group, 20.3 million people who sign up for the benefit but who do not get the low-income subsidies, are projected to pay an average of 28 percent less out-of-pocket than they were before.

"It's a mixed story," said Tricia Neuman, co-author of the report, vice president of the Kaiser Family Foundation, and director of its Medicare Policy Project. "There are significant savings for people with low incomes. Higher-income people will get less help. It's not surprising that many people get help because of the magnitude of dollars that are being spent to help people with drug costs. But some are helped more than others, and some may not see any savings in a given year."

Others see it more negatively. "I'm concerned that the drug plan does two things in terms of underlying purpose," said Dr. Marc Siegel, clinical associate professor of medicine at New York University School of Medicine. "One is that it may create pressure to get drugs that may or may not be necessary. And two, I'm concerned about the inability of the feds to negotiate prices, and that they're actually bringing more patients to the drug companies."

This Medicare drug benefit, which goes into effect in 2006, targets resources to low-income beneficiaries. To qualify for the plan's low-income subsidies, people with Medicare must have annual incomes of less than 150 percent of the federal poverty level (which was $9,310 for an individual in 2004). Assets are also taken into consideration. In order for a low-income person to qualify for the maximum in drug payment benefits, he or she can't have more than $6,000 in liquid assets.

The Congressional Budget Office expects that 29 million people will sign up for the new Medicare drug plans.

Overall, the simulation performed by the foundation projected that three out of four enrolling in plans offering the new benefit (21.6 million people) will have the same or lower out-of-pocket spending in 2006 than they would have without the new law.

The other 25 percent (7.4 million people) are expected to be paying more. For most of this group, the increases will be small, about $250 or less.

"The people who will see the biggest savings are those who have low incomes who get the low-income subsidies," Neuman says. The analysis predicted that the new drug plan will substantially reduce average personal outlay for those whose spending exceeds $3,600 out-of-pocket (about 3.1 million people).

On the other hand, many low-income people won't get subsidies either, because they don't know about it or because they have assets that are too high, Neuman added. More than 1 million of those with incomes below 150 percent of poverty will get the subsidy.

Medicare beneficiaries whose incomes fall below 100 percent of the federal poverty line who enroll and receive the low-income subsidies are projected to spend an average of $90 out-of-pocket for drugs in 2006. People at the same income level who do not receive the subsidy will spend about $943, more than 10 times as much.

For Neuman, the implications of the findings are clear. "Those who get low-income subsidies do much better than those who don't," she said. "An all-out effort is needed to reach those with low incomes to help them get this assistance."

Siegel has a different idea. "How many of the poor people are actually qualified for Medicaid, which gives 100 percent drug coverage, but don't know it?" he asks. "One alternative is that we can identify people who qualify for Medicaid and expand that coverage."

The Medicare plan, he says, "is a very expensive plan either for the patient or the government."

More information

Visit the Kaiser Family Foundation for more on the report.

Tricia Neuman, Sc.D., vice president, Kaiser Family Foundation and director, Medicare Policy Project, Kaiser Family Foundation, Washington, D.C.; Marc Siegel, M.D., clinical associate professor of medicine, New York University School of Medicine; Estimates of Medicare Beneficiaries' Out-of-Pocket Drug Spending in 2006
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