Wayne Adult Community Center

Feature article from the February, 2004 Newsletter

What’s in the New Federal Prescription Drug Plan?

The bill passed in by congress in December to provide prescription drug coverage to Medicare recipients is highly controversial.  Those on the political right object to its cost, and those on the political left object to its favoritism for health insurance companies and pharmaceutical companies as well as its potential harm to existing coverage.  It is possible that the bill will be modified before taking full effect, but we present below some major provisions in the current bill.  Most of the facts were provided by Bill Pharo, based on information in an AARP summary.  Your newsletter editor has done minor editing and has added some information from other sources including recent Letters to the Editor of the newspaper The Record by the two senators from New Jersey.

Items 1 through 3 below apply to a family that has no current prescription drug coverage but does have Medicare Parts A & B:

     1. The bill provides some help via the interim discount card for those that spend over $300 on prescription drugs for most of year 2004 and all of year 2005. The low income provision is of no value to New Jersey Seniors, because PAAD is a better alternative.  (Even those with higher incomes might not benefit, because other discount cards are already available, for instance the one offered free by Chilton Memorial Hospital).

     2. In the year 2006, individuals in the family have the option to either (a) make no change in their Medicare plan, or (b) to select the Medicare drug plan at $35 per month ($420 per year), or (c) to seek a private health plan that offers a stand-alone drug plan or a combined health and drug plan. (Incidentally many seniors have already left Medicare Part B for private health plans that have drug coverage. The new bill offers them the choice to return to Medicare Part B with drug coverage if that is a better deal.)

     3. The Medicare drug plan will provide some savings to those who spend over $670 a year for prescription medicines:  It will pay 75% of drug costs over $250, up to $2250 per year.  Thus a person can save as much as $1500 per year (75 % of $2000) minus the $420 annual insurance cost).  However, for the next $3850 in costs there is a hole in coverage, and the plan will pay nothing  Then, starting at $5100 in costs, the plan will pay 95%.

One open question concerns individuals covered by their employer’s Drug plan: If the employer forces them into the Medicare Drug plan, some individuals may get poorer coverage. The Bill provides a significant subsidy to employers to avoid this migration, but the companies are under no obligation to retain their plans.

There are other concerns:  The bill permits private health insurance companies to compete with Medicare, and the private companies are allowed to “cherry pick”, that is, to accept only the healthiest applicants, thus achieving windfall profits while burdening Medicare (and thus the taxpayers) with those who will impose the heaviest financial burdens.

Perhaps worst of all, the bill prohibits the government from negotiating price with the pharmaceutical companies.  It must accept whatever price the companies set.

Because of the concerns and objections noted above, as well as other controversial areas, there is a movement to amend the bill.  Therefore some details given in this article may have changed by the time the bill goes into full effect.  However, even in its present form, the plan will provide some coverage for those who currently have none.


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