New prescriptions for Medicare

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June 2002

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New prescriptions for Medicare

New prescriptions for Medicare
New legislation to provide prescription medicine benefits for Medicare recipients will soon be debated on the floor of the House. The bill outlines a voluntary insurance system for senior citizens and persons with disabilities that would be financed by a monthly premium payment by the enrollee and provided by private insurance companies offering "drug only" insurance plans. Similar programs through private insurance programs, like Medicare plus Choice and Medigap, have garnered criticism as non-cost-effective from American Association of Retired Persons (AARP) and others.

But critics of the new bill, AARP and Families USA, argue prescription coverage must be a direct part of Medicare in order to be accessible to all income-levels and geographic regions. An AARP poll showed that 80 percent of Americans favor prescription benefits within Medicare.

Prescription benefits for Medicare patients was one of President Bush's campaign promises in the 2000 election, and he has been urging Congress to act on legislation to provide assistance. According to the AARP Public Policy Institute, one in three non-institutionalized Medicare recipients have no prescription drug coverage. Of those who do have coverage, most purchased it individually through a private insurance company, are beneficiaries of an employer-sponsored plan, or enrolled in Medicare plus Choice (a Medicare HMO) or Medigap. Some low-income seniors receive benefits from Medicaid.

AARP and Families USA, a health care consumers organization, say Medicare plus Choice and Medigap are too costly and inaccessible. Families USA says there are 15 states where Medicare plus Choice with prescription drug coverage is not offered. An additional seven states offer it in only certain areas of the state. Furthermore, premiums for these programs are on the rise. In almost half the states that offer Medicare plus Choice, premiums rose by over 100 percent since 1999. Benefits from Medicare plus Choice are capped in the majority of states, with an average cap of around $750 or less. Families USA also notes that only about 6 percent of Medicare recipients participate in Medigap due to its high premiums.

AARP says beneficiaries with lower incomes are less likely to have supplemental drug coverage and that employer-sponsored plans for retirees are on the decline. It cites the larger problem that even those who do have individually purchased drug coverage plans still incur the same or more out-of-pocket expense as those without coverage, around $570 a year.

According to a Families USA, the insurance companies have made it clear they are not interested in providing "drug only" policies because such policies would "disproportionately attract consumers with existing health conditions, are sick or disabled, and are among the oldest of the old. As a result, policies would be very expensive and would have few takers among younger, healthier Medicare beneficiaries."

Families USA says relying on private insurance companies has failed in the past and "virtually guarantees that coverage will be uneven in availability, cost, and value."—Tara Dix

For more information:
AARP postion on prescriptions for Medicare
Families USA
President Bush announces medicare initiative

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