Medicare Prescription Drug Benefit: Signed But Not Delivered to Seniors

(Washington, D.C.) – President George W. Bush signed the Republican Medicare and Prescription Drug bill at a White House ceremony today.

The 749 page bill, which passed the House of Representatives before dawn on November 22^nd after Republican leaders held the vote open for unprecedented 3 hours in order to change enough votes to achieve narrow approval, phases in a number of different changes to the Medicare system over 10 years.

U The prescription drug benefit, which will be offered through private insurance companies, will not be available to anyone until 2006. When it does go into effect, it will cover less than a third of the average senior’s prescription drug costs, which experts estimate will be $3,100 a year in 2006.

U The bill’s first changes take effect in 2004. Payments to Medicare HMOs will increase by several billion dollars, and the Secretary of HHS will have discretion to increase rates even more. Payments to some doctors and hospitals will also increase. These payment increases will likely trigger increases in beneficiary premiums for Medicare Part B, which covers outpatient care and doctor visits.

U In about six months, some discount drug cards offered by private companies will be labeled "Medicare" discount cards, and seniors with very low incomes will receive a $600 subsidy toward buying drugs with the card. All other seniors will pay $30 a year for the card and the discounts are not guaranteed, and will vary by drug and location, just as the cards seniors currently use do.

U Starting in 2004, the "global cap" will also go into effect. If Medicare spending increases above an arbitrary level for any reason (including the payment increases in the bill) Congress will be required to immediately bring up legislation to cut benefits or increase copayments for current beneficiaries, or otherwise decrease Medicare spending.

U In 2005, Part B deductibles will increase to $110 for all seniors, and begin increasing annually. In 2007, all Medicare beneficiaries will need to provide their financial information to Medicare in order to receive Medicare Part B. Those with incomes above $80,000 will pay higher premiums.

U In 2010, up to 7 million Medicare beneficiaries will be required to participate in a "demonstration" in which they receive a voucher to buy private insurance instead of Medicare. Within five years, those who want to keep Medicare will likely pay 25 percent more than they would if they were not in the demonstration, and premiums will vary across the country.