Roughly 19 million people are expected to reap some savings from Medicare’s new prescription drug benefit, according to an independent analysis released Monday. But 10 million others would pay as much or more for their medicines.
The biggest winners are low-income Americans who will receive government assistance that is projected to reduce their drug spending by 83 percent when the drug insurance program begins in 2006, said the Kaiser Family Foundation. The poorest of these people would spend an average of $90 for medicines, said the study by Kaiser, a health care think tank.
The signature component of last year’s Medicare law, the prescription drug benefit will vary widely in its impact on the 29 million older and disabled Americans that the Congressional Budget Office projects will enroll, the study said. The CBO said the average savings will be 37 percent in 2006.
Report no surprise to lawmakers
The prospect of differing benefits is no surprise to lawmakers who wrote the Medicare legislation. The most assistance was to go to the poor and those whose drug bills exceed $5,100 a year. In between, there is help, but also a large gap — known as the “doughnut hole” — in which the government will pay nothing.
“The law works as it was designed,” said Diane Rowland, Kaiser’s executive vice president.
A separate issue, Rowland said, is “whether that meets public expectations.”
More than a third of those who enroll in the drug benefit will pay annual premiums expected to be around $420 and have no savings.
For 7.5 million people, that is because they spend little or no money on prescription medicines.
But another 2.4 million could see significantly higher out-of-pocket costs because they are projected to lose more generous prescription drug coverage from their former employers, the report said.
The Bush administration is projecting higher participation and larger average savings, exceeding 50 percent, among the 41 million Medicare beneficiaries.
Government criticizes results of study
The federal Centers for Medicare and Medicaid Services took the unusual step of sending reporters a four-page rebuttal of the Kaiser report, asserting that it contains “several important flaws” that understate savings and exaggerate the number of people who would pay more.
Dr. Mark McClellan, the Medicare chief, told reporters the number of people who might lose employer-sponsored drug coverage would be smaller than the 2.7 million used in the Kaiser report. But the administration has yet to make public its own estimate.
All the projections exclude the insurance premiums, projected to average $420 for 2006, that beneficiaries will pay.
In addition to the premium, participants will pay the first $250 in prescription expenses. After that, the government will pay 75 percent of the next $2,000 in drug bills. Above $2,250 in prescription costs, however, the doughnut hole opens and beneficiaries will pay the entire bill until it reaches $5,100. At that point, called the catastrophic limit, the government will pick up all but 5 percent of the costs.
Most of the charges will be waived for the poor. An estimated 8.7 million people with low incomes are projected to qualify for subsidies, the study said. But another 5.7 million people either will not sign up or will be denied assistance because they have too much in savings and other assets, despite their low incomes.
The savings for everyone else are estimated at 28 percent in the Kaiser study, based on a model developed by Actuarial Research Corp.
Although average out-of-pocket spending is projected to be lower than it otherwise would have been, many Medicare beneficiaries will continue to face high drug bills, the study said.
That includes almost 7 million people who are projected to reach the coverage gap, when they must pay their entire drug bill.
Of that group, 3.1 million will spend so much on drugs that they will hit the catastrophic limit. Their overall savings will be 37 percent, higher than the average, the study said.