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What's New? NEW MEDICARE DRUG BILL 1/2/2004 - Q: How much is the new Medicare drug benefit going to be worth? A: How much any senior gets in drug benefits will depend on how much they spend on medications, and what their income is. The law requires every senior who chooses the plan to pay a premium of $420 a year, and a deductible of $250. After paying the deductible, you pay 25% of your drug costs up to $2,250 in drug expenses. Then you hit a "doughnut hole", a no-coverage zone, that runs from $2,250 to $5,100 in drug costs. At this point, when you have spent $3,600 out of your own pocket, the Medicare catastrophic protection kicks in and you pay 5% of your drug costs from then on. The table below shows some examples: Annual Drug Costs You Pay % You Pay $250 $250 100% $1,000 $437 44% $3,000 $1,500 50% $6,000 $3,645 61% $10,000 $3,846 38% These figures do not include the $420 premium you have to pay. A senior with drug costs less than $810 a year will actually lose money by joining the Medicare plan, because they will pay more in premiums, deductible and copay than they get back from the plan. The average senior in America will have a drug bill of $3,160 by the year 2006 when this plan begins, and they will have to pay $1,660 out of their own pocket, or 53% of their bill. So most elders will find themselves still paying for half their drug costs or more once the Medicare drug plan starts. Unfortunately, the deductibles and the "doughnut hole" will increase every year after 2006, based on inflation in program drug spending so the amount seniors pay will keep rising. Q: Do low-income seniors get a break in the new Medicare drug law? A: Yes. There is a special break for low-income seniors, based on your income and your assets. Generally, elders with income below the poverty level (now $8,980) will not have to pay monthly premiums or deductibles for the drug plan. Elders with incomes below $12,123 a year get the same advantage, but their assets, like a bank account, cannot exceed $6,000. Elders with less than $13,470 a year qualify for lower premiums and deductibles, as long as their assets don't exceed $10,000. Because of asset limits, several million seniors will not get a premium or deductible break. Critics charge that the new law forbids Medicare from negotiating lower drug prices, and will cause Massachusetts to dismantle its still-new Prescription Advantage plan. To calculate how the Medicare plan would work for you, go to www.kff.org/medicare/rxdrugcalculator.cfm. This plan does not start until 2006, but drug discount cards should be on the market within six months for an enrollment fee of up to $30. Back to What's New?
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