The Medicare prescription drug benefit—
a holey mess

By John Abraham and Rachel Drown

If you are a senior citizen or a person with disabilities, don’t expect the new Medicare prescription drug benefit (Part D) to be an antidote for high drug prices. In November 2003, as a part of the Medicare Modernization Act, Congress included a new Medicare prescription drug benefit for eligible participants. The voluntary benefit takes effect on Jan. 1, 2006. Basically, Medicare Part D is a catastrophic drug plan with some profit sweeteners for drug companies, insurance companies and HMOs. The plan does nothing to control drug prices and puts current health benefits for Medicare’s 35 million participants at risk.

In its first year, the drug plan has a $420 annual premium and a $250 deductible. After the beneficiary meets the deductible, co-insurance picks up 75 percent of the beneficiary’s cost until she or he passes the $2,250 threshold. Then the huge coverage gap—known as the “doughnut hole”—occurs: Medicare insurance pays no portion of drug costs between $2,250 and $5,100. After $5,100, catastrophic-like coverage kicks in, and Medicare Part D pays 95 percent of the beneficiary’s cost.  Essentially, a Medicare Part D beneficiary must spend more than $4,000 before getting any real relief.

The AFT and a large coalition of organizations fought the passage of the bill as it was written, and feel the battle is not over yet. We are asking our members to learn more about how the new program will affect you and your family and to share your concerns with your U.S. senators and representative.

Problems with Medicare Part D

• Does nothing to rein in soaring prescription drug prices;
• Prevents federal government Medicare from negotiating lower drug prices or establishing a national Medicare-administered plan to compete with private insurers and HMOs;
• Continues to ban reimportation of safe, affordable drugs from Canada;
• Opens the door to an estimated $139 billion in profits for the pharmaceutical industry;
• Could force 3.2 million retirees to lose their employer-provided drug benefits;
• Forces millions of seniors and people with disabilities to pay more for their prescription drugs because private plans will determine how much to charge and what drugs are covered; and
• Does not cover out-of-pocket expenses between $2,250 and $5,100 in the first year—and this “doughnut hole” is predicted to increase in each additional year.

The new Medicare law was not proposed in the consumers’ best interest. It was passed after an intensive and costly lobbying effort by the pharmaceutical industry, HMOs and private insurance companies, all of which spent millions to pay for slick ads to sell the bill to the public.

What can AFT members do?

Ask Congress to:

• Repeal the provision that prevents Medicare from negotiating lower drug prices.
• Allow Medicare to establish a national Medicare-administered prescription drug plan to compete with private companies.
• Fill in the coverage gap, so seniors receive coverage for costs between $2,250 and $5,100.
• Provide additional subsidies for employers who otherwise will drop existing coverage for more than 3 million seniors.
• Eliminate the huge subsidies that Congress gave to HMOs and insurers to offer an alternative to the traditional Medicare program.
• Prohibit drug plans from limiting seniors’ access to drugs through drug formularies.