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Hard to Swallow: Older Americans and the High Cost of Prescription DrugsPrescription Drugs: A Big Part of Health Care
Seniors Use Lots of Prescription DrugsThe facts about senior citizens and prescription drugs are hard to ignore:
* Projections Seniors Need Reliable Drug CoverageMedicare — the basic health plan for nearly every American over 65 — has always covered most hospital and doctor bills, but not prescription drugs. Supplemental health plans that are designed to fill gaps in Medicare also have had limitations:
Help for Low-income Seniors.Low-income seniors may qualify for state means-tested prescription drug assistance programs, which have strict income limits.
High drug costs and lack of decent coverage are problems that affect millions of average seniors — not just the low-income. In fact, nearly half of those who lack coverage have incomes that are more than twice the poverty level (exceeding $17,000 a year).
* Projection Highest Prices in the World
Why? Other western governments have national health plans that either negotiate prices with drug companies or establish price ceilings for every drug. Similarly, Medicare could negotiate prices on behalf of its 40 million beneficiaries. So far, however, Congress has barred Medicare from doing so. As a result, older Americans with no coverage (along with 44 million younger, uninsured Americans) have been the only folks paying full retail at the pharmacy. The drug companies — forced to negotiate with all other payers — shift costs to U.S. seniors and make them subsidize the rest of the globe. Soaring Profits for Drug MakersThe big drug companies often manufacture miraculous products and deserve a fair return. But they currently are the world’s most profitable industry, with profit margins nearly four times those of the average Fortune 500 company. At the same time, their high prices are threatening drug coverage for millions of workers and retirees, while millions of uninsured are forced to choose between food and medicine.
Changes in MedicareIn November 2003, Congress enacted the Medicare Prescription Drug Improvement and Modernization Act, which made dramatic changes in the Medicare program. AFSCME believes the new law moves Medicare in the direction of a privatized system controlled by HMOs and insurance companies. As a result of some of the changes that will come from this law, seniors will pay more for health care in the future than they do today. To win favor for a major overhaul of Medicare, congressional supporters of the plan folded it into legislation that featured a benefit change seniors really need: prescription drug coverage. Unfortunately, the drug benefit in the new law has big coverage gaps and high out-of-pocket costs, and it puts employer-paid coverage at serious risk. The law passed without the support of most senior, consumer and labor organizations, who have raised numerous concerns. Following is a summary of how the law’s drug benefit works, as well as some of the problems it may cause: Skimpy Rx benefits with a big gap in coverage: The prescription drug benefit in the new law has an estimated premium of $35 a month or $420 per year, a $250 annual deductible and 25-percent co-pays for annual drug costs from $251 to $2,250. After $2,250 in drug expenses, the coverage stops and seniors are required to pay 100 percent out of pocket for the next $2,850 in prescription drug costs each year. This gap is known as the "doughnut hole." While in the "hole," seniors continue to pay the $35 monthly premium but get no benefits. After $5,100 is reached in annual drug spending, the plan covers 95 percent of drug expenses for the remainder of the year, with no limit. The drug benefit will be provided through private, prescription-drug-only insurance policies and by Medicare HMOs. Signing up for these plans is completely voluntary. Employer-sponsored Drug Coverage at Risk: Hoping to prevent employers from canceling coverage and shifting retirees to the new drug plans, Congress gave employers cash subsidies to help underwrite their high drug costs. But the subsidies are too small and may not be sufficient to stop many plan terminations as drug and other health care costs continue to rise. The Congressional Budget Office (CBO) estimates that three million retirees could lose their coverage. Unfortunately, part of the employer subsidy is in the form of a tax credit. But tax credits can’t be used by public and non-profit employers, who will get no comparable relief under the new law. The result could be higher premiums and co-pays for AFSCME retirees who are covered by employer plans (or even plan terminations by some of our smaller employers), as prescription drug prices continue to rise and drive up the cost of retiree health care. Inability to Contain Drug Costs: The law prohibits Medicare from negotiating with the drug companies for lower prices, thus foregoing the enormous buying power of a system that represents 40 million beneficiaries. While the law includes a provision to legalize re-importation of prescription drugs from Canada, this can occur only if the Department of Health and Human Services (HHS) certifies that there are no safety risks. With no reported cases of fraud or abuse, HHS has consistently refused to provide certification. Effective Date – 2006: The new drug benefit won’t take effect until January 2006. Because drug prices will continue to soar unchecked, CBO estimates that within seven years of the effective date, the annual deductible for drugs will grow from $250 to $445. The doughnut hole will grow too. In 2013, there will be no coverage between $4,000 and $9,066 in individual drug spending — a 78 percent increase over 2006. Drug Discount Card: These cards are a temporary measure, effective only until 2006, when the drug benefit starts. Under this program, Medicare-approved discount cards are being sold by private pharmaceutical benefit managers for $30 a year. Discounts are estimated at 10 to 25 percent, although many experts say they will be much less. Seniors with income below $12,569 a year will get an extra benefit: $600 toward annual drug costs. Big Winners – The Drug Companies: After spending millions in campaign contributions and lobbying expenses, the highly profitable drug industry (the most profitable in the world) will receive a bonanza from the new Medicare law. The law’s drug coverage for seniors will result in a higher volume of drug sales, while the total absence of cost-containment means nothing will get in the way of increased profits. It’s estimated that the drug companies will gain an additional $139 billion over 10 years. American Federation of State, County |
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People today are living longer than ever before. That’s certainly something to celebrate, but even longevity has its downside. Unfortunately, aging often means acquiring chronic illnesses — conditions such as heart disease, diabetes, high cholesterol, hypertension, arthritis and many others. The longer we live, the more likely we are to develop one or more.
