Muddling
Through the Medicare Morass
Highlights of the new
Medicare Law
by Patricia K. Gleich
The Medicare Prescription
Drug Improvement and Modernization Act-passed just before November 2003-is
a complicated, often misrepresented, yet, crucially important law for
older individuals and all of us who hope one day to matriculate to the
status of "senior." With politicians and vested interest
groups providing sometimes-skewed explanations of the changes, even
the most actuarially gifted may ponder.
This brief article will attempt to summarize the most critical ways
the Medicare Program will change, separate some of the myths from the
reality, and provide reliable sources of the much needed and more detailed
information. It will conclude with ways that congregations might assist
people in understanding and participating in the program.
It is important to note that this law will ultimately change Medicare
for everyone. Historically, Medicare has been an "entitlement"
program. As such, everyone, regardless of income or assets, has been
"entitled" to the same benefits at a standard premium cost.
Changes enacted by the new legislation will provide much needed prescription
drug benefits for folks at lower incomes. However, "means testing"
will mean that individuals in higher income groups will ultimately pay
higher premiums-for Medicare Part B and Medicate Part D-and importantly,
because the legislation specifically prohibits cost negotiation for
lower rates on pharmaceuticals, there is no safeguard to keep
drug costs from continuing to rise.
Those currently retired or anticipating retirement may find changes
in the benefits offered through their retirement programs, and penalties
for not enrolling in new Medicare offerings at optimum times.
The portion of the bill that was most touted-the Prescription Drug
benefit-will not go into effect until 2006, as Medicare Part D.
However, between May 2004 and 2006 discounted drug cards are becoming
available. With many, many options and varying descriptions, these cards
are proving to be very complex and confusing. Discussion will begin
with the Medicare Prescription Drug Discount Card.
Prescription Discount Cards
Starting in May 2004, seniors will be allowed to voluntarily purchase
a "Medicare approved" drug discount card. The discount cards
will not be available through the Medicare program, only through one
of many private companies. The discount cards will only be available
until the new prescription drug benefit becomes available in January
2006. The cost of the card cannot be higher than $30 per year. Individuals
may retain current private prescription drug coverage or cards if they
will remain available.
A large number of options put forward by 28 private companies found
to meet certain requirements, will begin offering cards providing a
discount on certain prescriptions in May 2004. Seniors may have as many
as 25 options, but will have at least to choose from, yet may only sign
up for one at any given time. Changing from one card to another will
only be allowed during specified open periods, and the first one will
be between November 15, 2004 and December 31, 2004. Each card will have
an individual and unique application.
There is no minimum discount that the cards are required to provide.
The government estimates that the average senior will save between 10
percent and 15 percent off their total drug spending. There is no requirement
that all Medicare eligible drugs be covered by the card, however cards
are to provide coverage for one drug in each of 209 categories. Companies
may change which drugs are covered and how the discount provided once
per week. Cardholders are not required to be notified of changes except
by posting on the Internet.
Pharmacies will choose which discount card they will honor, thus, each
senior will need to confirm-before selecting a discount card-that the
card will be accepted by pharmacies in his/her community.
Seniors with annual incomes less than 135 percent of the federal poverty
line ($12,568 for singles and $16,862 for couples in 2004) are eligible
(through Social Security) for $600 of medication credit and will need
to apply when selecting a card.
Key decisions individuals will need to make concerning the voluntary
card:
- Do any of the voluntary discount cards (formulary lists) cover my
current medications?
- If not, are there generic or other "brand" of my prescription
drug that are listed?
- Are the cards that cover my medications accepted by my local pharmacies?
- If not, how will I obtain the medications?
- Will any of the new discount cards provide a cost saving over my
current drug benefit?
- Actual cost saving will vary with each individual and will likely
change frequently.
- Am I willing to take the time to compare prices and monitor prescriptions
drug availability?
Once a card has been selected, the individual will not be able to change
cards except during a re-enrollment period at the end of calendar 2004.
What about future prescription drug benefits?
On January 1, 2006, a new, voluntary prescription drug benefit will
become available as Part D of Medicare. Beneficiaries will be able to
purchase either "standard coverage" or alternative coverage
with "actuarially equivalent" benefits. The new benefit will
be offered through private companies, not through the traditional Medicare
program itself. The new prescription drug benefit will not be available
through traditional Medicare. In most areas, a drug benefit will only
be available through private companies, either as a stand-alone benefit
or as part of a broader health package commonly known as an HMO or PPO.
At least one stand-alone full-service plan-Medicare Advantage (a HMO
or PPO)-must be available in each area. If they're not, a government
sponsored fallback plan will be established, financed by the federal
government but administered through private companies. In 2006, "standard
coverage" will have a $250 deductible, and a premium estimated
to be about $35 per month.
Beginning in 2007, these amounts will increase to reflect the costs
of the new Part D program for the previous year. By the year 2013, they
are projected to rise to $58 per month for the premium, and to $445
per year for the deductible.
The initial enrollment period will begin in November 2005, and will
last six months. Under the new law, activities designed to broadly disseminate
information about the program must begin at least one month before the
enrollment period begins.
Eligible seniors who sign up after the initial enrollment period (including
those whose retirement plans offer a non-equivalent drug benefit) will
be assessed a penalty that will be built into their monthly premiums
forever. The penalty will total 1 percent for each month the senior
opts out of coverage (reduced for seniors under 135 percent of poverty.
The penalty can be waived if the senior can show that late enrollment
is due to some change in his/her circumstances, such as job loss or
loss of other coverage, such as a retirement plan no longer offering
prescription drug coverage.
Medicare Part D
Beginning in 2006, the "standard" Part D Medicare benefit
will pay 75 percent of covered prescription drug costs up to $2250 after
the $250 deductible has been paid. Then the benefit stops until the
beneficiary has spent another $2,850 on covered medications. A total
of $3,600 in out-of-pocket costs must be reached to be eligible for
the catastrophic benefit.
After a total of $5100 has been spent, under the catastrophic coverage,
seniors will pay 5 percent of covered prescription drug costs or co-payments
of $2 for generics and $5 for brand names, whichever is higher.
Funding For Employer Provided Retiree Benefits
In order to encourage companies to maintain drug benefits for retirees
they can receive subsidies for 28% of the cost of their retiree prescription
drug costs between $250 and $5,000. An additional $18 billion in tax
benefits are provided as additional incentives to private companies
each year beginning in 2004. The subsidies are designed as cash payments
from the government to employers, which include private companies, federal,
state and local governments, and tax-exempt organizations such as charities
and Indian tribes.
Prescription drug cost containment
The federal government is specifically prohibited from negotiating
for lower prices with drug companies, a process that significantly reduces
costs for veterans and others whose agencies are permitted to use their
leverage to reduce costs for their beneficiaries.
Purchase of drugs form Canada or other countries is prohibited unless
the Secretary of the Department of Health and Human Services certifies
he/she can guarantee the safety of the imported drugs. The bill's provisions
may cause generic (and lower cost) versions of brand-name drugs to become
available earlier.
Changes to Medicare Part B
When a senior first becomes eligible for Medicare, a free voluntary
physical will be available. New preventative benefits will be available,
such as screening for diabetes and cardiovascular disease. A disease
management program will be provided to manage and promote health for
those with chronic illnesses.
Beginning in 2005, the Part B deductible will increase by 10 percent
to $110. Thereafter, the deductible will be indexed with inflation to
reflect the growth in Part B expenditures. Under current law, premiums
for Medicare's Part B (physician and outpatient) program are set to
cover no more than 25 percent of program costs. Premiums are applied
uniformly to all beneficiaries. Beginning in 2007, Part B premiums will
be means-tested for individuals with higher income and assets.
When fully phased in after seven years, singles with incomes above
$80,000 ($160,000 for couples) will pay premiums equal to 35 percent
of program costs; seniors above $100,000 ($200,000 for couples) will
pay 50 percent; seniors above $150,000 ($300,000 for couples) will pay
65 percent; and those above $200,000 ($400,000 for couples) will pay
80 percent.
Health savings account (HSA)
Taxpayers under age 65 and Medicare Beneficiaries covered by a high-deductible
insurance policy ($1,000 for individuals/$2,000 families) may open a
tax sheltered Health Savings Account (HSA) to pay for expenses not covered
by the policy. Up to 100 percent of the health plan deductible may be
saved annually, up to a maximum of $2,600 for individual policies and
$5,150 for family policies (these amounts are indexed after 2004). Individuals
age 55-65 can make additional "catch-up" contributions of
up to $500 (rising to $1,000 by 2009). Contributions can be made
on a tax-free basis by individuals, their employers, and family members.
How Can Congregations Help?
A quick assessment of the demographics of your congregation will let
you know how many people could be affected by the Medicare Law changes.
It might be helpful to plan a program, asking a representative of the
Social Security Administration-if one is available to come and explain
changes in the law.
It might also be helpful to have a pharmacist come to an informational
meeting to provide information about the drug discount card.
An important source of information for those using discount drug cards
is the Medicare Web site, www.medicare.gov, where formulary changes
will be posted each week. The population group least likely to have
consistent internet access is seniors, thus, identifying a volunteer
who can check for changes in drug coverages and communicate them to
individuals who are using the discount cards could be a critical step
in assuring coverage.
Detailed information on the many different facets of the law is available
at www.pcusa.org/health/usa/advocacy/medicarechanges.htm.
Many group are working to affect change in the law and as any changes
in regulation, eligibility or procedure unfold, they will be detailed
at that website.
Timeline for Medicare Changes
May 2004
Drug discount cards become available from June 2004 through Dec 2005.
Card includes $600-a-year credit for eligible low-income enrollees.
January 2005
Medicare Part B annual deductible increases from $100 to $110, and
rises yearly afterward.
January 2006
New drug benefit (Medicare part D) and Medicare Advantage program
go into operation.
January 2007
Beneficiaries begin paying more for Medicare Part B premiums according
to income.
Information for this article was summarized from reports and articles
produced by:
- The Congressional Budget Office
- Centers for Medicare & Medicaid Services / Department of Health
and Human Services
- The Kaiser Foundation
- The National Committee to Preserve Social Security and Medicare
(NCPSSM)
- Families USA, AARP and others.
Pat Gleich, associate for National Health
Ministries in the PC(USA) will provide "Health Connections"
for Presbyterian Women and Horizons! In this department, Pat will offer
health news and information that appeals especially to Presbyterian
Women. Read this bonus installment of Health Connections about the new
Medicare Act—available only on the Web! The article provides background,
discusses the specific ways changes affect participants in the Medicare
program, and lists reliable sources of more detailed information. Also
included are ways that congregations might assist people in understanding
and participating in the program, as well as a glossary of terms potentially
helpful to someone who is not familiar with the Medicare program and
language.
Look for the first "Health Connections" in the September/October
2004 issue of Horizons!
For other information from the National Health Ministries Office, contact
Pat Gleich, pgleigh@ctr.pcusa.org or 888/728-7228, ext.5793 or visit
the National Health Ministries Web site, www.pcusa.org/health/usa. |
