Medicare prescription drug coverage benefit: General details of plan

Here are details of the recently approved agreement that is designed to give all Medicare beneficiaries access to prescription drug coverage. Most of these details are provided by the U.S. Department of Health and Human Services.

Medicare drug benefit

Beginning in 2006, Medicare beneficiaries will have access to the standard drug benefit described below. The drug benefit will be provided through private prescription drug plans that contract with the Medicare program. To receive the benefit, a beneficiary will have to sign up with a plan offering the drug benefit in his or her area.

Although drug plan sponsors may change some of the specifications, the benefit offered must at least be equal in value to the standard benefit. Standard coverage includes:

  1. A monthly premium of about $35.
  2. A deductible of $250.
  3. Coinsurance of 25% up to an initial coverage limit of $2,250.
  4. Copays of $2 for generics and preferred multiple source drugs and $5 for all other drugs, or 5% of the price, once an enrollee’s out-of-pocket spending reaches a limit of $3,600.

Those beneficiaries with limited savings and low incomes will receive a more generous benefit package. For example, beneficiaries with limited savings and incomes below 135% of the federal poverty line ($12,123 for individuals and $16,362 for couples) will receive:

  • A $0 deductible.
  • A $0 premium.
  • No gap in coverage.
  • Copays of $2 for generics and preferred multiple source drugs and $5 for all other drugs, up to the out-of-pocket limit. (NOTE: For full dual eligibles — those eligible for both Medicare and Medicaid — under 100% of poverty, the copayment is reduced to $1 and $3 and for those full dual eligibles who are residents of nursing homes there is no copay.)
  • $0 copay for all prescriptions once the out-of-pocket limit is reached.

Beneficiaries with limited savings and incomes below 150% of the federal poverty level ($13,470 for individuals and $18,180 for couples) will receive:

  • A sliding scale monthly premium that would be about $35 for beneficiaries with incomes of 150% of the federal poverty level.
  • A $50 deductible.
  • No gap in coverage.
  • Coinsurance of 15% up to the out-of-pocket limit.
  • Copays of $2 or $5 once the out-of-pocket limit is reached.

Medicare-endorsed prescription drug discount card

Medicare beneficiaries that do not have drug coverage will be eligible for the Medicare-endorsed Prescription Drug Discount Card, which will begin operation six months after the enactment in December and continue until the full benefit is implemented. The card program is estimated to save beneficiaries between 10% and 25% on most drugs. Those with incomes below 135% of poverty will be given immediate assistance through a Medicare-endorsed prescription drug discount card with $600 annually to apply toward purchasing their medicines.

Critics say the plan won’t help seniors

Critics of the plan, however, warn of the "doughnut hole" in the standard coverage. After an individual reaches $2,250 in drug expenses in a year, for instance, the coverage stops and the person has to pay for all of the next $2,850 in drug expenses. Insurance coverage doesn’t start again until the drug expenses reach $5,100.

Critics also say that the drug benefit fails to offer incentives to drug companies to lower drug prices. In addition, the drugs covered can vary in each plan. That means seniors must ensure that their plan will pay for the drugs they need.