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Under the president’s proposal, Medicare enrollees above 150% of the poverty level would pay no deductible on prescription drugs but would be responsible for 50% of drug costs up to the spending cap and 100% of pharmaceutical costs after that. The cap would be phased in at $2,000 per year between 2002-2003, $3,000 between 2004-2005, $4,000 for 2006-2007, and $5,000 from 2008 onward.
Medicare beneficiaries below 135% of federal poverty levels would be provided a drug benefit without having to pay premiums or cost sharing. Beneficiaries between 135% and 150% of the federal poverty level would receive "premium assistance" for their drug costs.
In an effort to keep seniors in their exiting retiree benefits, the administration proposal would provide "financial incentives" for employers to continue to offer retiree health coverage. The retiree drug benefit coverage would have to be "at least equivalent to the new Medicare outpatient drug coverage," states a White House fact sheet.