The Medicare prescription drug benefit available next year will cost senior citizens an average of $722 annually. But retirees with chronic conditions such as diabetes and heart disease can expect to pay about double that amount and will face gaps in their coverage for as long as five months, according to projections being published today.
Nevertheless, participation in the voluntary program should represent savings for most Medicare recipients, according to the analysis by Bruce Stuart, executive director of the Peter Lamy Center on Drug Therapy and Aging at the University of Maryland School of Pharmacy.
Asked about the report's findings, Mark B. McClellan, administrator of the Centers for Medicare and Medicaid Services, said the drug benefit is intended to help the poorest and sickest seniors the most.
"Beneficiaries with chronic illnesses are going to save more money as a result of this drug coverage," he said in an interview. Low-income seniors -- those earning less than $9,000 -- will not be charged deductibles or premiums and will pay "just a few dollars" in co-payments, he said.
But the design of the drug program, with deductibles and a coverage gap dubbed the "doughnut hole," could have negative health implications for some, Stuart said, because people who face limits on their insurance or temporarily lose coverage are more likely to go without necessary medication.
Stuart's report, one in a trio of Medicare-related articles in the journal Health Affairs, illustrates some of the challenges America's seniors face as they begin to consider enrolling in the new benefit.
A companion study found that more than a quarter of seniors reported forgoing prescription medicine in the previous year because of cost concerns. Instead, they split pills, skipped doses or did not fill a prescription. Five percent of retirees said they had bought lower-priced medications from Canada or Mexico, although such importing of drugs is illegal.
When it enacted the Medicare Modernization Act in late 2003, Congress created a complex matrix of benefits. After reaching a $250 deductible next year, seniors will pay 25 percent of approved drug costs for the next $2,000 worth of drugs. Then there will be a pause in coverage and beneficiaries will pay the full price of medicines until their total outlay hits $5,100. At that point, catastrophic coverage kicks in and recipients will pay 5 percent of remaining drug bills.
"People with chronic health conditions often take multiple medicines and as a result have a very high likelihood of incurring expenses that will take them into the no-coverage zone," said Ron Pollack, vice president of Families USA, a consumer advocacy group that promotes health insurance for all. "They have a high predictability of having to pay 100 percent of their drug costs at some point during the year."
Each year the cycle begins anew, with higher deductibles, premiums and caps, which means retirees with moderate or high drug bills "will cycle in and out of coverage persistently from year to year," Stuart and two co-authors at the University of Maryland wrote.
Using data on drug spending from a nationally representative sample of 3,000 seniors from 1998 through 2000, Stuart developed a model to examine how those people would fare under the new drug program. He found that the model suggests the out-of-pocket savings "will be unequally distributed."
The average beneficiary, for example, would spend $722 in out-of-pocket drug costs, or 55 percent less than if there were no drug program. Medicare recipients with diabetes would spend $1,500 out of pocket, saving 32 percent, and seniors being treated for mental illness would spend more than $1,800, a reduction of 16 percent.
Although an estimated 85 percent of Medicare's 40 million beneficiaries suffer from at least one chronic condition, not all are burdened with expensive, long-term prescription costs, Stuart said in an interview. People who rely on a number of maintenance drugs, such as those with heart and respiratory problems, Alzheimer's disease, or arthritis, are likely to be most severely affected by the gaps in the drug benefit.