The NewStandard ceased publishing on April 27, 2007.

Bush Medicare Plan Will Raise Costs for Poorest Elderly, Disabled

by Catherine Komp

In what critics consider a giveaway favoring big drug companies, the price tag on the White House’s new Medicare scheme keeps going up -- not just for taxpayers, but also for those most in need of assistance.

Dec. 23, 2004 – An analysis of the Bush Administration’s new Medicare drug law, set to go into effect January 2006, found that low-income seniors and people with disabilities will end up paying more for prescription drugs than they currently do. The revelation is just the latest addition to a pile of complaints about the controversial legislation

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Through a series of state-specific reports on the effects of the new law, a progressive activist and advocacy organization called the Institute for America’s Future documents the program’s disproportionate impact on some of the country’s most vulnerable aid recipients.

In New York State, for example, the poorest residents will pay about $85.9 million more for prescriptions during the first five years of the new law, according to the report’s findings. In California, the total increase is $450.9 million.

According to the Institute for America’s future, 21 states and the District of Columbia currently provide prescription medicines to residents who are eligible for both Medicare and Medicaid free of charge or at very low cost. According to Families USA, a nonprofit progressive healthcare advocacy organization, the majority of those individuals live on annual incomes of less than $6,650. In 2006, the co-payments will rise to $1 for a generic drug prescription and $3 to $5 for a brand-name prescription. These rates will increase every year along with the consumer price index.

Medicare recipients will be required to stick with the plan they choose, even if the insurer stops covering the drugs they need.

For the nation’s poorest residents, many who live on less than $18 a day, those price increases could be significant.

Under another provision of the new Medicare law, which switches recipients over to private drug plans, insurers are permitted to limit the number of drugs covered to "two per therapeutic class." Each company is also allowed to both define those classes and change the definitions, and is only required to announce that information to its customers by posting changes to the Internet. If a patient’s medicine is not included on the insurer’s coverage list, he or she will have to pay 100 percent of the drug’s cost. Under current programs in states that provide prescription drug assistance, medications deemed "medically necessary" by patients’ doctors are covered.

While insurers are given flexibility to switch the drugs they cover, Medicare recipients will be required to stick with the plan they choose for several months at a time, even if the plan stops covering or raises the costs of the drugs they need.

April Greener, the primary author of the state-specific reports, says middle-income Americans will also face significant burdens under the new law, beginning with a penalty for enrolling late in what supporters call a "voluntary" benefit. According to Greener, penalties will be imposed on individuals who fail to sign-up within 63 days of becoming eligible for the program, but who then decide later that they want to join.

"The amount of the penalty will be either whatever the Health and Human Services Secretary determines is ‘actuarially sound’ or one percent of the monthly premium for every month eligible but not enrolled in a plan," Greener told The NewStandard. "This penalty is paid every month on top of the drug plan premium." That penalty would add up to an additional 60 percent of the premium, Greener said, if someone defers signing up for five years.

A Kaiser Family Foundation study, which looked at projected benefits and losses to the overall Medicare-eligible population, found that at any given time, one in four people enrolled in the new program will be spending more on prescription drugs than they would have spent under the previous programs. The privately operated Kaiser Foundation focuses on US health care policy.

Greener says the new law, which will cost upwards of $500 billion over the first ten years, is nothing more than a corporate give-away that will cause hardship for seniors, baby boomers, and younger generations. According to a study conducted by the Boston University Health Reform Program, drug companies are estimated to gain about $139.2 billion dollars in new profits over the first eight years of the program.

Greener says HMOs and other private insurance companies also win big. "The new law creates a new pay scale for participating insurance companies, overpaying them to provide the same care to people on Medicare that the traditional fee-for-service program would provide for less," she said.

The Medicare drug coverage legislation was controversial when debated one year ago in both houses of Congress, with Democrats generally opposing the legislation for benefiting drug companies over seniors, and many Republicans decrying its fiscal irresponsibility. After the bill narrowly passed, representatives were told that the Bush administration’s previous estimate of $400 billion over ten years was incorrect, and released an updated figure of $534 billion.

With the estimated long-term costs of the program shooting well past those projected for Social Security, analysts have warned it is unsustainable.

Comptroller General David M. Walker, who heads the General Accountability Office (GAO), Congress’ investigative wing, recently told the Los Angeles Times: "The Medicare problem is about seven times greater than the Social Security problem, and it has gotten much worse. It is much bigger, it is much more immediate, and it is going to be much more difficult to effectively address."

The program’s critics have accused the Bush administration of spreading misinformation about the drug benefits.

Last May, the General Accountability Office found the Department of Health and Human Services in violation of federal laws on publicity and propaganda after it produced and distributed promotional videos disguised as news stories, which touted the new Medicare law as beneficial to seniors. Television stations across the nation aired the taxpayer-funded "video news releases," which failed to make clear that reporters were not real journalists, but instead actors who were paid by the government for their services.

Meanwhile, as President Bush and Republican supporters of the Medicare Prescription Drug Law celebrated its one-year anniversary in early December, the GAO released a report stating the administration has been providing inaccurate information to the public about the law. In the GAO’s study of 420 calls placed during July 2004 to 1-800-MEDICARE, a hotline set up by the Administration to answer questions about the new law, 29 percent of inquiries were given inaccurate responses, and 10 percent were either transferred to voice mail or disconnected.

Given several days to respond, spokespeople for the Department of Health and Human Services did not return calls for comment by press time.

Greener says January 1, 2006 is going to be a very bleak day for millions of poor Americans. "We will see the Bush Medicare law have a real effect on people in our communities as seniors and people with disabilities are forced to muddle through complex insurance plans without any assurances that the plan they signed up for month after month will really help them."

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The NewStandard ceased publishing on April 27, 2007.


Catherine Komp is a contributing journalist.

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