The Medicare Drug Benefit – Can We Afford It?

The Wall Street Journal has a good article today entitled “How to Choose a Medicare Drug Plan.” The authors give helpful guidance to consumers by describing the new benefit as well as tips for sorting through the different options depending on if the person wants a dirt-cheap plan, has health problems, desires a local pharmacy, seeks rock-bottom generic drug costs, or needs a specific medication. The plan has many flaws, including a very confusing “donut hole”:

“After beneficiaries meet the [annual] deductible [generally $250], they pay 25% of medication costs until their drug bill reaches $2,250 in a year. Then the hole: They must pay all the costs for a while, until they’ve spent $3,600 out of pocket. After that, the benefits kick in again and cover 95% of the costs for the rest of the year.”

However, this article fails to mention a very real possibility that many others are discussing. See “Paying for Katrina Relief: Cancel or Delay the Medicare Drug Benefit” by The Heritage Foundation, a research and educational think tank.

“Sen. John McCain (R-AZ) says that, in light of Katrina, America’s taxpayers cannot afford this massive and unnecessary Medicare entitlement expansion next year. Meanwhile, members of the House Republican Study Committee have proposed a one-year delay of the benefit to offset rapidly rising Katrina-related costs. Delaying the prescription drug benefit for one or two years would save tens of billions of dollars that could be put to better use in Katrina recovery.”

I do not like the idea of weighing the cost of helping one group of needy individuals against another. I would suggest that the argument against the Medicare drug benefit should not be framed quite in those terms.

According to The Heritage Foundation, Centers for Medicare and Medicaid Services (CMS) released an estimate in February “putting the 10-year price tag of the drug provision is $724 billion for the period 2006 to 2015.” In addition, this drug plan benefits provides universal coverage of seniors, which includes effectively subsidizing many wealthy and middle-income retirees. “Roughly three-quarters of senior citizens already have some form of drug coverage, either through former employers and private insurance or through Medicaid.”

I know that CMS has been designing this benefit since the Medicare Modernization Act of 2003. However, there are many flaws including the absurd “donut hole” as well as universal coverage. I do agree that this universal benefit is costly and should be re-evaluated. It is unfortunate that a catastrophe such as Katrina is forcing us to revisit this benefit, but it needs to be done.

October 4, 2005

2 thoughts on “The Medicare Drug Benefit – Can We Afford It?”

  1. It is unfortunate to hear so many lack health insurance. We really need to improve our health care system. Health insurance is a major aspect to many and we should help everyone get covered. I hope we can make health insurance much more affordable.

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