Medicare Part D – The Drug Benefit

Nearly 6.5 million seniors with high prescription drug costs will still be responsible for thousands of dollars of expenses even after Medicare's drug benefit begins in January, according to a recent study by Pennsylvania State university and University of Maryland researchers.

The analysis concludes that gaps in Medicare's drug benefit -- known as Part D -- will leave many beneficiaries responsible for high expenses the program is intended to prevent. Medicare officials dispute the study, saying it grossly overestimates the number of seniors who will be faced with high drug bills. Other key study findings include:

  • The benefit pays for 75% of seniors' drug costs after a $250 deductible and about $35 per month in premiums. Coverage stops completely at $2,250 in personal spending and then kicks in again after $5,100 in costs, after which the program pays 95% of drug bills.
  • As many as 15 million low-income beneficiaries will be eligible for benefits that cover most premiums and close the coverage gap, often referred to as Medicare's "doughnut hole."
  • As many as 16 million middle- and higher-income seniors are expected to rely on Medicare as their sole source of drug coverage. Forty percent of them, or 6.4 million, are expected to reach the program's $2,250 coverage limit, beyond which they will be forced to pay all of their costs.
  • Beneficiaries who exceed the limit will face an average of $11,000 in drug costs during the three years between 2006 and 2008. Another 2.4 million seniors who spend $5,100 or more on prescriptions will still have to pay an average of $12,300 out of pocket during the same time.
  • Congress enacted the Medicare's premiums and its "doughnut hole" as a way to hold down the overall cost of the drug benefit, which is already slated to top $750 billion over 10 years.

Source: Pennsylvania State University and University of Maryland, July 12, 2005.

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